[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27525-27546]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13000]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 62, No. 97 / Tuesday, May 20, 1997 / Proposed
Rules
[[Page 27525]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 1005, 1007, 1011, and 1046
[Docket No. AO-388-A9, et al.; DA-96-08]
Milk in the Carolina and Certain Other Marketing Areas; Partial
Final Decision
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7 CFR
part Marketing area Docket No.
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1005... Carolina...................... AO-388-A9
1007... Southeast..................... AO-366-A38
1011... Tennessee Valley.............. AO-251-A40
1046... Louisville-Lexington- AO-123-A67
Evansville.
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AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This final decision would modify interim amendments which
established transportation credit provisions in 4 Federal milk orders
in the Southeastern United States. The interim amendments were based
upon proposals that were considered at a public hearing held in
Charlotte, North Carolina. The proposed modifications to the interim
amendments are based upon additional testimony heard at a reopened
hearing held in Atlanta, Georgia. The major modifications would
increase the maximum assessment by one cent or less in two of the
orders to pay for transportation costs and eliminate the reduction of
blend prices to producers to pay for transportation costs. The
amendments adopted in this decision will become effective if approved
by the producers in the affected markets.
FOR FURTHER INFORMATION CONTACT: Nicholas Memoli, Marketing Specialist,
USDA/AMS/Dairy Division, Order Formulation Branch, Room 2971, South
Building, P. O. Box 96456, Washington, DC 20090-6456 (Tel:202/690-1932;
E-mail:[email protected]).
SUPPLEMENTARY INFORMATION: This administrative action is governed by
the provisions of Sections 556 and 557 of Title 5 of the United States
Code and, therefore, is excluded from the requirements of 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, and it will not preempt any state or local laws, regulations,
or policies, unless they present an irreconcilable conflict with the
rule.
The Agricultural Marketing Agreement Act of 1937, as amended (7
U.S.C. 601-674), provides that administrative proceedings must be
exhausted before parties may file suit in court. Under section
608c(15)(A) of the Act, any handler subject to an order may file with
the Secretary a petition stating that the order, any provision 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 to be
exempted from the order. A handler is afforded the opportunity for a
hearing on the petition. After a hearing, the Secretary would rule on
the petition. The Act provides that the District Court of the United
States in any district in which the handler is an inhabitant, or has
its principal place of business, has jurisdiction in equity to review
the Secretary's ruling on the petition, provided a bill in equity is
filed not later than 20 days after the date of the entry of the ruling.
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
proposed rule will not have a significant economic impact on a
substantial number of small entities. No new entities will be regulated
as a result of the proposed rules, and any changes experienced by
handlers will be of a minor nature.
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 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.
The milk of approximately 8,600 producers is pooled on the
Carolina, Southeast, Tennessee Valley and Louisville-Lexington-
Evansville milk orders. Of these producers, 95 percent produce below
the 326,000-pound production guideline and are considered to be small
businesses.
There are 43 handlers operating pool plants under the four orders.
Of these handlers, 22 have fewer than 500 employees and qualify as
small businesses.
The proposed rules amending the transportation credit provisions
will promote orderly marketing of milk by producers and regulated
handlers operating within the 4 marketing areas. This decision
eliminates the provision which provides for the transfer of funds from
the producer-settlement fund to the transportation credit balancing
fund when the latter is insufficient to cover the amount of credits to
be distributed to handlers for a given month. Thus, the possibility of
a reduction of uniform prices to producers resulting from
transportation credits will no longer exist.
This decision also modestly increases the handler assessment from 6
cents to 6.5 cents per hundredweight of Class I producer milk in the
Carolina market and to 7 cents per hundredweight in the Southeast
market, but maintains the current 6-cent assessment in the Tennessee
Valley and Louisville-Lexington-Evansville markets. A 6-cent per
hundredweight assessment translates to approximately one-half cent per
gallon of milk. The one-half to one-cent assessment increase in Federal
Orders 1005 and 1007 may negatively impact some small businesses, as
any price increase would, but it may also positively impact other small
businesses by providing more funds for transportation credits.
At present, all handlers regulated under the 4 milk orders involved
in this
[[Page 27526]]
proceeding file a monthly report of receipts and utilization with the
market administrator. The proposed amendments will not significantly
add to the amount of information required to be reported by those
handlers requesting transportation credits. The estimated time to
collect, aggregate, and report this information will vary directly with
the amount of milk for which credits are requested, but should not be
significant.
Prior Documents in This Proceeding
Notice of Hearing: Issued May 1, 1996; published May 3, 1996 (61 FR
19861).
Tentative Partial Final Decision: Issued July 12, 1996; published
July 18, 1996 (61 FR 37628).
Interim Amendment of Orders: Issued August 2, 1996; published
August 9, 1996 (61 FR 41488).
Extension of Time for Filing Comments: Issued August 16, 1996;
published August 23, 1996 (61 FR 43474).
Extension of Time for Filing Comments: Issued October 18, 1996;
published October 25, 1996 (61 FR 55229).
Notice of Reopened Hearing: Issued November 19, 1996; published
November 25, 1996 (61 FR 59843).
Preliminary Statement
A public hearing was held to consider proposed amendments to the
marketing agreements and the orders regulating the handling of milk in
the aforesaid marketing areas. The hearing was held pursuant to the
provisions of the Agricultural Marketing Agreement Act of 1937, as
amended (7 U.S.C. 601-674), and the applicable rules of practice (7 CFR
Part 900), in Charlotte, North Carolina, on May 15-16, 1996, and in
Atlanta, Georgia, on December 17-18, 1996. Notice of the May hearing
was issued on May 1, 1996, and published May 3, 1996 (61 FR 19861).
An interim order amending the orders was issued on August 2, 1996,
and published on August 9, 1996 (61 FR 41488). The interim amendments
became effective on August 10, 1996.
Following 3 months' experience with the interim amendments, the
industry requested, and the Department agreed, to reopen the hearing to
receive additional evidence concerning their impact. This hearing was
held in Atlanta, Georgia, on December 17-18, 1996, following a notice
of such reopened hearing that was issued on November 19, 1996, and
published on November 25, 1996 (61 FR 59843).
Interested parties were given until January 24, 1997, to file post-
hearing briefs on proposals following the reopened hearing.
The material issues on the record of the hearing relate to:
1. Transportation credits for supplemental bulk milk received for
Class I use.
2. Deductions from the minimum uniform price to producers.
3. Whether emergency marketing conditions in the 4 regulated
marketing areas warrant the omission of a recommended decision with
respect to Issue No. 1 and the opportunity to file written exceptions
thereto.
4. The definition of producer.
This partial final decision only deals with Issue 1. Issue 3 was
discussed in the tentative partial final decision that was issued July
12, 1996, and is now moot. Issues 2 and 4 will be handled through
normal rulemaking procedures in a forthcoming recommended decision.
Summary of Changes to the Interim Amendments
This final decision differs from the tentative decision in several
respects. The key changes in the order amendments are as follows:
1. The provision providing for a transfer of funds from the
producer-settlement fund to the transportation credit balancing fund
when the latter fund has an insufficient balance to pay for the month's
transportation credits has been removed. Instead, the available balance
in the transportation credit balancing fund each month will be prorated
to handlers applying for transportation credits for that month. See
Sec. 100X.82(a).
2. The assessment for the transportation credit balancing fund has
been raised from 6 cents to 6.5 cents per hundredweight for the
Carolina order and to 7 cents per hundredweight for the Southeast
order. See Secs. 1005.81(a) and 1007.81(a).
3. The per mile rate for computing the transportation credit has
been reduced from 0.37 cent to 0.35 cent per hundredweight of milk. See
Sec. 100X.82(d)(2)(ii) and (d)(3)(iv).
4. A net shipment provision has been added to each of the 4 orders.
This provision reduces the pounds of milk eligible for a transportation
credit at a pool plant by the amount of milk transferred from that pool
plant to a nonpool plant on the same calendar day the supplemental milk
was received. See Sec. 100X.82(d)(1).
5. The computation of the transportation credit for producer milk
has been changed to more closely match the way the transportation
credit is computed for milk that is transferred from an other order
plant. In particular, if the farm ``origination point'' is within
another Federal order's marketing area, the Class I price at the
origination point shall be the price that would apply at that location
under the provisions of the order covering that area. See
Sec. 100X.82(d)(3)(v). In addition, in computing the credit for farm-
to-plant milk there is a deduction of 85 miles from the distance
between the farm origination point and the receiving plant. See
Sec. 100X.82(d)(3)(iii). Finally, the proportion of producer milk that
is eligible for the transportation credit has been changed to more
closely reflect the proportion of other order plant milk that would
receive the credit. See Sec. 100X.82(c)(2)(i).
6. The restricted area from which producer milk would be considered
ineligible to receive a transportation credit has been revised to
include six Kentucky counties--Allen, Barren, Metcalfe, Monroe,
Simpson, and Warren--in addition to the specified marketing areas of
Federal Orders 1005, 1007, 1011, or 1046. See Sec. 100X.82(c)(2)(iii).
7. The months during which the market administrator may extend
transportation credits have been changed from January through June to
January and June. See Sec. 100X.82(b).
8. The limitation on the amount of milk that may be delivered as
producer milk without being disqualified for transportation credits has
been changed from 32 days of production to 50 percent of the dairy
farmer's total production during not more than 2 months of January
through June when the dairy farmer was a producer. See
Sec. 100X.82(c)(2)(ii).
Findings and Conclusions
The following findings and conclusions on the material issues are
based on evidence presented at the hearing and the record thereof:
1. Transportation Credits for Supplemental Bulk Milk Received for
Class I Use. The tentative decision issued on July 12, 1996, concluded
that Federal Milk Orders 1005, 1007, 1011, and 1046 (hereinafter
referred to as ``the 4 orders'') should be amended to provide
transportation credits for supplemental bulk milk that is transferred
from an other order plant to a pool plant and for supplemental bulk
milk imported directly from producers' farms during the months of July
through December. Additionally, the decision concluded that a handler
assessment on the total pounds of Class I producer milk should be added
to each order to fund the transportation credits.
[[Page 27527]]
This final decision reaffirms the conclusions of the earlier
decision, but also recommends changes to that decision based upon the
testimony of the reopened hearing. This decision consists of four
parts. Part 1 is a brief summary of the testimony and briefs resulting
from the initial hearing; part 2 is a summary of the interim amendments
that were adopted in the July 12, 1996, tentative decision; part 3 is a
summary of the testimony and briefs resulting from the reopened
hearing; and part 4 explains why the interim amendments should be
modified.
A Brief Summary of Testimony and Briefs Resulting From the May 15-16,
1996 Hearing
A transportation credit for bulk milk received from an other order
plant for Class I use was proposed by Mid-America Dairymen, Inc. (Mid-
Am), a cooperative association that represents approximately 50 percent
of the producers in Orders 5, 7, and 11, and nearly one-third of the
producers in Order 46. According to Mid-Am, the Southeast States are
chronically short of milk for fluid use at certain times of the year,
namely the late summer and fall months. Mid-Am stated that the costs of
supplying handlers with an adequate supply of fluid milk fall
disproportionately on cooperative associations serving these markets.
Arguing that the Agricultural Marketing Agreement Act provides for
``marketwide service payments'' to provide for greater equity between
producers and handlers supplying a market with supplemental milk, Mid-
Am testified that the Secretary should immediately amend the 4 orders
to incorporate transportation credits into the 4 orders on milk that is
transferred from other order plants.
Carolina Virginia Milk Producers Association (CVMPA), a cooperative
association with producers supplying plants regulated under all 4
orders, stated that the Mid-Am proposal should be expanded to also
include supplemental milk received directly from producers' farms.
CVMPA noted that it imported far more supplemental milk directly from
producers' farms than from other order plants during the months of July
through December 1995.
The proposal to include supplemental milk shipped directly from
producers' farms was endorsed by both handlers and other cooperative
associations. Receiving milk in this manner, it was argued, would
encourage hauling efficiencies, improve milk quality, eliminate pump-
over expenses, and reduce product loss due to handling.
Fleming Dairy, a handler operating in Tennessee and Louisiana,
supported the transportation credit concept, but argued for a shorter
transportation credit period than was proposed by Mid-Am. Fleming
stated that extension of the transportation credit period should be
removed from the proposal.
Several witnesses suggested that the rate of 0.39 cent per mile
that was proposed by Mid-Am for computing a transportation credit was
too high. Testimony was also given regarding the necessity of
restricting transportation credits on bulk milk transfers between the 4
orders.
Several proprietary handlers testified in opposition to the
proposed transportation credits by arguing that the assessments would
create competitive disadvantages among handlers. The record indicated
that several handlers feared that marketing practices, such as stair-
stepping milk from one market to another, would result in false
shortages in the shipping market and, thus, that the cost of obtaining
additional milk supplies would not be shared equitably among handlers.
Briefs filed by various handlers reiterated their reservations
regarding transportation credits. It was maintained that the milk
shortage situation in the Southeast should be dealt with through means
outside of the order system, such as over-order premiums. Issues such
as Class III-A pricing and stair-stepping of milk were addressed as
concerns which could jeopardize the true intent of transportation
credits to compensate handlers for costs incurred in obtaining
supplemental supplies of milk for fluid use.
While acknowledging that sufficient testimony and record evidence
was offered in support of transportation credits, additional briefs
submitted by interested parties cautioned the Department against
potential abuse. Offsetting milk shipments into and out of the
marketing areas, establishing historical milk movements, and limiting
the amount of credits available (e.g. deducting the first 100 miles)
were all addressed as areas of concern.
One handler opposed the incorporation of transportation credits in
total, claiming that such credits were money-shifting schemes proposed
by those who have made no efforts to develop business relationships to
ensure a steady supply of milk. The brief of another handler suggested
limiting assessments to Class I sales made within the 4 marketing
areas.
Several of the post-hearing briefs argued that supplemental
producer milk, as well as plant-to-plant milk, should be eligible for
credits. CVMPA offered a definition of ``supplemental milk'' as the
milk of dairy farmers which is only pooled during the months of short
production. Suggestions for supplemental producer ineligibility were
offered to distinguish such producers from those normally associated
with subject markets. Recommendations on how to determine an
origination point for producer milk were also proposed, including
taking into consideration differences in Class I prices at the
receiving plant and the origination point.
In its post-hearing brief, Mid-Am emphasized that cooperatives were
bearing a disproportionate burden in supplying these markets with
supplemental milk. It argued that the cost associated with such milk
cannot be passed along to their customers and that absorbing this cost
placed their member producers at a competitive disadvantage relative to
non-member producers who do not share in this cost. Mid-Am also pointed
out that the incorporation of transportation credits would conform with
past agency decisions and would facilitate securing adequate supplies
of milk to meet the markets' fluid needs. It indicated that its
proposal should be expanded to provide transportation credits for
producer milk as well as plant milk.
Interim Amendments Effective August 10, 1996
Following the May hearing, interim amendments providing for
transportation credits became effective for the 4 orders on August 10,
1996. The amendments provided transportation credits to pool plant
operators and cooperative associations for Class I bulk milk received
from an other order plant and for milk received directly from
producers' farms and used in Class I.
Handlers and cooperative associations are required to report to the
market administrator receipts of bulk milk from other order plants and
receipts of producer milk, including the identity of individual
producers, for which transportation credits are requested pursuant to
Section 30 of the orders.
For plant milk, the credit is limited to milk that is allocated to
Class I. It is computed at a rate equal to 0.37 cent per mile per cwt.
based on the distance from the transferor plant to the transferee
plant. The resulting number is reduced to the extent that the Class I
price at the receiving plant exceeds the Class I price at the shipping
plant to arrive at the transportation credit for that load of milk.
In the case of milk received directly from producers' farms, the
origination
[[Page 27528]]
point of a bulk tank truck containing more than one producer's milk is
either the city closest to the farm from which the last farm pickup was
made or the location specified on a certified weight receipt obtained
at an independently-operated truck stop after the last farm pickup has
been made. The credit is computed by multiplying 0.37 cent times the
number of miles between the origination point and the location of the
plant receiving the milk, less any positive difference in the Class I
prices at the two points under the order receiving the milk.
Transportation credits are limited to the months of July through
December; however, an extension may be requested for any of the months
of January through June. During the months of January through June, the
market administrator has the authority to expand the transportation
credit period if market conditions indicate that producer milk for
Class I use will be in short supply and the marketwide Class I
utilization is likely to exceed 80 percent. Such a request must be made
in writing at least 15 days prior to the beginning of the month for
which it is to be effective and requires the market administrator to
issue a decision on the request by the first day of the month for which
it is to be effective.
Pursuant to the interim amendments, the credits are limited to
transfers from other order plants that are not regulated under Orders
5, 7, 11, or 46. This provision was added in response to concerns
expressed at the hearing that handlers in one of these 4 markets could
be required to pay for transporting milk into another of these markets
in the absence of any such restriction.
Certain location restrictions are also provided for supplemental
producer milk. Transportation credits do not apply to the milk of any
producer whose farm is located within any of the 4 marketing areas. In
addition, the farm must be at least 85 miles away from the plant to
which the milk is delivered.
In order to receive credits on producer milk, the producer cannot
be normally associated with the market in which the credit is
requested. A producer's milk is eligible to receive such credits as
long as the dairy farmer was not a producer under the order during more
than 2 of the immediately preceding months of January through June and
not more than 32 days' production of such farmer was received as
producer milk on the market.
The interim amendments adopted a transportation credit balancing
fund, as well as a 6-cent per hundredweight (or lesser amount) monthly
assessment on Class I producer milk to provide revenue for the fund.
The higher of the hauling credits distributed in the immediately
preceding 6 months or in the preceding July-December period is used to
determine the current month's assessment level. The market
administrator is authorized to maintain the transportation credit
balancing fund, deposit assessments into it, and distribute
transportation credits from it. Payments due from a handler are offset
against payments due to a handler. The assessment for the
transportation credit balancing fund is announced on the 5th day of the
month preceding the month to which it applies.
In the event that the transportation credit balancing fund is
insufficient to cover the cost of the transportation credits to be
distributed, the difference is deducted from the producer-settlement
fund.
Testimony and Briefs Resulting From the Reopened Hearing
At the reopened hearing, Mid-Am testified that it supports the
continuation of transportation credits in the 4 orders, but that
certain modifications should be made to fine-tune the provisions. Mid-
Am testified that changes should be made in the provisions applicable
to producer milk, but that no changes were needed with respect to the
provisions applicable to other order plant transfers.
Mid-Am testified that: (a) the credits applicable to a load of
producer milk should be comparable to those applicable to milk received
from an other order plant; (b) the mileage for computing credits should
be reduced by 85 miles from the origination point to the receiving
plant; (c) the transportation credit computation on producer milk
should reflect the difference between the shipping order's Class I
price at the origination point and the receiving order's Class I price
at the receiving plant; and (d) the geographic area from which
producers would be ineligible to receive credits on their milk should
be further expanded and clarified, including basing points found on the
edges of the marketing areas. In addition, Mid-Am proposed a revision
to Section 78, Charges on Overdue Accounts, in the Carolina, Southeast,
and Louisville-Lexington-Evansville orders to include payments of
transportation credit assessments due pursuant to Section 81 of the
orders.
Carolina-Virginia Milk Producers Association (CVMPA), a cooperative
association with producers supplying plants regulated under all 4
orders, testified in support of Mid-Am's proposal to modify the
transportation credits. CVMPA testified that, like Mid-Am, it believes
that the interim amendments are in need of some fine-tuning so that the
credits available on producer milk are comparable to those available on
plant milk. Also, CVMPA said that Mid-Am's proposed changes will reduce
the total amount of credits available on producer milk, thereby
lessening the probability that the value of the credits distributed
will exceed available funds.
Associated Milk Producers, Inc. (AMPI), a cooperative association
representing producers in the South and Southwest which also operates
manufacturing facilities in various states, testified in support of the
basic concept proposed by Mid-Am and CVMPA, but stated that certain
modifications to such proposals should be considered. AMPI testified
that it supports the proposal regarding the equalization of
transportation credits granted to producer milk imports and plant milk
shipments, but opposes the institution of basing points and the 85-mile
exclusion rule to establish producer milk ineligibility for
transportation credits. AMPI argued that the ineligibility requirement
would cause the uneconomical movement of milk because supplemental
supply sources in relatively close areas, such as eastern Texas, would
be passed over since supplemental producer milk from that area would
not receive any transportation credits. AMPI testified that it does not
oppose other aspects of Mid-Am's proposed modifications, such as
deducting the first 85 miles from the hauling distance to compute the
transportation credit value and having the credit cover only that
portion of a producer's load that is allocated to Class I.
AMPI also suggested including a net shipment provision as it
pertains to transportation credits on a daily or monthly basis. AMPI
argued that transportation credits should not be available on milk
received by a plant when on the same day the same milk may be diverted
or transferred to other order plants. While being unaware of any such
abuse currently, AMPI said that inclusion of such a provision would
prevent the encouragement of future abuse.
AMPI also testified that the transportation credits, as currently
structured, have created disorderly marketing conditions by
establishing an incentive for handlers to solicit producers away from
cooperatives during the transportation credit period. Although AMPI
contended that it had not lost producer membership, AMPI testified that
other cooperatives had lost some membership.
[[Page 27529]]
Testimony was also offered by a spokesman on behalf of Piedmont
Milk Sales, an organization that markets the milk of 277 dairy farmers
to handlers in the Southeast. Piedmont testified that the provision
which permits funds to be transferred from the producer-settlement fund
to the transportation credit balancing fund when the latter fund has an
insufficient balance to pay the month's transportation credits has been
detrimental to dairy farmers in the Southeast. Piedmont testified that
the loss of income to producers reflected in their reduced blend prices
is contrary to the economic philosophy relied on in half a century of
Federal order and price support administration.
Piedmont pointed out that the May 1996 hearing record indicated
that the impact on the blend price would be less significant than has
actually occurred, suggesting, perhaps, that abuse of the
transportation credits has occurred and will continue to occur in the
absence of any modification of the provision. In order to curtail
abuse, Piedmont suggested that transportation credits be prorated on
the basis of available funds collected from handlers and deposited into
the transportation credit balancing fund.
Piedmont also called for the restriction of credits on producer
milk by including a provision which would eliminate credits on milk
shipped directly from distant farms unless such milk was diverted
between markets; it should then be treated as if it were plant milk. In
essence, Piedmont argued for the tightening of the transportation
credit provisions to prevent the uneconomic movement of milk from
sources as far as California. The rate of 0.37 cent/mile also was
criticized as being too high; however, no specific alternative rate was
offered.
Piedmont supported a net shipment provision which would reduce the
amount of transportation credits obtained by a handler if that handler
shipped milk to a plant not regulated under any of the 4 orders. While
conceding that some transfers and diversions were justified and did not
constitute abuse, Piedmont contended that it is the responsibility of
the handler to demonstrate that supplemental milk actually moved into
such order(s) if a credit is requested.
In response to questions regarding the computation of the credits
for the various orders, Piedmont stated that currently under the
interim amendments the procedure used to compute such credits is not
identical for each of the orders with respect to location adjustments.
In order to promote greater equity, Piedmont suggested that the
procedures used in Orders 11 and 46 for such computation should be used
for all 4 orders.
Several Southeastern dairy farmers testified at the reopened
hearing to oppose and voice their concerns over the reduction in blend
prices resulting from the implementation of the transportation credits.
One dairy farmer stated that he does not understand why Class I
utilization rates have dropped in his marketing area in recent months,
while, at the same time, supplemental milk is being imported and is
eligible for transportation credits. Many of the farmer witnesses
complained that by deducting the difference between the amount of
credits to be paid out and the amount of funds available to cover these
credits from the producer-settlement fund, dairy farmers are penalized
and handlers are provided an incentive to continue to bring in milk
whether it is needed or not.
One dairy farmer stated that the importation of supplemental milk
would contribute to the demise of the dairy industry in the South. He
contended that hauling in supplemental milk does not benefit local
suppliers of feed or fertilizer and will eventually harm the
Southeastern economy. He also expressed concern about price uncertainty
which, he said, is exacerbated as a result of the transportation
credits. One dairy farmer maintained that producers already have to
contend with a number of variable factors affecting their blend price
(including the weather and drought) and should not be subject to any
additional uncertainties which may further reduce their blend price. He
stated that once the blend price is reduced, the dairy farmer has no
way to recoup the loss and cannot pass that cost along to anybody else.
Another dairy farmer testified that it is unfair and illogical to
reduce the blend price in the Southeast to bring in supplemental milk
when milk is also moving out of the area. He stated that he welcomes
competition from dairy farmers outside the Southeast area, but that
Southeast dairy farmers should not be responsible in any way for
hauling their distant competitors' milk into the area. He said that, in
essence, this has occurred with the implementation of the
transportation credit provisions.
Kraft, Inc. (Kraft), which operates manufacturing plants in several
states, testified that it is generally not opposed to ``cautious and
conservative use of transportation credits where necessary to assure
that milk required for Class I use is equitably and adequately
supplied.'' Kraft contended that the transportation credit provisions
adopted in the interim amendments appear to provide a financial
incentive to acquire distant supplemental producer milk rather than
plant milk by absorbing some of the hauling charges that would normally
be paid by the supplying producer. Kraft testified that the credits
should be continued, but that there should be an equalization of
incentives and/or disincentives with respect to plant milk versus
producer milk.
Kraft also testified that if a net shipment provision is to be
incorporated into the transportation credit program, it should only
include milk which has been transferred or diverted for Class I use to
another handler.
Milk Marketing, Inc. (MMI), speaking on behalf of its member
producers whose milk is pooled under Order 46, testified that it
supports Mid-Am's and CVMPA's proposal to modify the interim
amendments. MMI contended that such proposed modifications are needed
to resolve issues of equity involving producer milk and plant milk. In
addition, MMI stated that it firmly believes that producer milk
normally associated with the market should continue to be ineligible to
receive transportation credits.
Fleming Dairy, which operates pool distributing plants in
Nashville, Tennessee, and Baker, Louisiana, testified that it opposes
any increase of the current 6-cent assessment rate that is charged to
handlers regulated under the 4 orders. Fleming also addressed the issue
of net hauling provisions by stating that this is an area which needs
to be examined more thoroughly.
When asked about funds taken from the producer-settlement fund to
supplement the transportation credit balancing fund, Fleming testified
that Mid-Am's and CVMPA's proposals to reduce the amount of credits
given out will most likely result in a situation where a 6-cent
assessment will be enough to cover the value of the credits. Fleming
testified, however, that transportation credits primarily benefit dairy
farmers and, for this reason, it is appropriate to have all producers
supplement the funds available for credits by a reduction in the blend
price. In conclusion, Fleming testified that without transportation
credits, it would have had less money available within the company to
pay premiums to independent dairy farmers. Thus, according to Fleming
Dairy, dairy farmers have benefited from the incorporation of
transportation credits.
A witness representing Dairy Fresh Corp. and Barber Pure Milk Co.,
two handlers operating pool plants regulated under Order 7, also
supported
[[Page 27530]]
transportation credits as a concept, but opposed increasing the handler
assessment rate from 6 to 7 cents. Addressing the issue of the credit
rate, and in response to a question asked earlier at the hearing, the
witness stated that the 0.37 cent/mile rate should not be decreased as
the distance hauled increases. He argued that this would not be
appropriate because at times it is necessary to seek distant sources of
available milk supplies. Finally, the witness testified that Mid-Am's
proposal involving the 85-mile ineligibility requirement would
discourage handlers from obtaining milk directly from producers' farms
and thereby discourage greater efficiency and better quality milk.
Post-hearing briefs were filed by various interested parties. While
changes to the current transportation credit provisions have been
recommended throughout such briefs, the concept of transportation
credits was not opposed by any of the submitting parties, with the
exception of one handler recommending that the credits be eliminated
from Order 11.
In its brief, Southern Belle, a handler regulated under Order 11,
opposes any assessment on Class I producer milk for transportation
credits in Order 11, reiterating its position following the initial
hearing. Southern Belle restated the argument that many of its
competitors are pooled under an order which does not require such
assessment; therefore, the assessment places Southern Belle at a
competitive disadvantage. Furthermore, such brief stated the current 6-
cent assessment negatively impacts the Southern Belle's sales of
bottled milk.
A brief submitted by Kraft Foods, Inc., stated that Kraft does not
oppose transportation credits, but suggested that these provisions
should be modified to equalize the costs of supplying fluid milk
supplies to the Southeast. The brief stated that Kraft is at a
disadvantage in procuring milk for Class II use because credits are
available to those handlers with fluid milk plants which compete with
Kraft in their ancillary Class II operations. Kraft also expressed
concern over a net shipments provision and urged the Department to be
cautious in its adoption of any such provision by having shipment
limitations apply only when Class I milk (eligible for a transportation
credit) received in any of the markets has replaced Class I milk
(ineligible for a transportation credit) shipped out of the same market
if the receiving plant is not within the 4-market area. Kraft's brief
also reiterated its recommendation that the incentive and disincentives
regarding transportation credits on supplemental plant milk versus
supplemental producer milk should be equalized.
In its brief, Fleming Companies strongly supported the continuation
of transportation credits, but stated that a few minor adjustments may
be necessary. Fleming also restated its position that it opposes any
increase in the handler assessment rate. Additionally, the brief stated
that it is not inequitable for producers to share in the cost of the
transportation credits since such cost provides services of marketwide
benefit. As long as the contribution of handlers through assessments
exceeds the amount of contribution by producers, then, according to
Fleming, no increase in the assessment rate is justified.
Piedmont Milk Sales also submitted a post-hearing brief on behalf
of the 277 dairy farmers who ship through Piedmont and regulated
handlers, Land O'Sun, Inc., Hunter Farms, and Milkco, Inc. In its
brief, Piedmont conceded that transportation credits are needed in the
Southeast; however, Piedmont also recommended that certain changes are
necessary regarding transportation credits in order to curtail abuse or
potential abuse. According to Piedmont, several areas need to be
modified, including: (1) Producer milk eligibility, (2) the January
through June extension period for transportation credits, (3) the
deduction of funds from the producer-settlement fund resulting in blend
price reductions, and (4) the inclusion of a net shipment provision.
Piedmont suggests that credits have been given on milk which was
imported for Class I use into the 4-market area, while at the same time
milk was being shipped out of this area into Florida. Handlers and
producers, it was stated, paid to bring in replacement milk from as far
away as California when the milk could have been obtained from closer
sources. Piedmont argued that the current transportation credits create
an incentive to acquire milk on the basis of the generosity of the
credits as opposed to the most efficient movement of milk.
Piedmont's brief also suggested that the market administrator's
responsibility should be expanded to monitor transportation credit
requests to determine whether milk that was imported was actually
supplemental milk. The brief explains that the market administrator
should be required to verify that the credits due a handler do not
exceed the actual costs of hauling. In addition, Piedmont reiterated
its request for a net shipment provision to ensure that shipments from
these 4 markets to other order plants are not occurring simultaneously
with the importation of supplemental milk to replace these exports.
In its brief, Piedmont also strongly opposed any reduction in the
blend price of producers. A recommendation to prorate the available
funds to be paid out to handlers was supported.
According to Piedmont, if the Department does not eliminate
producer milk from being eligible for transportation credits, certain
restrictions should be placed on it. While supporting the proposed
amendment to assign producer milk to Class I in the same manner as
transferred milk, Piedmont opposes the other proposed changes involving
producer milk. Piedmont stated in its brief that when computing the
transportation credit, such credit should be reduced by 125 miles and
that it should also be reduced by an increment of 5% for each 100 miles
over 250 miles. In addition, Piedmont supports a reduction in the
credit rate of 0.37 cent per mile per hundredweight that is used in the
calculation of the credits. The rate decided upon should ensure that
handlers have an economic incentive to reduce the cost of transporting
milk.
A brief submitted by CVMPA supports a continuation of
transportation credits for the 4 markets, but also recommended that
certain modifications be adopted to the current provisions. In its
brief, CVMPA stated that the marketing situation which prompted the
need for transportation credits in the Southeast has not changed, and
any return to the pre-transportation credit situation would result in
disorderly marketing and irreparable harm to producers in certain
groups.
CVMPA stated that the credits available on supplemental producer
milk should be comparable to credits available on other order plant
milk. It suggests that one way of accomplishing this is to use the same
marketwide Class I utilization percentage to determine the proportion
of transferred milk and producer milk that is eligible for the credit.
A second change supported by CVMPA involves the adjustment of the
credit by the difference between the shipping point Class I price and
the receiving plant Class I price whether it is a producer load or an
other order plant transferred load. This will further equate the amount
of credits available on supplemental producer milk versus supplemental
plant milk.
In its brief, CVMPA restated its support of the reduction of the
first 85 miles in computing the transportation credit. Such a
reduction, CVMPA argued, would serve as a proxy for the
[[Page 27531]]
normal distance milk moves from farm to plant. This reduction is
appropriate, according to CVMPA, because the producer should be
responsible for the cost of farm-to-market hauling. This modification,
it adds, will further equate credits on producer milk and plant milk.
CVMPA's brief supports the proposal to have a producer's milk
ineligible for credits if the producer's farm is located within 85
miles of the plant receiving the milk, is within the 4 marketing areas,
is within 85 miles of certain cities on the periphery of the 4-market
area, or is located within certain states in the southeastern United
States. CVMPA argued that expansion of the geographic area would tend
to curtail the incentive to move milk uneconomically. CVMPA also
refuted certain arguments brought up during the reopened hearing which
maintained that such an expansion would result in the procurement of
milk from further distances so that credits could be earned. This,
CVMPA argued, is false logic.
Regarding the assessment rates, CVMPA argued in its brief that
assessments should be raised to a level high enough to ensure that
there will be no insufficiencies in the transportation credit balancing
fund. No justification exists for reducing the blend price to
producers, according to CVMPA; therefore, no deductions should be made
from the producer-settlement fund. CVMPA's brief also stated that any
other alternative, such as over-order pricing, will result in inequity
or uncertainty.
Finally, CVMPA opposed the installation of a net shipment provision
for reducing transportation credits received by a plant that also ships
out Class II or Class III milk during the same month that
transportation credits are received by such plant. In its brief, CVMPA
argued that seasonal, monthly, and weekly balancing of customer needs
is very important to a cooperative association such as itself. While
some operators of supply plants have the ability to reshuffle supplies
through the week and weekend to help with weekly balancing,
cooperatives which do not have manufacturing plants lack such
opportunity. According to CVMPA, it is untenable to reduce
transportation credits on supplemental milk simply because a
cooperative is balancing the daily and weekly need of distributing
plants by diverting producer milk.
Mid-Am also submitted a post-hearing brief in support of the
continuation of transportation credits under the 4 orders, but with the
modifications summarized earlier. Mid-Am reiterated its support for a
modification of the interim provisions that would ensure that credits
given on producer milk are comparable to credits given on plant milk.
Mid-Am pointed out in its brief that if the proposed modifications
to the interim amendments concerning credits on producer milk are
adopted, the amount of credits paid out will be significantly reduced;
therefore, for Orders 5, 11, and 46, the current assessment rate of 6
cents per hundredweight should be sufficient to cover the costs of
credits due. However, Mid-Am stated that in order to prevent funds from
being deducted from the producer-settlement fund, an increase of the
assessment to 7 cents in Order 7 would be necessary. Mid-Am also
reiterated its opposition to the adoption of a net shipment provision
for reducing transportation credits. According to Mid-Am, no
justification exists for the incorporation of such a provision. Milk
Marketing Inc. also submitted a brief in support of the continuation of
transportation credits.
MMI stated that it fully supports the positions of CVMPA and Mid-Am
with respect to the modification of the interim amendments. According
to MMI, the proposed modifications will result in the transportation
credit provisions being administered in a more equitable and uniform
manner.
A brief filed by AMPI also supported modifications of the current
transportation credit provisions so that the credits available on
producer milk are more comparable to the credits available on other
order plant milk. According to AMPI, such modifications would result in
the elimination of the transportation credit advantage of producer milk
over plant milk which causes disorderly procurement activities by
various handlers.
In its brief, AMPI opposes the modification proposed by Mid-AM and
CVMPA that would render ineligible for credits that milk shipped from
producers' farms located outside the 4 marketing areas, but within 85
miles of certain basing points. AMPI argues that such a restriction
would result in the uneconomical movement of milk, thereby creating
additional transportation costs in the Southeast.
AMPI's brief also recommends the inclusion of a net shipment
provision to guard against abuse of the transportation credits by
various handlers. AMPI's brief stated that it is unreasonable to base
such a net shipment provision on monthly transfers and diversions; it
suggested that netting shipments that occur within the same 24-hour
period would be more appropriate.
Barber Pure Milk Company and Dairy Fresh Corporation also submitted
a post-hearing brief opposing certain modifications of the current
transportation credit provisions. Barber and Dairy Fresh stated that
they are concerned over issues of inequity which may result from any
changes to the current provisions.
In their brief, Barber and Dairy Fresh oppose any proposal to have
credits on supplemental producer milk be contingent upon the lower of
the marketwide Class I utilization or the Class I utilization of the
receiving plant. By making the credits on producer milk and plant milk
comparable, they argue, other inequities would be created.
Additionally, they note that the proposed modifications, including the
proposal to subtract 85 miles from the total farm-to-plant mileage,
would encourage the importation of other order plant milk rather than
producer milk, which is more efficient.
According to Barber and Dairy Fresh, the interim orders should
remain as they are with respect to adjustments involving Class I prices
applicable at the origination point and the receiving plant. Any
modification to the current computation would not have sufficient
justification, according to the commentors. Any change to the
geographic area from which producers' milk is ineligible to receive
credits was opposed by Barber and Dairy Fresh because restrictions
would be placed on producer milk which would not apply to milk from
other order plants.
In their brief, Barber and Dairy Fresh also opposed decreasing the
amount of credits available as the distance increases. This, it was
argued, would force the uneconomical movement of milk. Any increase in
the assessment rate was opposed by the commentors also. They maintain
that producers also must share some responsibility for supplying the
Class I milk needs of the markets. Finally, Barber and Dairy Fresh
suggest that a net shipment provision be incorporated in the orders to
prevent milk from being brought into one order for the transportation
credit, while simultaneously milk is being shipped by the same handler
to another market. According to the commentors, the Florida markets are
benefiting from the transportation credit provisions at the expense of
the 4 southeastern markets.
Gold Star Dairy also submitted a post-hearing brief opposing any
assessments on Class I prices in order to fund transportation credits
under Order 7 and maintains its position as stated in its brief
following the May 1996 hearing. Gold Star Dairy also opposes any
modifications of the orders regarding
[[Page 27532]]
the interim amendments claiming that proper notice had not been given.
Select Milk Producers, Inc., submitted a brief in support of the
continuation of transportation credits without modification. In
addition to reiterating its position from an earlier brief submitted
after the May 1996 hearing, Select stated that proposals to limit
transportation credits based on distance would result in an inequitable
situation by placing the burden of transporting milk from further
distances on cooperatives servicing the southeast markets.
Additionally, Select maintained that the small reduction in producer
pay prices resulting from the credits will end once the funds in the
transportation credit balancing funds are built up; therefore, these
past reductions do not justify changing the current provisions. Select
also argued that proper notice had not been given to interested parties
prior to the reopened hearing.
A brief was also filed by a producer from Tennessee who expressed
concern that transportation credits place southeastern producers at a
competitive disadvantage. In his brief, he also questioned why
southeast producers have been paying to have distant milk hauled into
their markets.
Conclusion
Testimony and exhibits introduced at both sessions of the hearing
indicate that the Southeastern United States has a chronic shortage of
milk for fluid use in the summer and fall months, which often extends
into the winter months. This shortage has been worsening over time as
milk production has declined and population has increased. This trend
is likely to continue, exacerbating the problem of obtaining a
sufficient supply of milk for fluid use in an orderly and equitable
manner.
Under the arrangements that existed in these markets prior to the
adoption of the interim amendments, the costs of obtaining an
increasing supply of supplemental milk were not being borne equally by
all handlers and producers in each of the 4 orders. The record
indicates that disorderly marketing conditions existed because of the
significantly different costs that were incurred by handlers who
provide the additional service versus those who do not. It also
indicates that the disproportionate sharing of costs was jeopardizing
the delivery of adequate supplies of milk for fluid use. Thus, based
upon the record of the first session of the hearing in these matters,
interim amendments were adopted to restore stability and order in
providing adequate supplies of milk for fluid use. The reasons for
adopting the interim amendments were thoroughly explained in the
tentative decision and the provisions that were adopted have been
summarized above. Therefore, the discussion that follows will not
reiterate the reasons for adopting the interim amendments, but instead
will focus on the reasons for changing them based upon the new
information presented at the December hearing.
The interim amendments provided for transportation credits during
the months of July through December and included all of the months of
January through June in a ``discretionary transportation credit
period.'' Under those provisions, a handler may request that
transportation credits be extended to any of the months of January
through June by filing such a request with the market administrator 15
days prior to the beginning of the month for which the request is made.
After providing notice of such a request to interested parties and
conducting an independent study of the situation, the market
administrator has the ultimate authority to grant or deny the request
but must notify handlers of the decision by the first day of the month.
The complete procedure to be followed is described in Sec. 100X.82(b)
of the order language.
This final decision changes the discretionary period from the
months of January through June to January and June only. Outside of the
July through December period, January and June are likely to be the
months when these markets are most in need of supplemental milk for
fluid use. Class I utilization generally begins to drop in February and
milk supplies are usually adequate for fluid use until June.
The reasons for changing these discretionary months are twofold.
First, including all of the months of January through June in the
discretionary period could result in a situation where transportation
credits are provided on nearly a year-round basis. Were this to happen,
it would destroy the concept of a supplemental producer because a dairy
farmer conceivably could be shipping milk to one of these markets on a
year-round basis. Moreover, under the provisions provided in this
decision, if a dairy farmer were to supply milk for more than 2 months
of the January through June period, the producer's milk would be
ineligible for transportation credits beginning in July. Hence, these
provisions would be in conflict with each other. A second reason for
restricting the discretionary period to January and June is to give the
transportation credit balancing fund a chance to build up so that funds
will be available when the markets are most in need of supplemental
milk starting in July.
The interim amendments provided for a transfer of funds from the
producer-settlement fund to the transportation credit balancing fund
when the latter fund had an insufficient balance to pay the month's
transportation credits. When this provision was adopted, it was assumed
that it would only be needed for the first year that these provisions
were in effect and that, thereafter, the transportation credit
balancing fund would maintain a sufficient balance to preclude such a
transfer of funds. Experience has indicated otherwise, particularly
with respect to the Southeast and Carolina markets. Data introduced by
the market administrators' offices show that all 4 orders had an
insufficient balance in the transportation credit balancing fund during
every month that transportation credits have been in effect, with the
exception of Order 46 in November 1996. The data also show that the
transfer of funds from the producer-settlement fund to the
transportation credit balancing fund reduced blend prices to producers
by varying amounts during the 4-month period of August through November
1996, ranging from 1 cent for Order 46 to as much as 21 cents in
October for Order 7.
To cope with the milk shortage of the past year, action had to be
taken to provide handlers with adequate milk supplies to meet their
fluid needs as equitably as possible. Since the transportation credit
provisions did not become effective until August 10, 1996, there was no
opportunity to accumulate funds with which to pay all of the
transportation credits. Therefore, as a short-term measure, provision
was made for taking funds from the producer-settlement fund. The logic
behind this provision was that if transportation credits could not be
paid fully from funds collected from handlers, the next best
alternative was to have all of a market's producers contribute to
making up the difference; otherwise, certain producers (i.e., members
of cooperative associations) would bear a disproportionate share of the
cost of bringing in supplemental milk.
Based on the experience with transportation credits during the past
4 months, it can be concluded with some certainty that, under present
conditions, the transportation credit balancing fund of Orders 5 and 7
would contain insufficient funds to pay for all of the transportation
credits that are likely to be accrued during the months of July through
December 1997 and that, based upon the current 6-cent assessment rate,
funds would have to be transferred from
[[Page 27533]]
the producer-settlement fund to the transportation credit balancing
fund by fall 1997 if these provisions remain unchanged.
We agree with the proponents of transportation credits that the
cost of bringing supplemental milk to a market generally should be
shared among all of a market's handlers. However, from the data for the
last 4 months, it can now be concluded with reasonable certainty that
to fully cover handlers' costs for the Southeast and Carolina markets
under the present provisions, the assessment rate would have to be
raised significantly. A better approach, we believe, is to address the
revenue problem from both ends: slightly increase revenue, but more
significantly reduce payouts. This would ensure that only necessary
imports are made, and would encourage the most cost effective methods
of procurement. At the same time, it would provide handlers with
significant, if not total, recoupment of costs.
In particular, based upon the record of this hearing and the
experience with transportation credits during the months of August
through November 1996, several changes should be made to the
transportation credit provisions to correct certain problems that have
become evident.
First, the transfer of funds from the producer-settlement fund to
the transportation credit balancing fund should be eliminated. This
temporary measure is no longer needed. Transportation credits should be
paid out each month to the extent possible from the available funds in
the transportation credit balancing fund. If the credits exceed the
balance in the transportation credit balancing fund, the available
funds should be prorated to handlers based upon the transportation
credits that are due to each handler.
Second, the per mile transportation credit rate should be reduced
to 0.35 cent per hundredweight per mile from the present level of 0.37
cent. This reduction is consistent with the testimony of several
witnesses who warned during the course of the hearings that it is
better to under-compensate handlers for supplemental milk costs rather
than overcompensate them. In this way, handlers will only import milk
that is truly needed because their costs may not be fully covered. This
argument makes sense and, in view of the need to conserve funds, this
suggestion should be adopted.
Third, the proposal by Mid-Am to exclude 85 miles from the mileage
when computing credits for supplemental producer milk should be
adopted. Mid-Am is correct in arguing that producers should be expected
to bear their normal farm to plant hauling cost, and the 85-mile figure
proposed appears to be a reasonable approximation of the distance used
in computing such cost. This modification will also help significantly
to reduce transportation credits.
Fourth, certain changes should be made in the proportion of
supplemental producer milk eligible for transportation credits and in
the formula for computing those credits. These changes are explained
below.
Finally, the maximum assessment for the transportation credit
balancing fund should be increased slightly for Orders 5 and 7. It is
likely that, even with the changes adopted above and others yet-to-be
discussed, there will be a shortfall in funds to pay for all of the
projected transportation credits if production patterns continue as
they have for the past 3 years. A modest rate increase will help narrow
this gap. Therefore, the maximum assessment rate for Order 5 should be
increased to 6.5 cents per hundredweight of Class I producer milk and
the rate for Order 7 should be increased to 7 cents per hundredweight.
The rate should remain at 6 cents per hundredweight for Orders 11 and
46, however.
This modest increase in the assessment rates for Orders 5 and 7
will help to avoid having to prorate available funds to handlers in
these markets. It should be kept in mind that this rate is the maximum
rate that can be charged. If production increases and/or supplemental
milk imports decrease and less money is needed for the transportation
credit balancing fund, these changes will trigger an automatic
reduction in this assessment.
The current 6-cent assessment for Orders 11 and 46 is likely to
meet all of the anticipated transportation credits for 1997. In fact,
by the first half of 1998 it may be possible to maintain a sufficient
balance in the transportation credit balancing fund with a rate below 6
cents per hundredweight for these 2 markets.
In conjunction with the limit on the disbursement of transportation
credits, as explained above, a new procedure should be implemented for
receiving the required information, computing the credits to be
disbursed, and making final settlement for appropriate adjustments.
Experience with the transportation credit provisions during the
months of August through December 1996 has demonstrated a handler/
cooperative association problem in getting complete and accurate
transportation credit documents to the market administrator by the 7th
day of the month, when such information must be received for purposes
of computing the uniform price. Because of difficulties in obtaining
timely information, the market administrators have accepted late
submissions of supplementary information.
Now that the possibility exists that transportation credits may
have to be disbursed on a prorata basis, fixing the time for the final
submission of requests and for final payment based upon such requests
is even more of a necessity. If the submission of supplemental
information were left open-ended, the procedure for prorating credits
could get hopelessly complicated with endless recalculations based on
tardy information. Therefore, the procedure should be clear,
reasonable, and unalterable once in place.
When the market administrator receives handlers' reports of
receipts and utilization by the 7th day of the month, the market
administrator will determine whether there are sufficient funds in the
transportation credit balancing fund to cover the requests for
transportation credits. If there is not a sufficient balance, the
market administrator will compute a preliminary proration percentage by
dividing the balance in the fund by the total amount of transportation
credits requested. The prorated credits so computed will be disbursed
along with any payments from the producer-settlement fund on or before
the 13th day of the month with respect to Orders 5, 7, and 11 (16th day
of the month in the case of Order 46).
Handlers will be given the opportunity to correct and file complete
documentation of their initial transportation credit requests for the
preceding month by filing updated information with the market
administrator by the 20th day of the month. After such date, the market
administrator will conduct a preliminary audit of the requests and will
then compute a final proration percentage based upon the revised
numbers. Handlers then will be notified of any additional credits due
them or of any payments due from them and such payments will be
completed the following month when payments are next due.
At the May 1996 hearing, Mid-Am proposed permitting transportation
credits for bulk transfers of milk for Class I use from any other order
plants. The interim amendments restricted such transfers to plants
regulated under Federal orders other than Orders 5, 7, 11, and 46. The
reason for excluding plants under these 4 orders from transportation
credits was to avoid
[[Page 27534]]
potential abuses from undue movements of milk among the orders to take
advantage of transportation credits. In particular, handlers were
concerned that milk could be stair-stepped from Order 46 to Order 7,
for example, thereby creating a shortage of milk in Order 46. Order 46
handlers then would have to import replacement milk, and their
assessments for transportation credits would be used to cover
transportation costs for such replacement milk when, some argued, Order
7 handlers should have borne the full cost of importing milk from the
ultimate source. At the reopened hearing, there were no problems
mentioned in connection with the provisions applicable to plant
transfers, except for concern that milk could be moved or stair-stepped
among orders to obtain credits. As a result, the provisions that
prohibit credits to receipts of transferred milk among the four orders
should remain unchanged in the final amendments.
Currently, producer milk is eligible to receive transportation
credits as discussed above. At the reopened hearing, there was no
testimony suggesting that transportation credits be eliminated for
producer milk. In fact, the available data shows that during the months
of August through November 1996 far more supplemental milk was received
directly from producers' farms than from other order plants. Several
suggestions were made concerning how to compute such credits in a more
equitable and efficient manner. Since most of these suggestions have
merit, modifications to the interim amendments involving producer milk
are provided.
The thrust of the testimony was that the present method for
computing transportation credits for producer milk resulted in an
overly generous credit as compared to the method used for plant milk
and, therefore, provided an artificial incentive to receive producer
milk directly from farms rather than milk transferred from an other
order plant. The testimony, as summarized earlier, was quite
convincing, with the exception of Mid-Am's proposal to exclude the milk
of a producer who is within 85 miles of the perimeter of any of the 4
marketing areas from transportation credit eligibility. Such proposal
should not be adopted.
In the interim amendments, producer milk was not eligible for a
transportation credit if the producer's farm was located within one of
the 4 marketing areas or if the farm was within 85 miles of the plant
to which milk from the farm was delivered. The tentative decision
concluded that it was ``reasonable to conclude that the markets''
regular producers are located reasonably close to the plants receiving
their milk. Thus, such producers' farms are likely to be within the
geographic marketing areas defined in each order.''
At the reopened hearing, Mid-Am proposed expanding this restriction
to include producers whose farms are: (a) Within the States of Florida,
Georgia, Alabama, Louisiana, Mississippi, Arkansas, Tennessee, South
Carolina, North Carolina, or Kentucky; or (b) within 85 miles of the
City Hall in the nearer of Lake Charles or Shreveport, Louisiana;
Little Rock, Arkansas; Evansville, Indiana; Fulton, Louisville, or
Lexington, Kentucky; Bristol, Tennessee; or Reidsville, or Roanoke
Rapids, North Carolina.
Mid-Am's 10-state exclusion area would randomly exclude many
counties in Arkansas and Kentucky that are outside of any of the 4
marketing areas and should not be adopted. It would be difficult to
justify the exclusion of a county from transportation credits simply
because of its location within a particular state. For example, under
the Mid-Am proposal, many counties in northwest Arkansas and northeast
Kentucky would be excluded from transportation credits. These counties
may or may not be part of the regular supply for the 4 markets. By
randomly excluding all territory within a state, certain counties
outside of the 4 marketing areas may be unfairly excluded. The
exclusion of territory from transportation credits should be based upon
whether that territory is a regular source of supply for the markets
involved in this proceeding. It must be noted, however, that simply
because a county is within one of the 4 marketing areas does not
necessarily make it a regular source of supply for these 4 markets. By
the same token, simply because a county is just outside these marketing
areas does not mean it is not a regular source of supply either.
However, it is reasonable and appropriate to use such marketing area
boundaries to define the exclusionary area since it is apparent that
most of the producers located within these areas supply plants
regulated under these orders. Furthermore, other performance measures
are used to distinguish between producers who are or who are not
regular suppliers of these markets. Thus, the exclusionary area need
not be overly restrictive as proposed by Mid-Am.
The interim amendments excluded the area within the 4 marketing
areas from transportation credits. However, the use of the marketing
area definition failed to exclude several unregulated counties within
the State of Kentucky where producers are located and who could qualify
for transportation credits. These counties are completely encircled by
the Order 7 and Order 46 marketing areas and are an integral part of
the milk supply for those 2 markets. There can be no doubt that these
counties-- Allen, Barren, Metcalfe, Monroe, Simpson, and Warren--
clearly should be part of the area excluded from transportation credits
because the surrounding markets are clearly the regular outlets for
this milk. Accordingly, the order language should be modified to
include these 6 counties in Sec. 100X.82(c)(2)(iii).
The proposal of Mid-Am to exclude the territory within 85 miles of
the cities mentioned above should not be adopted. This proposal would
exclude many producers who are located in counties adjacent to the 4
marketing areas. These producers may, for the most part, be regular
suppliers of other markets. For example, there may be dairy farmers in
East Texas who are within 85 miles of Lake Charles or Shreveport,
Louisiana, from whose farms milk is delivered on a supplemental basis
to other plants within the Southeast market that may be hundreds of
miles away. It would make no sense to exclude these farms from
transportation credits and thereby force cooperative associations and
plant operators to bring in supplemental milk from even farther
distances when this closer milk is available.
Not all of the pool distributing plants regulated under these
orders are located within the 10-state area specified above. For
example, a pool distributing plant regulated under Order 5 is located
in Lynchburg, Virginia. The interim amendments dealt with this problem
by specifying that a farm had to be more than 85 miles from the plant
to be eligible for a transportation credit. This provision was based
upon a suggestion made by MMI at the May 1996 hearing restricting
supplemental producers to those who are more than 85 miles from
Louisville or Lexington, Kentucky, or Evansville, Indiana.
As explained above, the amendments provided in this decision would
subtract 85 miles from the transportation credit computation for
producer milk. In view of this adjustment, it is no longer necessary to
specify that a producer must be more than 85 miles from the plant
because a transportation credit would not be given for that distance
anyway. In effect, the origination point for producer milk has to be at
least 85 miles from the plant of receipt before milk from that point
would receive a transportation credit. Thus, the language now contained
in Sec. 100X.82(c)(2)(ii) of the interim
[[Page 27535]]
amendments referring to 85 miles has not been carried forward to the
comparable revised paragraph, Sec. 100X.82(c)(2)(iii), of the attached
final amendments.
Mid-Am also proposed certain changes to the way transportation
credits are computed for producer milk. As provided in the interim
amendments, all producer milk classified as Class I milk is eligible
for the credit. At present, the proportion of such milk that receives a
Class I classification is approximately equal to the utilization of the
plant receiving the milk. Receipts of transferred milk from other order
plants, on the other hand, are allocated to Class I based upon the
lower of the receiving handler's Class I utilization or the marketwide
Class I utilization. This difference in classifying supplemental milk,
according to Mid-Am, has provided an incentive for a high Class I
utilization handler to receive supplemental producer milk rather than
supplemental milk transferred from an other order plant in order to
receive credits on a greater proportion of the supplemental milk.
To correct this bias, Mid-Am proposed that supplemental milk from
producers should be assigned to Class I in the same proportion as other
order supplemental milk to determine the proportion of such milk that
is eligible for the transportation credit. This modification should be
adopted. Supplemental producer milk should be assigned to Class I, for
transportation credit purposes, by adding a paragraph--(c)(2)(i)--to
Section 82 (``Payments from the transportation credit balancing
fund''). This new paragraph states that the quantity of producer milk
that is eligible for the transportation credit shall be determined by
multiplying the total pounds of supplemental producer milk received at
the plant by the lower of the marketwide Class I utilization of all
handlers for the month or the Class I utilization of the pool plant
operator receiving the milk after all of the handler's receipts have
been allocated to classes of utilization in Section 44 of the
respective order.
Another change that should be made to the transportation credit for
producer milk has to do with the way the gross credit is adjusted by
the difference in Class I price at the receiving plant and the
origination point for the load of milk. At the present time, even
though a farm and an other order plant may be identically located in
another order's marketing area, there may be a difference in the
transportation credit that would apply to milk coming from those
identically-located points under the provisions of Orders 5, 11, and
46. The Class I price, adjusted for location, under Orders 5, 11, and
46, applicable to a plant in the marketing area of some other order is
not necessarily the same as the Class I price, adjusted for location,
applicable to that plant pursuant to the provisions of that other
order. For example, the Class I price to any plant under the Eastern
Ohio-Western Pennsylvania order is $2.00 plus the basic formula price
under the provisions of the Eastern Ohio-Western Pennsylvania order,
but the Class I price that would apply to a plant located in the
Eastern Ohio-Western Pennsylvania marketing area under the provisions
of the Carolina order would be based upon mileage from specified basing
points in North Carolina; it could be greater or less than $2.00 plus
the basic formula price. Under the Southeast order, by contrast, the
Class I price applicable to a plant that is located in the marketing
area of some other order is the Class I price that would apply to that
plant under the provisions of the order covering that marketing area.
Therefore, under the Southeast order the transportation credit for a
plant or farm identically located in another Federal order marketing
area is the same, but for Orders 5, 11, and 46 it may not be.
In computing transportation credits for plant milk, the gross
credit (i.e., the mileage times 0.35 cent) is adjusted by subtracting
the Class I price applicable to the plant under the other order from
the Class I price applicable to the plant receiving the milk. For
producer milk, however, the gross credit is adjusted by subtracting
this order's Class I price at the origination point from this order's
Class I price at the receiving plant. As a result, there could be a
difference in the transportation credit applicable to plant milk versus
producer milk, even though the plant and farm are adjacent to each
other.
This can and should be corrected for plants and farms located in
Federal order marketing areas by changing the way the credit is
computed for producer milk. The adjustment to the gross credit for
producer milk should be computed as if the origination point for the
producer milk were a plant location. Specifically, if the origination
point is in another order's marketing area, the other order Class I
price applicable at the origination point should be subtracted from the
receiving order's Class I price at the receiving plant. This change is
provided in Sec. 100X.82(d)(3)(v) of the order language.
A complication arises in the case of an origination point that is
not located within any Federal order marketing area. While the other
order Class I price that would apply to an other order plant that is
located in unregulated territory is known, the same cannot be said for
a farm location (i.e., an origination point for a load of supplemental
producer milk). In view of this uncertainty, the most reasonable
treatment for such milk is to price it under the provisions of the
order receiving the milk. For example, if an Order 5 plant in Raleigh,
North Carolina, received supplemental producer milk from a farm in an
unregulated county in central Pennsylvania, the gross transportation
credit for that load of milk would be adjusted by subtracting from the
credit the difference between the Order 5 Class I price at the
Pennsylvania origination point and the Order 5 Class I price at
Raleigh.
Another issue, not addressed at the hearing, must be discussed. It
is possible that milk may be transferred from an other order plant that
is located in one Federal order marketing area but is regulated under a
different order. For example, a plant may be located in the Eastern
Ohio-Western Pennsylvania marketing area but may be regulated under the
Ohio Valley order. In such a case, a question may arise concerning
which order's Class I price to use in computing the transportation
credit. In this situation, the market administrator should use the
Class I price that applies at that plant under the order in which the
plant is regulated. Thus, in the example given, the Class I price at
the plant would be the applicable Class I price under the Ohio Valley
order. This treatment will ensure that the transportation credit
properly reflects the difference in the Class I prices applicable to
the shipping handler and the receiving handler.
In addition to considering the geographic location of a dairy farm
for the purpose of determining whether milk from that farm is
supplemental to a market's needs, attention should be focused on
whether milk from that farm is regularly associated with the market or
is shipped to the market as needed.
Since the need for supplemental milk generally drops off sharply
after the month of December or January in all of these markets and does
not reappear, usually, until the month of July, it is reasonable to
conclude that the milk of a producer who is located outside of the
exclusionary areas (the 4 subject marketing areas or the 6 Kentucky
counties mentioned above) generally would not be needed during the
months of January through June, but might be needed starting in July.
It is also logical that the milk of a supplemental producer would not
be needed each day but perhaps once or twice a week.
[[Page 27536]]
Accordingly, if a dairy farmer was a regular supplier of the market
during January through June--i.e., a ``producer'' on the market for
more than 2 of those months--the milk of such a dairy farmer should not
be considered supplemental milk during the following months of July
through December.
It would be unduly restrictive to disqualify a dairy farmer for
shipping a limited amount of milk during one or two months of the
January through June period, however, because even the months of
January and June can be short months in the Southeast, and, in fact,
these 2 months can be included in the transportation credit period.
Therefore, the provision should be flexible enough to accommodate some
shipments to the market during the January through June period.
Specifically, a dairy farmer should not lose status as a supplemental
producer if milk is shipped to a market for not more than 2 months of
the January through June period. However, shipments during this period
should be of a limited duration. Therefore, not more than 50 percent of
the dairy farmer's production may be received as producer milk, in
aggregate, during the 2 months of the January through June period in
which the dairy farmer was a producer on the market. In addition, if
January and/or June are months in which transportation credits are
extended, those months should not be included in the 2-month limit for
a supplemental producer. The transportation credits would not be
extended to January or June if milk were not needed during those
months, and it would be counterproductive to penalize a producer for
responding to that need. Therefore, if January and June are part of the
transportation credit period, a dairy farmer may be a producer during
those months and, in addition, may be a producer during 2 of the months
of February through May provided that the dairy farmer's producer milk
during those additional 2 months did not exceed the 50 percent limit.
The interim amendments provided that 32 days' production of a dairy
farmer could be delivered during January through June before the dairy
farmer would lose status as a supplemental producer. This has been
changed to ``50 percent of the dairy farmer's production'' to simplify
reporting and administration of this provision.
The provisions in the interim amendments prescribing the
determination of an origination point for a load of supplemental
producer milk are continued in this final decision. No problems were
noted with this provision and no suggestions were made for changing it
at the reopened hearing or in the post-hearing briefs. The 2
alternatives provided for determining a supplemental producer milk
origination point are contained in Sec. 100X.82(d)(3)(i).
As noted earlier, there was a great deal of concern expressed at
both sessions of the hearing about ``stair-stepping'' milk from one
market to another. Suggestions were made at both sessions of the
hearing to adopt a net shipment provision to offset transfers from a
pool plant to other order plants against supplemental milk brought into
the pool plant within a specified period of time.
This issue can be quite complex, particularly in large markets,
such as the Southeast market. It may very well make economic sense to
ship surplus milk from one part of a market (for example, southern
Louisiana in the Order 7 marketing area) to another market that is
short of milk (for example, the Florida markets) at the same time that
bulk milk is imported for a handler in another part of the Order 7
marketing area (for example, a handler in Nashville). Also, it is
entirely possible that milk may be needed at the beginning of a month,
while by the end of the month milk must be exported out of the market
for surplus disposal. Finally, since fluid milk processors have
different bottling needs, extra milk may be needed on certain days but
not on other days within the same week.
In response to concerns expressed at both sessions of the hearing,
the 4 orders should contain a net shipment provision to prevent the
type of abuses feared by proponents of such a provision. However, in
view of the varying circumstances surrounding the fluid needs of these
markets, the provision should be flexible enough to accommodate these
varying needs. To be effective, the net shipment provision should apply
to all supplemental milk received, either by transfer or directly from
producers' farms as producer milk.
In applying the net shipment provision, bulk transfers to nonpool
plants that were made on the same day that supplemental milk was
received at a pool plant should be subtracted from the total receipts
of supplemental milk for which the pool plant operator or cooperative
association is requesting a credit. In reducing the supplemental milk
eligible for the credit pursuant to this net shipment provision, the
market administrator should first subtract the loads of milk that were
most distant from the plant and then continue in sequence with less
distant loads. This procedure, which is described in Sec. 100X.82(d)(1)
of the orders, will minimize the depletion of funds from the
transportation credit balancing fund resulting from unwarranted
receipts of supplemental milk.
The net shipment provision will require accurate accounting and
reporting on the part of handlers. Specifically, each pool plant
operator applying for transportation credits will be required to
maintain accurate accounting records of daily transfers of bulk milk
from the plant to nonpool plants. This is provided in
Sec. 100X.30(a)(7) of the order language for Orders 5, 7, and 46, and
Sec. 100X.30(a)(8) for Order 11.
Although specific proposals were made to net outgoing shipments
from incoming shipments within a 24-hour period, this suggestion could
prove to be tedious for handlers, as well as for the market
administrator. Therefore, the attached amendments provide for netting
based on receipts and shipments occurring the same calendar day.
The diversion of producer milk to a nonpool plant was not addressed
at great length at either session of the hearing, although AMPI did
state in its brief that diversions to nonpool plants should also be
included in a net shipment provision.
It is certainly a fact that milk is diverted from pool plants in
these 4 markets to nonpool plants for Class II and Class III use. Each
pool plant operator has a regular supply of producer milk for its Class
I needs and that milk should be utilized to the full extent before
importing supplemental milk. While diversions could have been
incorporated into the net shipment provision, as suggested by AMPI,
there would be numerous obstacles to overcome in doing so. Therefore,
we concluded, on balance, that any possible benefit of including
diverted milk would be outweighed by the problems caused by such a
complicated provision.
To illustrate one type of problem, for example, not all
supplemental milk may be needed at a pool plant every day; some days it
may be diverted to a nonpool plant close to the farm where produced and
hundreds of miles away from the pool plant where it is received on a
supplemental basis some of the time. If diversions were included in the
net shipment provision, the milk that is not needed--i.e., it is
diverted to a nonpool plant--would have to be subtracted from the
supplemental milk that was needed that day, which could result in the
handler getting no transportation credit for supplemental milk received
on that day. While a provision undoubtedly could be written to
distinguish ``regular'' or ``close-in'' producer milk that is diverted
from
[[Page 27537]]
``supplemental'' or ``distant'' producer milk in an attempt to overcome
these problems, it would likely be a very cumbersome provision. If, at
some point, it becomes obvious that handlers are diverting local milk
for manufacturing use while importing supplemental milk for Class I use
within the same 24-hour period, appropriate action should be taken to
stop this abuse of the transportation credit provisions. In the
meantime, however, handlers should be given as much freedom as possible
to move milk according to their needs.
At the reopened hearing, Mid-Am proposed an amendment to that
section of the orders dealing with overdue accounts. Specifically, it
proposed adding overdue payments to the transportation credit balancing
fund in the list of late payments to which a late payment charge would
apply.
This proposal should be adopted. Although handler compliance with
the transportation credit balancing fund assessment has been excellent
thus far, it is possible that late payments may occur in the future.
Were this to happen, one handler could gain an advantage over competing
handlers by using money that should have been paid to the market
administrator. To discourage this from happening, and to rectify the
situation when it does happen, a late payment charge should apply to
delinquent payments to the transportation credit balancing fund.
A conforming change should be made in Order 46 with respect to the
payment of assessments for the transportation credit balancing fund and
the payment of transportation credits to handlers. In the interim
amendments, assessments for the transportation credit balancing fund
were uniformly due on the 13th day of the month for all 4 orders and,
similarly, payment of transportation credits to handlers was uniformly
set at the 12th day of the month for all 4 orders. However, Order 46
differs from the other 3 orders with respect to payments to and from
the producer-settlement fund. Under Order 46, payments to the producer-
settlement fund are due on the 15th day of the month and payments from
the producer-settlement fund are due on the 16th day of the month. For
the other 3 orders, however, payments into the producer-settlement fund
must be made by the 12th day of the month and payments out of the
producer-settlement fund must be made by the 13th day of the month. To
facilitate the payments of transportation credit assessments and
payouts under Order 46, the dates in Secs. 1046.81(a) and 1046.82(a)
should be changed from the 12th and 13th, respectively, to the 15th and
16th, respectively, to coincide with payments in and out of the
producer-settlement fund for that order.
A conforming change also should be made in Sec. 100X.81 with
respect to how the assessment for the transportation credit balancing
fund is to be determined. In the interim amendments, the standard used
for determining how much the handler assessment would be each month was
based upon the credits disbursed during the preceding July through
December period or during the immediately preceding 6-month period.
This paragraph was worded that way because transportation credits
theoretically could have been in effect every month of the year.
However, as modified in this final decision, transportation credits can
only be effective during the months of June through January and the
months of June and January are subject to a finding by the market
administrator that supplemental milk is needed for fluid use.
In view of the change in months for which transportation credits
may be effective, it is also appropriate to change the benchmark for
determining the level of such assessments. Specifically,
Sec. 100X.81(a) should be modified to read ``the total transportation
credits disbursed during the prior June-January period.'' However, in
the event that the funds disbursed are prorated based on the available
funds, the assessment should be based upon the total amount of credits
that would have been disbursed as determined by the market
administrator. Although the yardstick for the balance in the fund can
now be raised to 8 months instead of 6, this change is necessary to
maintain a balance in the transportation credit balancing fund that is
sufficient to cover the transportation credits to be disbursed in the
following short production period. In other words, if the months of
January and/or June were included in the prior transportation credit
period, the amount of credits given during these months should also be
included in the calculation of the assessment rates for the 4 orders.
Section 100X.77, adjustment of accounts, of the Carolina, Tennessee
Valley, and Louisville-Lexington-Evansville orders should also be
amended to conform with the changes adopted above. Presently, the
orders lack any instruction pertaining to the adjustment of accounts in
the event that an error has been made either involving payments into
the transportation credit balancing fund by handlers or payments to
handlers by the market administrator from such fund. Therefore, it is
necessary to include such language in section 100X.77 of these 3 orders
to avoid any ambiguity concerning these matters. In particular,
transportation credit balancing fund adjustments should be handled in
the same manner as adjustments to the producer-settlement fund, except
that additional transportation credits due handlers should be made as
soon as transportation credit funds become available and not
necessarily within 15 days of the time that this adjustment is
discovered. A similar conforming change is not necessary for the
Southeast order because the language contained in Sec. 1007.77 of that
order is general enough to accommodate adjustments related to the
transportation credit balancing fund.
Rulings on Proposed Findings and Conclusions
Briefs and proposed findings and conclusions were filed on behalf
of certain interested parties. These briefs, proposed findings and
conclusions and the evidence in the record were considered in making
the findings and conclusions set forth above. To the extent that the
suggested findings and conclusions filed by interested parties are
inconsistent with the findings and conclusions set forth herein, the
requests to make such findings or reach such conclusions are denied for
the reasons previously stated in this decision.
General Findings
The 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.
(a) 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;
(b) 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 the marketing areas, and the minimum
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, ensure a sufficient quantity of pure and wholesome
milk, and be in the public interest;
(c) The tentative marketing agreements and the orders, as hereby
[[Page 27538]]
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, marketing
agreements upon which a hearing has been held; and
(d) 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.
Marketing Agreement and Order
Annexed hereto and made a part hereof is an Order amending the
orders regulating the handling of milk in the Carolina, Southeast,
Tennessee Valley, and Louisville-Lexington-Evansville marketing areas,
which has been decided upon as the detailed and appropriate means of
effectuating the foregoing conclusions. A marketing agreement that
reflects the attached order verbatim is available upon request from the
market administrator.
It is hereby ordered that this entire decision and the order
amending the orders be published in the Federal Register.
Determination of Producer Approval and Representative Period
February 1997 is hereby determined to be the representative period
for the purpose of ascertaining whether the issuance of the orders, as
amended and as hereby proposed to be amended, regulating the handling
of milk in the aforesaid marketing areas is approved or favored by
producers, as defined under the terms of the individual orders (as
amended and as hereby proposed to be amended), who during such
representative period were engaged in the production of milk for sale
within the aforesaid marketing areas.
It is hereby directed that a referendum be conducted to ascertain
producer approval in the Louisville-Lexington-Evansville marketing
area. The referendum must be conducted and completed on or before the
30th day from the date that this decision is issued in accordance with
the procedure for the conduct of referenda (7 CFR 900.300-311), to
determine whether the issuance of the attached order as amended, and as
hereby proposed to be amended, regulating the handling of milk in the
Louisville-Lexington-Evansville marketing area is approved or favored
by producers, as defined under the terms of the order, as amended and
as hereby proposed to be amended, who during such representative period
were engaged in the production of milk for sale within the marketing
area.
The agent of the Secretary to conduct such referendum is hereby
designated to be Arnold M. Stallings.
List of Subjects in 7 CFR Parts 1005, 1007, 1011, and 1046
Milk marketing orders.
Dated: May 12, 1997.
Michael V. Dunn,
Assistant Secretary, Marketing and Regulatory Programs.
Order Amending the Orders Regulating the Handling of Milk in the
Carolina, Southeast, Tennessee Valley, and Louisville-Lexington-
Evansville Marketing Areas
This order shall not become effective unless and until the
requirements of Sec. 900.14 of the rules of practice and procedure
governing proceedings to formulate marketing agreements and marketing
orders have been met.
Findings and Determinations
The findings and determinations hereinafter set forth supplement
those that were made when the 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.
(a) Findings. A public hearing was held upon certain proposed
amendments to the tentative marketing agreements and to the orders
regulating the handling of milk in the aforesaid marketing areas. The
hearing was held pursuant to the provisions of the Agricultural
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), and the
applicable rules of practice and procedure (7 CFR Part 900).
Upon the basis of the evidence introduced at such hearing and the
record thereof, it is found that:
(1) The said orders as hereby 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 the aforesaid marketing areas. The
minimum prices specified in the orders as hereby amended are such
prices as will reflect the aforesaid factors, ensure a sufficient
quantity of pure and wholesome milk, and be in the public interest;
(3) The said orders, as hereby amended, regulate the handling of
milk in the same manner as, and are applicable only to persons in the
respective classes of industrial or commercial activity specified in,
marketing agreements upon which a hearing has been held; and
(4) All milk and milk products handled by handlers, as defined in
the order as hereby amended, are in the current of interstate commerce
or directly burden, obstruct, or affect interstate commerce in milk or
its products.
Order Relative to Handling
It is therefore Ordered, that on and after the effective date
hereof, the handling of milk in each of the specified orders' marketing
areas shall be in conformity to and in compliance with the terms and
conditions of each of the orders, as amended, and as hereby amended.
Accordingly, the interim rule amending 7 CFR Parts 1005, 1007,
1011, and 1046, which was published at 61 FR 41488 on August 9, 1996,
is adopted as a proposed rule with the following changes:
1. The authority citation for 7 CFR parts 1005, 1007, 1011, and
1046 continues to read as follows:
Authority: 7 U.S.C. 601-674.
PART 1005--MILK IN THE CAROLINA MARKETING AREA
Sec. 1005.30 [Amended]
2. In Sec. 1005.30, paragraphs (a)(7) and (a)(8) are redesignated,
respectively, as paragraphs (a)(8) and (a)(9), new paragraph (a)(7) is
added, and paragraphs (a)(5), (a)(6), and (c)(3) are revised to read as
follows:
Sec. 1005.30 Reports of receipts and utilization.
* * * * *
(a) * * *
(5) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1007, 1011, and 1046, for which a
transportation credit is requested pursuant to Sec. 1005.82, including
the date that such milk was received;
(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;
* * * * *
[[Page 27539]]
(c) * * *
(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 paragraphs (a)(5), (a)(6), and (a)(7) of this
section.
* * * * *
Sec. 1005.32 [Amended]
3. In Sec. 1005.32, a new paragraph (a) is added to read as
follows:
Sec. 1005.32 Other reports.
(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1005.9(a), (b), 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).
* * * * *
Sec. 1005.61 [Amended]
4. In Sec. 1005.61, paragraph (a)(4) is removed and paragraphs
(a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5),
respectively.
Sec. 1005.77 [Amended]
5. Sec. 1005.77 is revised to read as follows:
Sec. 1005.77 Adjustment of accounts.
(a) Whenever verification by the market administrator of payments
by any handler discloses errors made in payments to the producer-
settlement fund pursuant to Sec. 1005.71 or to the transportation
credit balancing fund pursuant to Sec. 1005.81, the market
administrator shall promptly bill such handler for any unpaid amount
and such handler shall, within 15 days, make payment to the market
administrator of the amount so billed. Whenever verification discloses
that payment is due from the market administrator to any handler
pursuant to Sec. 1005.72 or Sec. 1005.82, the market administrator
shall make payment to such handler within 15 days or, in the case of
the transportation credit balancing fund, as soon as funds become
available. If a handler is due additional payment for a month in which
payments to handlers were prorated pursuant to Sec. 1005.82(a), the
additional payment pursuant to this section shall be multiplied by the
final proration percentage computed in Sec. 1005.82(a)(2).
(b) Whenever verification by the market administrator of the
payment by a handler to any producer or cooperative association for
milk received by such handler discloses payment of less than is
required by Sec. 1005.73, the handler shall pay such balance due such
producer or cooperative association not later than the time of making
payment to producers or cooperative associations next following such
disclosure.
Sec. 1005.78 [Amended]
6. In the introductory text of Sec. 1005.78, the number
``1005.81,'' is added following the number ``1005.77,''.
Sec. 1005.81 [Amended]
7. In Sec. 1005.81, paragraph (c) is removed and paragraphs (a) and
(b) are revised to read as follows:
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. 1005.9(b) 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 [Amended]
8. Sec. 1005.82 is revised to read as follows:
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 an
other order plant 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. 1005.77. 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
[[Page 27540]]
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, 1011, and 1046, and allocated to
Class I milk pursuant to Sec. 1005.44(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. 1005.45(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. 1005.44;
(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 areas of
Federal Orders 1007, 1011, or 1046, or within the Kentucky counties of
Allen, Barren, Metcalfe, Monroe, Simpson, and Warren.
(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.
PART 1007--MILK IN THE SOUTHEAST MARKETING AREA
Sec. 1007.30 [Amended]
9. In Sec. 1007.30, paragraphs (a)(7) and (a)(8) are redesignated,
respectively, as paragraphs (a)(8) and (a)(9), new paragraph (a)(7) is
added, and paragraphs (a)(5), (a)(6), and (c)(3) are revised to read as
follows:
Sec. 1007.30 Reports of receipts and utilization.
* * * * *
(a) * * *
(5) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1005, 1011, and 1046, for which a
transportation credit is requested pursuant to Sec. 1007.82, including
the date that such milk was received;
(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;
* * * * *
(c) * * *
(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 paragraphs (a)(5), (a)(6), and (a)(7) of this
section.
* * * * *
Sec. 1007.32 [Amended]
10. In Sec. 1007.32, a new paragraph (a) is added to read as
follows:
[[Page 27541]]
Sec. 1007.32 Other reports.
(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1007.9 (a), (b), 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).
* * * * *
Sec. 1007.61 [Amended]
11. In Sec. 1007.61, paragraph (a)(4) is removed and paragraphs
(a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5),
respectively.
Sec. 1007.78 [Amended]
12. In the introductory text of Sec. 1007.78, the number
``1007.81,'' is added following the number ``1007.78,''.
Sec. 1007.81 [Amended]
13. In Sec. 1007.81, paragraph (c) is removed and paragraphs (a)
and (b) are revised to read as follows:
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. 1007.9 (b) 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. 1007.44 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 [Amended]
14. Sec. 1007.82 is revised to read as follows:
Sec. 1007.82 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. 1007.30(a)(5), bulk milk transferred from an
other order plant as described in paragraph (c)(1) of this section or
that received, and reported pursuant to Sec. 1007.30(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. 1007.32(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 any payment adjustments 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. 1007.77. 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, 1011, and 1046, allocated to Class I
milk pursuant to Sec. 1007.44(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. 1007.45(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. 1007.44;
(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 areas of
Federal Orders 1005, 1011, or 1046, or within the
[[Page 27542]]
Kentucky counties of Allen, Barren, Metcalfe, Monroe, Simpson, and
Warren.
(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. 1007.52;
(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.
PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA
Sec. 1011.30 [Amended]
15. In Sec. 1011.30, paragraphs (a)(8) and (a)(9) are redesignated,
respectively, as paragraphs (a)(9) and (a)(10), new paragraph (a)(8) is
added, and paragraphs (a)(6), (a)(7), and (c)(3) are revised to read as
follows:
Sec. 1011.30 Reports of receipts and utilization.
* * * * *
(a) * * *
(6) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1005, 1007, and 1046, for which a
transportation credit is requested pursuant to Sec. 1011.82, including
the date that such milk was received;
(7) Receipts of producer milk described in Sec. 1011.82(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;
(8) For handlers submitting transportation credit requests,
transfers of bulk milk to nonpool plants, including the dates that such
milk was transferred;
* * * * *
(c) * * *
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1011.82, all of the
information required in paragraphs (a)(6), (a)(7) and (a)(8) of this
section.
* * * * *
Sec. 1011.32 [Amended]
16. In Sec. 1011.32, a new paragraph (a) is added to read as
follows:
Sec. 1011.32 Other reports.
(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1011.9(a), (b), and (c) shall report to the
market administrator any adjustments to transportation credit requests
as reported pursuant to Sec. 1011.30(a)(6), (7), and (8).
* * * * *
Sec. 1011.61 [Amended]
17. In Sec. 1011.61, paragraph (a)(4) is removed and paragraphs
(a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5),
respectively.
Sec. 1011.77 [Amended]
18. Sec. 1011.77 is revised to read as follows:
Sec. 1011.77 Adjustment of accounts.
(a) Whenever verification by the market administrator of payments
by any handler discloses errors made in payments to the producer-
settlement fund pursuant to Sec. 1011.71 or to the transportation
credit balancing fund pursuant to Sec. 1011.81, the market
administrator shall promptly bill such handler for any unpaid amount
and such handler shall, within 15 days, make payment to the market
administrator of the amount so billed. Whenever verification discloses
that payment is due from the market administrator to any handler
pursuant to Sec. 1011.72 or Sec. 1011.82, the market administrator
shall make payment to such handler within 15 days or, in the case of
the transportation credit balancing fund, as soon as funds become
available. If a handler is due additional payment for a month in which
payments to handlers were prorated pursuant to Sec. 1011.82(a), the
additional payment pursuant to this section shall be multiplied by the
final proration percentage computed in Sec. 1011.82(a)(2).
(b) Whenever verification by the market administrator of the
payment by a handler to any producer or cooperative association for
milk received by such handler discloses payment of less than is
required by Sec. 1011.73, the handler shall pay such balance due such
producer or cooperative association not later than the time of making
payment to
[[Page 27543]]
producers or cooperative associations next following such disclosure.
Sec. 1011.81 [Amended]
19. In Sec. 1011.81, paragraph (c) is removed and paragraphs (a)
and (b) are revised to read as follows:
Sec. 1011.81 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. 1011.9(b) 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. 1011.44 by $0.06 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. 1011.82 [Amended]
20. Sec. 1011.82 is revised to read as follows:
Sec. 1011.82 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. 1011.30(a)(6), bulk milk transferred from an
other order plant as described in paragraph (c)(1) of this section or
that received, and reported pursuant to Sec. 1011.30(a)(7), 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. 1011.32(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. 1011.77. 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. 1011.30(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, 1007, and 1046, and allocated to
Class I milk pursuant to Sec. 1011.44(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. 1011.45(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. 1011.44;
(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 areas of
Federal Orders 1005, 1007, or 1046, or within the Kentucky counties of
Allen, Barren, Metcalfe, Monroe, Simpson, and Warren.
(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
[[Page 27544]]
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. 1011.52;
(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 milk described in paragraph (c)(2) 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.
PART 1046--MILK IN THE LOUISVILLE-LEXINGTON-EVANSVILLE MARKETING
AREA
Sec. 1046.30 [Amended]
21. In Sec. 1046.30, paragraphs (a)(7) and (a)(8) are redesignated,
respectively, as paragraphs (a)(8) and (a)(9), new paragraph (a)(7) is
added, and paragraphs (a)(5), (a)(6), and (c)(3) are revised to read as
follows:
Sec. 1046.30 Reports of receipts and utilization.
* * * * *
(a) * * *
(5) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1005, 1007, and 1011, for which a
transportation credit is requested pursuant to Sec. 1046.82, including
the date that such milk was received;
(6) Receipts of producer milk described in Sec. 1046.82(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;
* * * * *
(c) * * *
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1046.82, all of the
information required in paragraphs (a)(5), (a)(6), and (a)(7) of this
section.
* * * * *
Sec. 1046.32 [Amended]
22. In Sec. 1046.32, paragraph (c) is redesignated as paragraph (d)
and a new paragraph (c) is added to read as follows:
Sec. 1046.32 Other reports.
* * * * *
(c) On or before the 20th day after the end of each month, each
handler described in Sec. 1046.9(a), (b), and (c) shall report to the
market administrator any adjustments to transportation credit requests
as reported pursuant to Sec. 1046.30(a)(5), (6), and (7).
* * * * *
Sec. 1046.61 [Amended]
23. In Sec. 1046.61, paragraph (a)(4) is removed and paragraphs
(a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5),
respectively.
Sec. 1046.77 [Amended]
24. Sec. 1046.77 is revised to read as follows:
Sec. 1046.77 Adjustment of accounts.
(a) Whenever verification by the market administrator of payments
by any handler discloses errors made in payments to the producer-
settlement fund pursuant to Sec. 1046.71 or to the transportation
credit balancing fund pursuant to Sec. 1046.81, the market
administrator shall promptly bill such handler for any unpaid amount
and such handler shall, within 15 days, make payment to the market
administrator of the amount so billed. Whenever verification discloses
that payment is due from the market administrator to any handler
pursuant to Sec. 1046.72 or Sec. 1046.82, the market administrator
shall make payment to such handler within 15 days or, in the case of
the transportation credit balancing fund, as soon as funds become
available. If a handler is due additional payment for a month in which
payments to handlers were prorated pursuant to Sec. 1046.82(a), the
additional payment pursuant to this section shall be multiplied by the
final proration percentage computed in Sec. 1046.82(a)(2).
(b) Whenever verification by the market administrator of the
payment by a handler to any producer or cooperative association for
milk received by such handler discloses payment of less than is
required by Sec. 1046.73, the handler shall pay such balance due such
producer or cooperative association not later than the time of making
payment to producers or cooperative associations next following such
disclosure.
Sec. 1046.78 [Amended]
25. In the introductory text of Sec. 1046.78, the number
``1046.81,'' is added following the number ``1046.77,''.
Sec. 1046.81 [Amended]
26. In Sec. 1046.81, paragraph (c) is removed and paragraphs (a)
and (b) are revised to read as follows:
Sec. 1046.81 Payments to the transportation credit balancing fund.
(a) On or before the 15th day after the end of the month, each
handler
[[Page 27545]]
operating a pool plant and each handler specified in Sec. 1046.9(b) 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. 1046.44 by $0.06 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. 1046.82 [Amended]
27. Sec. 1046.82 is revised to read as follows:
Sec. 1046.82 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 16th 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. 1046.30(a)(5), bulk milk transferred from an
other order plant as described in paragraph (c)(1) of this section or
that received, and reported pursuant to Sec. 1046.30(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. 1046.32(c). 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. 1046.77. 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. 1046.30(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 by the pool plant
operator pursuant to Sec. 1046.73(f)(2).
(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, 1007, and 1011, and allocated to
Class I milk pursuant to Sec. 1046.44(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. 1046.45(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. 1046.44;
(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 areas of
Federal Orders 1005, 1007, or 1011, or within the Kentucky counties of
Allen, Barren, Metcalfe, Monroe, Simpson, and Warren.
(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;
[[Page 27546]]
(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. 1046.52;
(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 milk described in paragraph (c)(2) 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.
[FR Doc. 97-13000 Filed 5-19-97; 8:45 am]
BILLING CODE 3410-02-P
