[Federal Register Volume 61, Number 139 (Thursday, July 18, 1996)]
[Proposed Rules]
[Pages 37628-37646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18227]
[[Page 37627]]
_______________________________________________________________________
Part III
Department of Agriculture
_______________________________________________________________________
Agricultural Marketing Service
_______________________________________________________________________
7 CFR Part 1005, et al.
Milk in the Carolina and Certain Other Marketing Areas; Tentative
Decision on Proposed Amendments To Marketing Agreements and Orders;
Proposed Rule
Federal Register / Vol. 61, No. 139 / Thursday, July 18, 1996 /
Proposed Rules
[[Page 37628]]
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; Tentative
Decision on Proposed Amendments To Marketing Agreements and Orders
------------------------------------------------------------------------
7 CFR Part Marketing area Docket No.
------------------------------------------------------------------------
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 tentative partial decision proposes, on an emergency
basis, amendments to four Federal milk orders in the Southeastern
United States. The amendments would establish a transportation credit
balancing fund from which to reimburse handlers for the cost of
importing bulk milk into these markets for fluid use when milk supplies
that are normally associated with these markets are insufficient to
meet fluid needs. The amendments also would establish a monthly
assessment to maintain the solvency of the fund and a methodology for
computation of the transportation credits. The proposed rules are based
upon proposals that were considered at a public hearing held May 15-16,
1996, in Charlotte, North Carolina. Producers in the affected areas
will have an opportunity to vote on the interim amendments before they
go into effect.
DATES: Comments must be submitted on or before August 19, 1996.
ADDRESSES: Comments (4 copies) should be filed with the Hearing Clerk,
Room 1083, South Building, United States Department of Agriculture,
Washington, DC 20250.
FOR FURTHER INFORMATION CONTACT: Nicholas Memoli, Marketing Specialist,
Order Formulation Branch, USDA/AMS/Dairy Division, Room 2971, South
Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 690-1932.
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.
The Regulatory Flexibility Act (5 U.S.C. 601-612) requires the
agency to examine the impact of a proposed rule on small entities.
Pursuant to 5 U.S.C. 605(b), the Agricultural Marketing Service has
determined that this 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.
The amended orders will promote orderly marketing of milk by
producers and regulated handlers by providing transportation credits to
assist them in bringing supplemental milk to the market for fluid use.
The record of this proceeding indicates that supplemental milk is
regularly imported into the Southeastern United States, that the burden
of cost for providing this service has been increasing, and that it
falls unevenly among the handlers and dairy farmers operating in these
markets.
There will be a modest assessment on handlers to provide funds for
the proposed new transportation credits, which will be used to
reimburse handlers for the costs that they incur, but this assessment
will not exceed 6 cents per hundredweight of Class I producer milk. The
assessment will be reduced or waived completely once the balance in the
transportation credit balancing fund is sufficient to cover the sum of
six months' credits. The 6-cent per hundredweight assessment translates
to about one-half cent per gallon of milk.
At present, all handlers regulated under the 4 milk orders involved
in this proceeding file a monthly report of receipts and utilization
with the market administrator. The proposed amendments resulting from
this proceeding will only add 2 lines of information to this report.
However, only those handlers applying for transportation credits on
supplemental milk will have to provide this additional information to
the market administrator. The estimated time to collect, aggregate, and
report this information, which is already compiled for other uses, is
less than 15 minutes per month.
The net impact of the proposed amendments on dairy farmers should
be insignificant. Some dairy farmers may experience a reduction in
their blend price during the first year that the new rules are in
effect. This reduction, which should amount to less than 5 cents per
hundredweight, will occur only if the balance in the transportation
credit balancing fund is insufficient to cover the current month's
transportation credits. Once the fund has been fully endowed, dairy
farmers would experience no reduction in the uniform price as a result
of transportation credits.
The preamble of this tentative decision clearly explains to all
handlers and dairy farmers in these markets how the new provisions will
work. The market administrator will send a copy of this decision to
each handler, cooperative association, and nonmember dairy farmer
covered by these orders. In addition, the market administrator's office
is accessible by telephone for any additional questions that may arise
during regular business hours.
The amendments proposed herein have been reviewed under Executive
Order 12778, Civil Justice Reform. This rule is not intended to have a
retroactive effect. If adopted, this proposed rule will not preempt any
state or local laws, regulations, or policies, unless they present an
irreconcilable conflict with this rule.
The Agricultural Marketing Agreement Act of 1937, as amended (7
U.S.C. 601-674), provides that administrative proceedings must be
exhausted before parties may file suit in court. Under section
608c(15)(A) of the Act, any handler subject to an order may file with
the Secretary a petition stating that the order, any 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.
Prior documents in this proceeding:
Notice of Hearing: Issued May 1, 1996; published May 3, 1996 (61 FR
19861).
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. Notice of
such hearing was issued on May 1,
[[Page 37629]]
1996, and published May 3, 1996 (61 FR 19861).
Interested parties were given until May 28, 1996, to file post-
hearing briefs on the proposals as published in the Federal Register
and as modified at the hearing. Comments also were requested on whether
the proposals should be considered on an emergency basis.
Interested parties may file written exceptions to this tentative
decision with the Hearing Clerk, U.S. Department of Agriculture,
Washington, DC 20250 by the 30th day after publication of this decision
in the Federal Register. Four copies of the exceptions should be filed.
All written submissions made pursuant to this notice will be made
available for public inspection at the Office of the Hearing Clerk
during regular business hours (7 CFR 1.27(b)).
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.
This tentative partial decision only deals with Issues 1 and 3.
Issue 2 will be handled through normal rulemaking procedures in a
forthcoming recommended decision.
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
Federal Milk Orders 1005, 1007, 1011, and 1046 (hereinafter
referred to as ``the 4 orders'') should be amended to provide a
transportation credit for supplemental bulk milk that is transferred
from an other order plant to a pool plant during the months of July
through December. A credit also should be provided to those handlers
who import supplemental bulk milk for fluid use directly from
producers' farms. For plant milk, the credit should be limited to milk
that is allocated to Class I and should be computed at a rate equal to
3.7 cents per 10 miles per cwt. or fraction thereof from the transferor
plant to the transferee plant. The credit should be reduced to the
extent that the Class I price at the transferee plant exceeds the Class
I price at the transferor plant.
In the case of milk received directly from producers' farms, the
origination point of a bulk tank truck containing more than one
producer's milk should be the city closest to the farm from which the
last farm pickup was made. Alternatively, the origination point may be
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 should be computed by multiplying 3.7 cents times the
number of 10-mile increments 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.
A transportation credit for bulk milk received from an other order
plant for Class I use was proposed by Mid-America Dairymen, Inc., 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.
A spokesman for Mid-Am testified that: (a) The Southeast states are
chronically short of milk for fluid use at certain times of the year
and this shortage will be particularly acute during the upcoming summer
and fall months; (b) the Federal order Class I pricing structure will
not accommodate the movement of milk from surplus markets to deficit
markets; (c) the burden of supplying the 4 Southeast markets with
supplemental milk for fluid use falls disproportionately on the
cooperative associations serving these markets; (d) 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 during short production months; and (e)
therefore, the Secretary should immediately amend the 4 orders
effective July 1, 1996, to provide relief to those handlers who will be
relied upon to provide supplemental milk to meet the fluid needs of
consumers in the area.
The General Manager of 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 proposed
transportation credits but stated that the proposal should be expanded
to include supplemental milk received directly from producers' farms.
The spokesman testified that during the period from July through
December 1995, CVMPA imported more than 19 million pounds of plant milk
at a transportation cost of 307 thousand dollars. During that same
period, however, CVMPA imported more than 38 million pounds of
supplemental producer milk directly from farms at a cost of 528
thousand dollars, he said.
The CVMPA spokesman testified that supplemental milk shipped
directly from producers' farms can often be purchased at lower cost
than plant milk. He also noted that this farm-shipped milk is often of
better quality because it requires less handling. He concluded that the
orders should be amended to give handlers the economic incentive to
transport milk in the most efficient manner.
A spokesman for Milk Marketing, Inc. (MMI), a cooperative
association supplying handlers under Orders 11 and 46, testified in
opposition to the Mid-Am proposal as it relates to Order 46. The MMI
spokesman stated that MMI opposed the proposal on the basis that over-
order charges would be a better method of obtaining reimbursement for
the costs associated with importing milk into the market for fluid use.
Also, he said that MMI did not support the proposal because it did not
provide a transportation credit for bulk supplemental milk shipped
directly from producers' farms to plants. However, he said that if the
Department should adopt Mid-Am's proposal, it should be expanded to
include supplemental milk received directly from producers' farms.
Receiving milk in this manner, he explained, would encourage hauling
efficiencies, improve milk quality, eliminate pump-over expenses, and
reduce product loss due to handling.
Select Milk Producers, Inc., a New Mexico dairy cooperative that
provides supplemental milk to the Southeast markets, endorsed the
suggestion of CVMPA and MMI to provide transportation credits for farm-
to-plant milk as well as plant-to-plant milk.
The Mid-Am proposal also received a qualified endorsement from
Fleming Dairy. The spokesman for Fleming, which operates pool
distributing plants in Nashville, Tennessee, and Baker, Louisiana,
suggested that Mid-Am's proposal be modified to restrict transportation
credits to the months of July through October instead of July through
December. He also suggested eliminating the provision proposed by Mid-
Am that would permit credits during the months of January through June
if the Class I utilization during the month is higher than 80 percent.
[[Page 37630]]
The Fleming spokesman stated that during the months when
transportation credits are in effect, Class III-A pricing in these
markets and in the surrounding markets should be suspended. At the
present time, he said, the presence of Class III-A pricing in these
markets significantly adds to the cost of obtaining supplemental milk
because cooperatives and fluid milk processors have to bid this
supplemental milk away from butter-powder plants.
A spokesman for Land O' Sun Dairies, Kingsport, Tennessee, Milkco,
Inc., Asheville, North Carolina, and Hunter Farms, Charlotte and High
Point, North Carolina, also offered constructive criticism of the Mid-
Am proposal. The spokesman suggested that handlers seeking
reimbursement for transportation costs should be required to show that
they, in fact, incurred the cost. If the actual transportation cost was
less than the credit provided in the order, a handler should only
receive reimbursement for the cost actually incurred. He also
questioned whether the proposed 3.9 cents per 10 miles accurately
represented the cost of transporting bulk milk and he criticized the
proposal for not restricting transportation credits on the movement of
bulk milk between the 4 orders involved in this proceeding. Finally,
the witness suggested borrowing funds from the producer-settlement fund
reserve, instead of the marketwide pool, when the proposed
transportation credit balancing fund contains an insufficient balance
to cover a month's transportation credits.
Several proprietary handlers testified in opposition to the
proposed transportation credits. The president of Southern Belle Dairy,
Somerset, Kentucky, stated that handlers make choices in arranging for
their milk supplies and the Federal order program should not be called
upon to ``absolutely level the playing field.'' He said the proposed 6-
cent assessment for the transportation credit balancing fund would put
Southern Belle at a competitive disadvantage with its competitors in
Indiana, Virginia, West Virginia, and Ohio. He also stated that it will
promote inefficient movements of milk by giving regional cooperatives
the opportunity to divert regional milk supplies to Florida and then
replace those supplies with supplemental milk at handlers' expense.
Finally, he criticized the proposal for not including the suspension of
Class III-A pricing.
The Director of Milk Procurement for Dean Foods Company, Franklin
Park, Illinois, also testified in opposition to the Mid-Am proposal. He
said that negotiation between buyer and seller was the best vehicle to
recover costs and that proprietary handlers that purchase all or part
of their milk supply from independent producers should not be expected
to pay into a transportation pool to assure a milk supply for
processors who choose to purchase their milk from a ``marketing
agency.'' The proposed amendments, he said, could create false
shortages and force fluid processors to make unnecessary payments into
a transportation pool for the sole benefit of cooperatives.
The vice president of finance for Holland Dairies, Holland,
Indiana, also testified in opposition to the proposal. The witness
stated Holland Dairies has developed its own milk supply from
independent producers and, as a result, carries the risk of balancing
this milk supply during the flush and short seasons of production. He
said that while the proposed transportation credits would cost Holland
Dairy a considerable amount of money, it would provide no apparent
benefit to Holland Dairy. He concluded that suppliers of milk in the
Southeast voluntarily chose to do business in that region and should
therefore be required to manage their business accordingly.
Briefs. Several briefs were filed following the hearing. A brief
from the Kroger Company indicates Kroger's opposition to the
transportation credit proposal. Kroger states in its brief that ``* * *
a temporary situation should not be used as justification for a
permanent change in the order which would allow the use of pool money
to cover the cost of transportation * * * the current system has worked
in the past and will continue to do so in the future.''
Holland Dairies, Inc., in its brief, reiterated its opposition to
the transportation credit proposal. Holland stated that ``it is
completely unfair to independent handlers and processors to legislate
that they are required to pay into a fund that only a cooperative can
draw funds from.'' (It appears from this statement that Holland has
misconstrued the proposal. As proposed, and as adopted herein,
transportation credits would be available to any handler that brings
supplemental milk into the market. Accordingly, should Holland Dairy
run short of milk during the months of July through December, it could
import milk from Wisconsin or Michigan, for example, and receive a
transportation credit for such milk.)
While conceding that the Southeast has always been in a deficit
position, Holland maintains that handlers should pay for supplemental
milk through premiums outside of the order. Holland is also concerned
that stair stepping of milk to markets farther south will occur and
that normal deliveries should be excluded from receiving a
transportation credit.
Holland also argues in its brief that handlers should have a choice
of buying milk from a cooperative association or from independent
producers. It states that the proposed transportation credits would
eliminate this choice.
Holland contends that Order 46 should not be part of the proposed
transportation credit because it is far removed from deficit areas in
Georgia and Florida. Finally, it states that if a transportation credit
is implemented, it should not apply for the first 250 miles.
A brief filed on behalf of the Fleming Company states that the
proposed transportation credits are compellingly supported by the
evidence in this proceeding. Fleming, however, reiterates its
suggestion that the credits be limited to the months of July through
October and suggests a further limitation based upon mileage or source
of supply. The handler again expresses a concern about Class III--A
pricing and suggests that it be suspended when supplemental milk is
needed in the Southeast. Fleming urges the Secretary to act on an
emergency basis to adopt the proposal.
A brief was also filed on behalf of Land O' Sun Dairies, Milkco,
Inc., and Hunter Farms. The plants of these handlers are regulated
under Orders 5 and 11.
These handlers note in their brief that ``the record discloses a
disturbing trend in raw milk production and fluid consumption in the
Southeastern United States * * * raw milk production has not been
keeping pace with consumption in the Southeast.'' While desiring to
maintain a local dairy industry in the Southeast, they recognize that
``some considerations must be made for obtaining fluid milk supplies
from non-local sources when that milk is needed.''
The brief of these handlers indicates that they are not opposed to
adoption of a modified transportation credit proposal. They are
concerned, however, that the provision not be abused. For this reason,
they offer several suggestions to prevent abuse. One suggestion is to
exclude bulk shipment of milk between the 4 orders from receiving any
transportation credits. (This suggestion has been adopted in this
decision.)
Another suggestion of these handlers is to establish historical
movements of milk from these 4 orders to the 3 Florida orders. If a
handler or a cooperative association shipped anything more than these
historical shipments to Florida
[[Page 37631]]
and, at the same time, imported milk into the market from which these
Florida shipments originated, the new or replacement milk would not
qualify for a transportation credit.
These 3 handlers state that they are opposed to a provision in the
Mid-Am proposal that would permit transportation credits during the
months of January through June if a market's Class I utilization
exceeds 80 percent. The basis for their opposition, according to their
brief, is that some parties may try to manipulate the Class I
utilization in one or more of these markets, causing some handlers to
pay an assessment for transportation credits while their competitors in
one or more of the other 4 markets involved in this proceeding do not.
Taken to its logical conclusion, the position of these 3 handlers
seems to be that this provision should be administered as if the 4
separate markets were, in fact, one market. This would have to be so
because the only way that the assessment for the transportation credits
can be uniform among the 4 individual orders is if the transportation
credits given out each month are proportionately the same in each
market. It is unlikely that this will be the case since the Class I
utilization does vary among the 4 markets. It is conceivable that
during some months Orders 5, 7, or 11 may need supplemental milk, while
Order 46 may not. Thus, transportation credits and assessments for
transportation credits would be applicable under Orders 5, 7, and/or
11, but not Order 46.
The 3 handlers also state that transportation credits should not
apply for the first 100 miles of shipment and that the credit should be
something less than the proposed 3.9 cents per 10 miles. They also
suggest borrowing money from the producer-settlement fund reserve,
rather than the producer-settlement fund itself, when transportation
credits exceeds the available funds in the transportation credit
balancing fund. In support of this idea, they state that local milk
production has suffered enough and payments to producers should not be
reduced further by taking money out of the producer-settlement fund.
The brief of the 3 handlers supports the proposal of CVMPA to allow
farm-to-plant supplemental milk to qualify for a transportation credit.
However, they suggest limiting this milk to dairy farms located outside
of the 4 marketing areas.
Finally, the 3 handlers express their concern about the possible
exclusion of Order 46 from the transportation credit proposal. If this
were to happen, they state, it would disrupt the competitive
relationship among competing handlers in Orders 5, 11, and 46.
A brief was received on behalf of Select Milk Producers (SMP), a
cooperative association based in Artesia, New Mexico. The brief states
that SMP expects to market milk in the Southeast marketing area in the
fall of 1996 and therefore requests that transportation credits be
extended to farm-to-plant milk as well as to plant-to-plant milk.
SMP states that they concur with MMI's suggestion regarding the
application of transportation credits for farm-to-plant supplemental
milk. SMP suggests that supplemental milk be defined as milk that was
not associated with any of the 4 markets during the prior months of
January through July.
Southern Belle Dairy, Somerset, Kentucky, reiterated their
opposition to the transportation credit proposal for Order 11 in its
brief. Southern Belle states that it bears the full cost of its milk
supply and that it has made private arrangements to solve any problem
that might arise. It also contends that the proposal would reduce their
competitive relationship vis-a-vis handlers in other markets and that
the Tennessee Valley order does not need the transportation credits.
Finally, it states that Florida is an integral part of the deficit
problem in the Southeast and, accordingly, should be included in the
solution to the problem.
Southern Belle concludes that the proposed transportation credits
are simply a money-shifting scheme whereby dairies such as itself that
have developed an independent supply of milk over a long period of time
will be forced to subsidize other dairies who have not invested in
these relationships which would ensure a steady supply of milk.
Gold Star Dairy, Little Rock, Arkansas, also filed a brief in
opposition to the proposed transportation credits. This handler
maintains that there is no need for supplemental milk in the western
part of the Southeast market, and that, in those parts of the marketing
area where supplemental milk is being brought in, cooperatives are now
being compensated through over-order charges.
Gold Star argues that it has little in common with plants in the
eastern part of the marketing area; it does not share a common supply
area with them; it is only technically part of the Southeast market
because it is within the defined marketing area; it is already paying
for marketwide services through over-order charges; and that if,
notwithstanding these arguments, the Secretary should adopt the
proposed transportation credits, the assessment to fund the credits
should not be based on Class I sales made outside the marketing area.
In its brief, Carolina-Virginia Milk Producers Association offers
several suggestions for implementing its modified proposal, which would
provide transportation credits for supplemental milk supplied to the
market directly from producers' farms. The cooperative supports a
prohibition on credits for milk moving between the 4 markets, as well
as the proposed hauling rate of 3.9 cents per 10 miles. CVMPA also
endorses a suggestion made at the hearing to borrow funds from the
producer-settlement fund reserve, rather than the producer-settlement
fund itself, when there are insufficient funds in the transportation
credit fund to cover a current months' credits. It states that the
reserve fund could be paid back in future months for the money that is
borrowed.
With respect to the mechanics of providing transportation credits
for farm-to-plant milk, CVMPA suggests defining ``supplemental milk''
as the milk of dairy farmers which is pooled only during the period of
market shortage. Specifically, it suggests that transportation credits
not be available to a dairy farmer who was a producer on any of the 4
markets ``for more than 35 days during more than 8 months in the
previous July-June period.''
To determine the origination point for farm-to-plant milk, CVMPA
suggests using the county courthouse closest to the farm of the last
producer whose milk is on the load. It also suggests subtracting any
positive difference between the Class I price at the receiving pool
plant and the Class I price at the origination point in computing the
net transportation credit. This treatment would make the transportation
credit computation virtually identical for transfers of plant milk and
direct farm-to-plant deliveries.
Finally, CVMPA suggested the requirement that receiving handlers
provide the market administrator with a list of the producers for whom
transportation credits are requested.
Milk Marketing, Inc., filed a brief reiterating its opposition to
the transportation credit proposal for Order 46 only. It maintains that
over-order pricing is the best method for handling additional costs
associated with importing milk to the market for fluid use. MMI states
that if the Department should nevertheless adopt a transportation
credit provision for Order 46, the provision should include an
extension of the credit to cover supplemental milk shipped directly
from farm to plant. Several of the
[[Page 37632]]
safeguards mentioned in the brief are similar to those already
described with respect to CVMPA's brief.
Mid-America Dairymen, Inc., submitted a lengthy brief setting forth
the historical background for the hearing, pertinent facts and figures
brought out in the hearing record, the legislative history for the
marketwide service payment provision contained in the Agricultural
Marketing Agreement Act, a review of past agency decisions concerning
transportation credits, and a comprehensive review of the arguments
supporting its proposal.
Several points brought out in Mid-Am's brief are particularly
noteworthy and should be emphasized. Mid-Am points out once again that
a disproportionate share of the supplemental milk that is brought into
the Southeast markets is brought in by the cooperative associations
serving these markets. It argues that the costs incurred in importing
this milk cannot simply be passed on to their customers because it
would put these customers at a competitive disadvantage with other
handlers who are fortunate enough to have adequate supplies of locally-
produced milk to meet their needs.
Mid-Am contends that the cost of supplying these markets with
surplus milk puts their member producers at a disadvantage compared to
non-member producers who do not share in this cost. The cooperative
also points out that when these markets are short of milk, it shuts
down its manufacturing plants, which adds to its cost. It notes, for
instance, that during the months of July through December 1995, it shut
down its facilities in Louisville, Kentucky, Lewisburg, Tennessee, and
Franklinton, Louisiana.
In its review of the legislative history of the Food Security Act
of 1985, the foundation for the marketwide service provision in
Sec. 608c(5)(J) of the Act, Mid-Am notes that Congress sought to
achieve equity between producers or handlers who bear service costs
that benefit the market and those who do not. It included an excerpt
from one of the committee reports (reprinted at 1985 U.S. Code
Congressional and Administrative News 1103), which appears to be
particularly relevant to the proposal at hand. It reads: ``* * * At the
moment, there are three major problems with respect to the operation of
the Federal order systems: (1) minimum Federal order Class I prices are
not adequate to attract the necessary supply to meet the Class I needs
in deficit areas; (2) handlers who must go outside their territory to
acquire additional milk incur greater costs for milk than handlers who
obtain all of their milk from the local area; and (3) those producers
who assume the responsibility of supplying the needs of the market have
to pay the cost of transporting supplemental milk, resulting in
producers not receiving uniform prices.'' Mid-Am argues that its
proposal for transportation credits conforms to the equity-promoting
goals described in the legislative history.
Mid-Am also argues that its proposal conforms with past agency
decisions. Among many quotes included in its brief is the following
from a final decision issued October 8, 1987, incorporating permanent
transporting credits in the Chicago Regional order (52 FR 38240): ``* *
* a major purpose of the order program is to assure an adequate supply
of pure and wholesome milk for the fluid market and to establish and
maintain orderly marketing conditions. This includes adopting order
provisions to facilitate securing adequate supplies of milk to meet the
market's fluid needs. The record shows that obtaining adequate milk for
those needs is not being accomplished in an orderly and equitable
fashion under the current order provisions.''
Mid-Am states that the suggested modifications of MMI and CVMPA to
provide transportation credits for farm-to-plant milk should be given
favorable consideration by the Secretary. It urges the Secretary to
incorporate appropriate safeguards, however, to ensure that no
artificial economic advantage is created for supplies that are not
normally associated with the market.
Mid-Am notes that the supply/demand situation in the Southeast has
become particularly acute in recent months. It emphasizes that the
shortage this summer and fall will likely be even worse than in 1995,
pointing to reduced production during the first 4 months of 1996,
compared to a year earlier, especially in Tennessee and Kentucky, 2
important supply areas for the Southeast. It also notes that the
Olympic Games that will be held in Atlanta this summer will likely
increase consumer demand for fluid milk. It urges the Secretary to
issue an expedited decision that would allow the transportation credits
to be effective by July 1, 1996.
Conclusion. Testimony and exhibits introduced at 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, and 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 current arrangements, the costs of obtaining an
increasing supply of supplemental milk are not being borne equally by
all handlers and producers in each of the 4 orders. The service
provided by handlers, particularly, cooperative associations, in
obtaining sufficient supplies of milk is a service of marketwide
benefit for which the Secretary is authorized to include provisions in
Federal milk orders to compensate handlers. The record of this hearing
demonstrates that disorderly marketing conditions exist because of the
significantly different costs that are incurred by handlers who provide
the additional service versus those who do not. The increasing
magnitude of the disproportionate sharing of costs is jeopardizing the
delivery of adequate supplies of milk for fluid use. Thus, the record
justifies the adoption of these provisions to restore stability and
order in providing adequate supplies of milk for fluid use for Orders
5, 7, 11, and 46, as explained below.
Data in the record of this hearing show that the area covered by
Orders 5, 7, 11, and 46 is a highly seasonal, deficit milk production
area. As shown in Table 1, milk production in the 12 Southeast states
of Arkansas, Louisiana, Mississippi, Tennessee, Kentucky, Alabama,
Georgia, Florida, South Carolina, North Carolina, Virginia, and West
Virginia has fallen from 15.4 billion pounds in 1988 to 14.5 billion
pounds in 1995. Based upon this trend, production in the year 2000 is
expected to be 13.1 billion pounds.
Table 1.--Milk Production and Population in 12 Southeastern States 1988-
2010
------------------------------------------------------------------------
Year Population Production (lbs.)
------------------------------------------------------------------------
1988................................... 57,961,000 15,432,000,000
1989................................... 58,732,000 15,356,000,000
1990................................... 59,266,000 15,505,000,000
1991................................... 60,265,000 15,362,000,000
1992................................... 61,090,000 15,499,000,000
1993................................... 61,926,000 15,310,000,000
1994................................... 62,767,000 14,994,000,000
1995................................... 63,573,000 14,554,000,000
2000................................... 66,876,000 13,114,000,000
2005................................... 70,471,000 11,603,000,000
2010................................... 74,066,000 10,092,000,000
------------------------------------------------------------------------
Source: Population--U.S. Bureau of the Census.
Milk Production--Milk Production, NASS, USDA, Washington, DC.
The bar graph below compares quarterly production in the 12
Southeastern states during the past 4 years. It shows that quarterly
production is down from the previous year's quarter
[[Page 37633]]
for the past 4 years. The graph also shows that not only has production
decreased for 4 consecutive years, but that such decreases have
occurred at an accelerating rate. Furthermore, the graph demonstrates
that the degree of seasonality between the relatively flush and short
production months has also been increasing.
BILLING CODE 3410-02-P
[[Page 37634]]
[GRAPHIC] [TIFF OMITTED] TP18JY96.000
BILLING CODE 3410-02-C
[[Page 37635]]
While production in the Southeast has been declining, the
population of this area has been rising. As shown in Table 1, the
population of the 12 Southeastern states rose from 57.9 million in 1988
to 63.5 million in 1995. By the year 2000, population is expected to
reach 66.8 million.
Data in the record indicates that the per capita consumption of all
dairy products in the 12 Southeastern states has grown in the past 7
years, from 568 pounds (milk equivalent) per capita in 1988 to 582
pounds in 1995. Conservatively estimating no growth in the per capita
consumption of fluid milk products in the next 10 years, the deficit in
Southeast milk production will grow significantly based upon population
growth alone. According to Census Bureau data, 16 states will gain more
than 1 million persons by the year 2020; 7 of these states are covered
at least in part by the milk orders involved in this proceeding. There
clearly is no question concerning the continuing--and, in fact,
growing--need to import supplemental milk into the Southeastern United
States for fluid use.
The record shows that the production decline and the population
increase has resulted in an increasing Class I utilization in these 4
markets. During the period from April 1995 to April 1996, producer milk
pooled under the 4 orders decreased by 42 million pounds. At the same
time, the Class I utilization of producer milk under the 4 orders
increased by almost 13 percentage points to 77.5 percent. It
undoubtedly would have increased even more except for the fact that the
milkshed continues to expand in a northerly and westerly direction to
more and more distant farms. In this regard, it should be noted that
milk has been regularly flowing into the Southeast markets from Texas
and New Mexico, and there are indications that such shipments will
start sooner than ever this summer.
These markets are tightest during the late summer and fall months.
The Class I utilization reached 86.1%, 85.5%, 83.7%, and 80.2% in
Orders 5, 7, 11, and 46, respectively, during August 1995. This
compares to 84.0%, 83.3%, 85.1%, and 73.8%, respectively, one year
earlier. Percentages of this magnitude indicate a very tight market
situation when taking into consideration the bottling schedule of fluid
milk plants, the desire of handlers to make some Class II products
locally, and the unavoidable need to process some local milk into
storable manufactured products, particularly on weekends when it is not
needed for fluid use.
It is impossible to reveal precisely the total amount of
supplemental milk needed by these markets because of restrictions on
the release of confidential data (i.e., data represented by less than 3
handlers). In addition, much of the supplemental milk that is needed
entered these markets directly from the farms of dairy farmers who are
not regular suppliers of these markets. With these shortcomings taken
into consideration, market administrator data entered in the record for
Orders 5, 11, and 46 show that bulk receipts of other order milk for
Class I use increased from 13.1 million pounds in 1993 to 49.6 million
pounds in 1995. For these 3 markets, the data also show that first
quarter receipts of bulk other order milk for Class I use is running at
more than 10 times the level of 1995.
It is difficult to compare similar data for Order 7 to earlier
periods because several markets were merged into the present Southeast
marketing area in July 1995. Thus, shipments which formerly would have
been other order bulk transfers are now transfers between pool plants
within the order. Nevertheless, treating the merged order as if it were
still 5 separate orders and comparing the other order bulk receipts for
Class I use in 1995 to 1993 indicates a more than twofold increase in
such receipts.
Data entered into the record by Mid-Am shows that during the months
of July through December 1995 more than 100 million pounds of other
order bulk receipts were transferred into Orders 5, 7, 11, and 46.
According to Mid-Am, the cooperative also brought in supplemental
producer milk on a direct-ship basis. The record data also show that
while Mid-Am represents 47 percent of the producer milk pooled under
the 4 markets, it accounted for more than 70 percent of the other order
bulk milk that was brought into these markets during the months of July
through December 1995.
Exhibits entered by CVMPA show that the cooperative imported more
than 19 million pounds of other order plant milk during the months of
July through December 1995, while at the same time bringing in more
than 38 million pounds of supplemental milk directly from producers'
farms. The exhibits show that the transportation cost for these
supplemental purchases were nearly one million dollars.
A detailed breakdown of Mid-Am's interorder transfers during the
months of July and August 1995 shows the location of the transferor
plant and the transferee plant, the mileage between the two plants, the
total cost of hauling the milk, and the freight rate broken down into
10-mile increments. During July and August 1995, the exhibit shows that
the average hauling cost for this milk was 3.7 cents per 10 miles.
The Mid-Am spokesman testified that Mid-Am was proposing a hauling
credit of 3.9 cents per 10 miles due to increasing fuel costs in recent
months, justifying a slightly higher credit.
After carefully reviewing the record testimony and data, it is
concluded that a transportation credit for supplemental milk during the
seasonally short period of July through December is fully justified for
this year's milk shortage and on a continuing basis, as needed, for
future years. Such a credit will restore market order and provide the
opportunity for all handlers to bring in supplemental milk when needed
for fluid use.
While handlers opposed to the incorporation of these credits in the
orders argue that reimbursement for transportation costs should be
handled outside the order, experience has shown that this is not always
possible. The absence of reimbursement for the costs of providing
supplemental milk by cooperatives in this area last summer and fall
demonstrate very well what can happen in a competitive market
situation. Over-order pricing does not always ensure either stability
or uniform costs among handlers. Also, premiums can disappear as
quickly as they are introduced even when markets are desperately short
of milk because of the pressure to maintain uniform costs among
competing handlers.
Over-order pricing has been used in these markets in the past to
equalize costs among handlers, but the industry was much different than
it is today. There are now far fewer, but larger, fluid processing
plants operating in these markets, creating daily and weekly demands to
which the market's suppliers must react. On the supply side, the number
of cooperative associations has decreased dramatically in the last
decade. Consequently, only a few organizations are incurring costs in
providing balancing services for these markets and the amount of milk
being handled is far greater than the quantity of milk handled by any
single cooperative in prior years. For this reason, it is imperative
that the cooperatives and handlers providing balancing services for the
benefit of the entire market be fairly compensated for these costs to
ensure that an adequate supply of milk is available for fluid use.
In fact, the current market is not meeting the standard of orderly
marketing. Markets which, at times, are short of milk must have some
structure to provide for sharing the costs in the movement of
supplemental milk to processors. Otherwise, orderly
[[Page 37636]]
marketing conditions can deteriorate and all handlers will not be
competing for a supply of milk on an equal footing.
Under current market conditions, producers supplying these markets
are also negatively affected. Producers who are members of cooperative
organizations incurring the costs of supplemental milk are forced to
bear the costs unfairly relative to nonmember producers.
The Agricultural Marketing Agreement Act recognized that disorderly
markets can occur in a market when there are no standards which all
segments of the market must satisfy. In this case, such standards must
apply to all milk supplied to the regulated market. When the market
fails to provide this equity, it becomes necessary for the order
structure to provide the system.
As indicated, over-order premiums may be used to serve this
purpose. This record clearly indicates, however, that such is not the
case in these markets. The record, in fact, clearly indicates that the
supplemental milk supplies, as they are currently being handled, are
creating disorder. It is, therefore, proper that the regulations be
amended to restore order to the system by equitably allocating the
costs associated with obtaining supplemental milk supplies.
The adoption of transportation credits will enable handlers to make
decisions involving supplemental milk supplies with a greater degree of
certainty and be assured that the equity required by the Act is
provided.
Congress recognized the inequities that can and do occur in
supplying markets with supplemental milk and provided the Secretary of
Agriculture with certain tools to handle these problems. The record of
this hearing clearly demonstrates a need for these remedies in the 4
orders involved in this proceeding. Moreover, the production and
population statistics justify the incorporation of these tools on a
permanent basis so that they can be used when needed. The alternative
approach, which some handlers appear to favor, is to hold a hearing and
temporarily amend the orders each time a crisis occurs. However, as
last fall's crisis demonstrated, it is very difficult to hold hearings
and amend orders after these problems already have occurred. It is much
better to anticipate the problems and have provisions that can be used
as needed. Accordingly, the permanent incorporation of provisions to
facilitate the importation of supplemental milk to these deficit
markets is the most prudent course of action to follow and is fully
supported by the record of this hearing.
The amendments adopted in this tentative decision are similar to
those proposed by Mid-Am, but also differ in several respects. First,
the transportation credits should be limited to the months of July
through December. It should not include other months when the Class I
utilization is over 80 percent because handlers would not know until
after the month is over whether or not they would be eligible for a
transportation credit on bulk milk brought into the market.
A better approach during the months of January through June would
be to simply give the market administrator 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. The
market administrator is in an excellent position to review such a
request, which should be made in writing at least 15 days prior to the
beginning of the month for which it is to be effective.
Upon receiving a request to extend the transportation credit
period, the market administrator will 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. The market
administrator's notice to interested parties also may invite comments
on other remedies that may be available including, but not limited to,
an increase in the supply plant shipping percentage as provided in
Secs. 1005.7(b), 1007.7(f), and 1011.7(b)(4) and, in the case of Order
7, the desirability of adjusting diversion limitations as provided in
Sec. 1007.13(d)(9). 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.
The provisions adopted in this decision also differ slightly from
Mid-Am's proposal with respect to plant-to-plant shipments that are
eligible for transportation credits. As proposed by Mid-Am, Class I
bulk transfers from any other order plant would qualify for
transportation credits. As adopted in this decision, however, the
credits are limited to plants that are outside of the marketing areas
of Orders 5, 7, 11, and 46.
There was a great deal of concern expressed at the hearing about
``stair stepping'' milk from one market to another. For instance, if
milk from Order 11 was transferred to Order 7 while at the same time
supplemental milk was brought into Order 11 from Order 46, handlers in
Order 11 conceivably could be contributing funds to replace milk that,
if not sent to Order 7, would have been available to Order 11 handlers.
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 Upper Florida market) while during the
same day bring in bulk milk for a handler in another part of the
marketing area (for example, Fleming Dairy in Nashville) from another
order plant (other than from one of the 4 orders involved in this
proceeding). Given the order's current pricing structure, it is
unrealistic to expect milk from southern Louisiana, where the Class I
differential price is $3.58, to be shipped north to Nashville, where
the Class I differential price is $2.55.
The attached order amendments place no restriction on the the
interorder shipment of milk among the 4 markets, but they do not
provide transportation credits for such shipments. The record of this
hearing supports a restriction of credits to milk that is truly
supplemental to the market. For this reason, transportation credits
should be restricted to bulk shipments from plants outside of these 4
marketing areas. Data and testimony in the record indicate that nearly
all of the supplemental milk needed for these 4 markets comes from
plants located outside of the 4 marketing areas anyway, so that the
restriction should not be a major problem for handlers in locating
supplemental milk. Moreover, handlers may still obtain plant milk from
within the 4 orders; they simply would not be able to get a
transportation credit for such milk.
Another departure from the original Mid-Am proposal concerns the
milk eligible for the transportation credit. It was apparent from
hearing testimony and briefs that other cooperatives operating in these
markets are more apt to supply the market with supplemental milk on a
direct-ship basis rather than transferring milk from an other order
plant. Such cooperatives include CVMPA, MMI, and Select Milk Producers.
The testimony was convincing that permitting a credit on such imports
would be more equitable to those organizations that are unable to
import plant milk, would promote efficiencies in bringing supplemental
milk directly from producers' farms, would result in better quality
milk because unnecessary pumpovers are eliminated, and would result in
less milk lost due to reduced handling.
[[Page 37637]]
While the inclusion of farm-to-plant milk is a logical extension of
the transportation credit concept, there are some practical problems to
overcome in implementing such a provision. One of the first problems
that arises in constructing a transportation credit on farm-to-plant
milk is distinguishing a market's regular producer milk from its
supplemental producer milk on which the credit would apply.
A primary consideration in distinguishing the market's regular
producers from the supplemental producers is the location of producers'
farms. It is 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. Accordingly, transportation credits should
not apply to any producer whose farm is located within any of the 4
marketing areas. This provision was suggested by MMI and should be
adopted.
Not all of the pool distributing plants regulated under these
orders are located within the defined marketing areas. For example, a
pool distributing plant regulated under Order 5 is located in
Lynchburg, Virginia, which is outside of the Order 5 marketing area. In
such a case, some other location criteria is needed to distinguish a
regular producer from a supplemental producer.
In its suggested language, MMI proposed restricting supplemental
producers to those who are more than 85 miles from Louisville or
Lexington, Kentucky, or Evansville, Indiana. This proposal should be
adopted but expanded to cover all pool distributing plants within or
outside of the 4 marketing areas. In other words, farm-to-plant milk
that is eligible for a transportation credit must be produced on a farm
that is outside of the 4 marketing areas and at least 85 miles away
from the plant to which the milk is delivered.
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.
As noted earlier, MMI in its brief stated that transportation
credits should not apply to the milk of a dairy farmer who was a
producer under Orders 5, 6, 7, 11, 12, 13, or 46 during more than 8
months in the previous July through June period or if more than 32
days' production of the producer was received as producer milk under
these orders during the entire 12-month period. CVMPA's brief contained
a similar proposal but did not include Orders 6, 12, and 13 (the 3
Florida orders) and specified 35 days' production, rather than 32, for
the prior 12-month period.
These proposals should not be adopted. As proposed, if a dairy
farmer was a producer on one of these markets for more than 8 months in
the previous July through June period, the dairy farmer could not be
considered as a supplemental producer under another one of the 4
markets. For example, if a dairy farmer from Texas was a producer under
Order 11 during the months of January through September 1996, that
dairy farmer would be ineligible to receive a transportation credit
under Order 7 in October 1996, even though the dairy farmer's farm
meets the location criteria set forth in this decision for a
supplemental producer and the dairy farmer was never previously
associated with Order 7.
It is questionable whether the provisions of one order should be
based on a dairy farmer's association with another order. Each order
should stand on its own. Accordingly, the determination as to whether a
producer is regularly associated with a market or is, in fact, only
seasonally associated with the market should be based on the dairy
farmer's association with that market alone.
Since the need for supplemental milk generally drops off sharply
after the month of December--1996 being an exception--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 any of these marketing areas 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.
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 4 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. 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 his/her status as a supplemental producer
if his/her 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, so not more than 32 days' production
may have been received as producer milk during the two months of the
January through June period in which the dairy farmer was a producer on
the market.
Having established the criteria to distinguish a supplemental
producer from a regular producer, attention must now focus on the
provisions needed to establish the transportation credit for farm-to-
plant supplemental milk. The first question that arises in this regard
is the determination of the origination point for the load of milk. Two
problems arise. First, there may be more than one dairy farmer's milk
on the truck. Second, even if a dairy farmer can fill up an entire
truck with milk, his or her farm may be impossible to pinpoint on a
map.
This decision adopts two alternatives to determine the origination
point for a load of farm-to-plant milk. First, after filling the tank
truck with farm milk, the hauler may elect to stop at an independently
operated truck stop to obtain a certified weight receipt identifying
the truck, the gross weight of the loaded truck, the time and date, and
the location of the truck stop. This certificate would be turned over
to the pool plant operator receiving this load of milk and, in turn, be
made available to the market administrator for verification of the
information. Truck stops with scales are commonly found along major
highways and in small towns and cities. Thus, it would be neither time-
consuming nor expensive to fulfill this requirement.
Alternatively, if the hauler does not obtain a certified weight
receipt to establish an origination point, the market administrator
will determine the location of the farm of the last load of milk that
was added to the truck, locate the nearest city, and compute the
mileage from that city to the receiving pool plant for purposes of
determining the mileage. If this alternative understates the mileage
involved to the plant, the hauler can easily obtain a certified weight
receipt if that would result in a more accurate transportation credit.
Traditionally, provisions in Federal milk orders have used the
county courthouse as a basing point to determine mileage. In their
briefs, MMI and CVMPA suggested using the county courthouse closest to
the farm of the last producer on the route to establish the
[[Page 37638]]
origination point for a load of farm-to-plant milk. The reason for not
adopting this suggestion is that there are now more precise ways of
measuring the mileage between various points using any of several
computer mapping programs that are available in addition to more
traditional standard highway mileage guides that are available to the
market administrator. By specifying ``city'' rather than ``county
courthouse,'' in conjunction with providing the option of establishing
location based upon a certified weight receipt, we hope to achieve
greater precision in establishing the mileage between the last
producer's farm and the plant to which the milk is delivered.
This decision adopts the proposed transportation credit balancing
fund concept proposed by Mid-Am, as well as a monthly assessment on
Class I milk to provide revenue for the fund. It differs from the
proposal, however, in using the higher of the hauling credits
distributed in the immediately preceding 6 months or in the preceding
July-December period for purposes of determining the current month's
assessment level in Sec. 100X.81(a). This was done to ensure that the
fund will have a sufficient balance to meet the markets' needs when
credits start to be distributed in the month of July. As proposed by
Mid-Am, if no credits were distributed during the months of January
through June, no new assessment would be warranted. Therefore, the
yardstick to measure the assessment level would begin to decline in
January and, if no new credits were given out, would be zero by July.
This depletion of the fund could jeopardize its usefulness and require
the market administrator to transfer funds for transportation credits
from the producer-settlement fund.
This should only be done as a last resort. It will be less likely
to occur by using the alternative yardstick approach adopted in this
decision for determining the minimum balance needed in the
transportation credit balancing fund.
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
will be offset against payments due to a handler.
The use of a transportation credit balancing fund will permit
assessments that are needed for the transportation credits to be spread
out throughout the year. This will permit the assessment rate to be
kept at a lower and more stable level. It will also allow handlers to
reflect the assessment in their pricing plans. At the maximum level
permitted, the 6-cent assessment represents about one-half cent of the
raw product cost of a gallon of milk.
In its brief, Gold Star Dairy suggested exempting from the
assessment Class I sales made outside of the 4 marketing areas. This
suggestion should not be adopted. While such an exemption might put
Gold Star in a more favorable position with competitors in other
markets, such as the Texas marketing area, it would not be fair to
those handlers with whom Gold Star competes in the Southeast marketing
area, its primary sales territory. Moreover, if supplemental milk is
brought into any one of the 4 markets to supply a handler, there is no
reason why that handler should not bear its fair share of the
transportation costs for such milk, regardless of where the handler may
eventually sell it.
The market administrator will announce the assessment for the
transportation credit balancing fund on the 5th day of the month
preceding the month to which it applies. Accordingly, on the 5th day of
December, the assessment would be announced for January. An exception
to this rule should be made during the first month that transportation
credits are in effect because otherwise all of the first month's
transportation credits would have to come out of pool funds.
Accordingly, for the first month that these rules are in effect, the
assessment for the transportation credit balancing fund will be
announced no later than the Federal Register publication date of the
interim order amending the orders. For example, if the interim order
amending the orders is published on July 1, 1996, handlers will be
notified of the assessment for July on, or a few days before, that day.
On July 5, handlers will be notified of the assessment for August.
For the first 3 months that these amendments are effective, the
assessment for the transportation credit balancing fund should be 6
cents per hundredweight. It is necessary to specify a rate in Section
81(c) of the attached orders because there is no 6-month credit
distribution history from which to determine it, as provided in
paragraph (a) of Section 81.
It is possible that during the first year that these provisions are
in effect, and possibly thereafter under unusual conditions, it may be
necessary to transfer funds from the producer-settlement fund to pay
the transportation credits that are distributed. Transferring funds
from the producer-settlement fund will result in lower uniform prices
to producers. For this reason, several parties suggested, instead,
borrowing from the producer-settlement fund reserve and paying back the
reserve fund in future months from transportation credit assessments
that are collected.
The market administrator maintains a producer-settlement fund (psf)
reserve equal to approximately 4-5 cents per hundredweight of producer
milk in the pool. This reserve is used to pay audit adjustments and
other unforseen expenses.
The suggestion to borrow from the reserve is no doubt well-
intentioned, but the alternative of transferring funds from the psf
itself is the better approach for several reasons.
First, the reserve fund is maintained as a cushion to provide ready
cash for audit adjustments and other unforseen expenses that arise.
Depleting this reserve to pay for transportation credits, even for a
temporary period of time, would not be prudent.
Second, we appreciate the concerns of those who do not want to
reduce the blend price to producers to pay for transportation credits,
but we believe that this transfer of funds may only be necessary during
the first year that this provision is in effect. Thereafter, there
should be adequate funds in the transportation credit balancing fund to
pay for future transportation credits.
Third, by transferring funds from the psf, rather than borrowing
the funds from the psf reserve, it will not be necessary to postpone
the disbursement of credits, as might be necessary under the
alternative approach suggested by Milkco and others. To the extent that
reimbursement for transportation expenses is postponed, certain
handlers will be disadvantaged relative to others who did not incur
such expenses.
Finally, by transferring funds from the psf, rather than borrowing
the funds from the psf reserve, producers will be sharing with handlers
the cost of supplying the market with supplemental milk. This will help
to minimize the assessment to handlers during months when
transportation credits are not needed because the current month's
assessments will not be used to pay back funds borrowed from the psf
reserve for prior months but, instead, will be used to pay only current
months' credits or to build up the transportation credit balancing fund
for future months.
At this hearing, concern was once again expressed about the
difficulty of obtaining supplemental milk when the Class III-A price is
allegedly providing a profitable market for manufacturers of nonfat dry
milk. A proposal was made to suspend Class III-A pricing while
transportation credits are in effect.
[[Page 37639]]
As noted earlier, Mid-Am testified that it shut down its butter-
powder plants in these 4 markets during the months of July through
December 1995. Therefore, to the extent that handlers were competing
with butter-powder plants for supplemental milk, it was not
supplemental milk in these 4 markets.
The proposal to suspend Class III-A pricing in other markets goes
beyond the scope of this hearing. Therefore, the proposals to suspend
such pricing must be denied.
Several handlers criticized the proposed transportation credits for
not including the Florida markets. They argued that since the Florida
markets are the markets most in need of supplemental milk, it is unfair
that handlers in those markets do not have to pay the assessment for
the transportation credit balancing fund.
There was no testimony at this hearing concerning the current
premium structure in the Florida markets. It is a known fact, however,
that the Florida markets are 100 percent cooperatively supplied and
that the premium structure in those markets as of the September 1995
hearing was markedly different (and much higher) than the premium
structure prevailing in Orders 5, 7, 11, and 46.
Whether or not the Florida markets have the type of transportation
credits adopted in this decision is immaterial to the need for such
provisions in Orders 5, 7, 11, and 46. Given the tight supply situation
prevailing in the Florida markets, it is unlikely that any Florida
handler would have a pricing advantage over a handler regulated under
one of the 4 markets involved in this proceeding. Moreover, since
cooperative associations control the entire supply of milk in the
Florida markets, those markets do not have to deal with the difficult
issue of unequal sharing of the cost of supplying the market with
supplemental milk (i.e., the member versus nonmember issue).
The absence of a transportation credit in Florida does not mean
that handlers in Orders 5, 7, 11, and 46 will bear the cost of
providing supplemental milk to Florida. To the extent that milk is
shipped to Florida from any of the 4 markets involved in this
proceeding, such milk likely would have been shipped with or without
Florida's participation in the current hearing.
3. Whether Emergency Marketing Conditions in the Four Regulated Areas
Warrant the Omission of a Recommended Decision and the Opportunity to
File Written Exceptions Thereto With Respect to Issue 1
The omission of a recommended decision was proposed by the Mid-Am
spokesman. He also requested that the issue be handled on an expedited
basis, but suggested that the Secretary may wish to issue a tentative
final decision to provide another opportunity for comments and
adjustments to the amendments. No testimony was received in opposition
to the request.
The due and timely execution of the functions of the Secretary
under the Act imperatively and unavoidably require the omission of a
recommended decision and an opportunity for written exceptions with
respect to Issue No. 1. The continued orderly marketing of milk in the
respective areas requires that the attached order be made effective as
soon as possible, since the amount of supplemental milk needed for
Class I use in each of the four orders is expected to increase
significantly during the summer and fall months. Handlers, cooperative
associations, and others should know promptly and with certainty how
the Department is proposing to facilitate the importation of
supplemental milk so that arrangements may be made.
It is therefore found that good cause exists for omission of a
recommended decision and the opportunity for filing exceptions to it.
As noted earlier, however, this decision is being issued as a tentative
final decision. What this means is that producers will vote on the
amendments to the 4 orders just as they would with a normal final
decision. However, interested parties will have 30 days from the
Federal Register publication of this tentative final decision to
comment on it. After the comment period is over, the Department will
then issue a final decision, and producers will again have an
opportunity to vote on the orders as amended.
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.
The following findings are hereby made with respect to each of the
aforesaid tentative marketing agreements and orders:
(a) The tentative marketing agreements and 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 aforesaid 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, insure a sufficient quantity of pure and
wholesome milk, and are in the public interest; and
(c) The tentative marketing agreements and the orders, as hereby
proposed to be amended, will regulate the handling of milk in the same
manner as, and will be applicable only to persons in the respective
classes of industrial and commercial activity specified in, marketing
agreements upon which a hearing has been held.
Interim Marketing Agreement and Interim Order Amending the Orders
Annexed hereto and made a part hereof is an Interim Order amending
the orders regulating the handling of milk in the aforesaid marketing
areas, which has been decided upon as the detailed and appropriate
means of effectuating the foregoing conclusions. It is hereby ordered
that this entire decision and order amending the orders be published in
the Federal Register. Parties who desire to enter into a marketing
agreement covering the terms and conditions of the attached interim
order may request a marketing agreement from the market administrator
of the respective order.
[[Page 37640]]
Determination of Producer Approval and Representative Period
April 1996 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 the
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: July 12, 1996.
Michael V. Dunn,
Assistant Secretary, Marketing and Regulatory Programs.
Interim Order Amending the Orders Regulating the Handling of Milk in
Certain Specified Marketing Areas
This interim 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, insure a sufficient
quantity of pure and wholesome milk, and be in the public interest; and
(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.
Proposed Interim 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 marketing areas
shall be in conformity to and in compliance with the terms and
conditions of the orders, as amended, and as hereby amended, as
follows:
The authority citation for 7 CFR Parts 1005, 1007, 1011, and 1046
is revised to read as follows:
Authority: 7 U.S.C. 601-674.
PART 1005--MILK IN THE CAROLINA MARKETING AREA
1. In Sec. 1005.30, paragraphs (a) and (c) are revised to read as
follows:
Sec. 1005.30 Reports of receipts and utilization.
* * * * *
(a) Each handler, with respect to each of its pool plants, shall
report the quantities of skim milk and butterfat contained in or
represented by:
(1) Receipts of producer milk, including producer milk diverted
from the pool plant to other plants;
(2) Receipts of milk from handlers described in Sec. 1005.9(c);
(3) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(4) Receipts of other source milk;
(5) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1007, 1011, and 1046, for which a
transportation credit is requested pursuant to Sec. 1005.82;
(6) Receipts of producer milk described in Sec. 1005.82(c)(2),
including the identity of the individual producers whose milk is
eligible for the transportation credit pursuant to Sec. 1005.82(c)(2);
(7) Inventories at the beginning and end of the month of fluid milk
products and products specified in Sec. 1005.40(b)(1); and
(8) The utilization or disposition of all milk, filled milk, and
milk products required to be reported pursuant to this paragraph (a).
* * * * *
(c) Each handler described in Sec. 1005.9 (b) and (c) shall report:
(1) The quantities of all skim milk and butterfat contained in
receipts of milk from producers;
(2) The utilization or disposition of all such receipts; and
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1005.82, all of the
information required in paragraphs (a) (5) and (6) of this section.
* * * * *
2. Section 1005.61 is amended by redesignating paragraphs (a)(4),
(a)(5), (b)(5), and (b)(6) as paragraphs (a)(5), (a)(6), (b)(6), and
(b)(7), respectively, amending paragraph (b)(3) by revising ``(a)(3)''
to read ``(a)(4)'' and ``(a)(4)(ii)'' to read ``(a)(5)(ii)'', amending
newly designated paragraphs (b)(6) by revising ``(b)(4)'' to read
``(b)(5)'', amending newly designated paragraph (b)(7) by revising
``(b)(5)'' to read ``(b)(6)'', and adding new paragraphs (a)(4) and
(b)(5) to read as follows:
Sec. 1005.61 Computation of uniform price (including weighted average
price and uniform prices for base and excess milk).
(a) * * *
(4) Deduct the amount by which the amount due from the
transportation credit balancing fund pursuant to Sec. 1005.82 exceeds
the available balance in the transportation credit balancing fund
pursuant to Sec. 1005.80;
* * * * *
[[Page 37641]]
(b) * * *
(5) Deduct the amount by which the amount due from the
transportation credit balancing fund pursuant to Sec. 1005.82 exceeds
the available balance in the transportation credit balancing fund
pursuant to Sec. 1005.80;
* * * * *
3. Following Sec. 1005.78, a new undesignated center heading and
Secs. 1005.80, 1005.81, and 1005.82 are added to read as follows:
Marketwide Service Payments
Sec. 1005.80 Transportation credit balancing fund.
The market administrator shall maintain a separate fund known as
the Transportation Credit Balancing Fund into which shall be deposited
the payments made by handlers pursuant to Sec. 1005.81 and out of which
shall be made the payments due handlers pursuant to Sec. 1005.82.
Payments due a handler shall be offset against payments due from the
handler.
Sec. 1005.81 Payments to the transportation credit balancing fund.
(a) On or before the 12th day after the end of the month, each
handler shall pay to the market administrator a transportation credit
balancing fund assessment determined by multiplying the pounds of Class
I milk assigned pursuant to Sec. 1005.44 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 higher of the following
amounts:
(1) The total transportation credits dispensed during the prior
July-December period; or
(2) The total transportation credits dispensed during the
immediately preceding 6-month period.
(b) On or before the 13th day after the end of the month, the
market administrator shall credit the transportation credit balancing
fund, from the producer-settlement fund, any amount deducted pursuant
to Sec. 1005.61 (a)(4) or (b)(5).
(c) 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, except that for the first month
that this section is effective the assessment shall be announced no
later than [the publication date of the final rule in the Federal
Register] and for the first 3 months that this section is effective the
assessment pursuant to paragraph (a) of this section shall be 6 cents
per hundredweight.
Sec. 1005.82 Payments from the transportation credit balancing fund.
(a) 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), bulk milk
directly from producers' farms as specified in paragraph (c)(2) of this
section an amount determined pursuant to paragraph (d) of this section.
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 any of the months of January through June if the market
administrator receives a written request to do so 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) The transportation credit described in paragraph (a) of this
section 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; and
(2) Bulk milk classified pro rata as Class I milk pursuant to
Sec. 1005.44 received directly from the farms of dairy farmers at pool
distributing plants under the following conditions:
(i) 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 32 days' production of the dairy farmer was received
as producer milk under this order during that period; and
(ii) 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, and, is not within 85 miles of the
plant to which its milk is delivered.
(d) Transportation credits shall be computed as follows:
(1) For milk described in paragraph (c)(1) of this section, the
market administrator shall:
(i) Determine the shortest hard-surface highway distance between
the transferor plant and the transferee plant;
(ii) Multiply the number of miles computed in paragraph (d)(1)(i)
of this section by 0.37 cents;
(iii) Subtract the other order's Class I price applicable at the
transferor plant's location from the Class I price applicable at the
transferee plant as specified in Sec. 1005.53;
(iv) Subtract any positive difference computed in paragraph
(d)(1)(iii) of this section from the amount computed in paragraph
(d)(1)(ii) of this section; and
(v) Multiply the remainder computed in paragraph (d)(1)(iv) of this
section by the hundredweight of milk described in paragraph (c)(1) of
this section.
(2) For milk described in paragraph (c)(2) of this section:
(i) Each milk hauler that is transporting the milk of producers
described in paragraph (c)(2) of this section may stop at the nearest
independently-operated truck stop with a truck scale and obtain 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. The
location of the truck stop shall be used as a starting point for the
purpose of measuring the distance to the pool plant receiving that load
of milk. If a weight certificate for a supplemental load of milk for
which a transportation credit is requested is not available, the market
administrator shall use the nearest city to the last producer's farm
from which milk was picked up for delivery to the receiving pool plant;
(ii) For each bulk tank load of milk received pursuant to paragraph
(d)(2)(i) of this section, the market administrator shall determine the
shortest hard-surface highway distance between the receiving pool plant
and the truck stop or city, as the case may be;
[[Page 37642]]
(iii) Multiply the number of miles computed in paragraph (d)(2)(ii)
of this section by 0.37 cents;
(iv) Multiply the number computed in paragraph (d)(2)(iii) of this
section by the hundredweight of milk described in paragraph (c)(2) of
this section;
(v) Subtract this order's Class I price applicable at the
origination point determined pursuant to paragraph (d)(2)(ii) of this
section from the Class I price applicable at the distributing plant
receiving the milk; and
(vi) Subtract any positive difference computed in paragraph
(d)(2)(v) of this section from the amount computed in paragraph
(d)(2)(iv) of this section.
PART 1007--MILK IN THE SOUTHEAST MARKETING AREA
4. The authority citation for part 1007 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
4a. In Sec. 1007.30, paragraphs (a) and (c) are revised to read as
follows:
Sec. 1007.30 Reports of receipts and utilization.
* * * * *
(a) Each handler, with respect to each of its pool plants, shall
report the quantities of skim milk and butterfat contained in or
represented by:
(1) Receipts of producer milk, including producer milk diverted by
the handler from the pool plant to other plants;
(2) Receipts of milk from handlers described in Sec. 1007.9(c);
(3) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(4) Receipts of other source milk;
(5) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1005, 1011, and 1046, for which a
transportation credit is requested pursuant to Sec. 1007.82;
(6) Receipts of producer milk described in Sec. 1007.82(c)(2),
including the identity of the individual producers whose milk is
eligible for the transportation credit pursuant to Sec. 1007.82(c)(2);
(7) Inventories at the beginning and end of the month of fluid milk
products and products specified in Sec. 1007.40(b)(1); and
(8) The utilization or disposition of all milk, filled milk, and
milk products required to be reported pursuant to this paragraph (a).
* * * * *
(c) Each handler described in Sec. 1007.9 (b) and (c) shall report:
(1) The quantities of skim milk and butterfat contained in receipts
of milk from producers;
(2) The utilization or disposition of all such receipts; and
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1007.82, all of the
information required in paragraphs (a) (5) and (6) of this section.
* * * * *
5. Section 1007.61 is amended by redesignating paragraphs (a)(4),
(a)(5), (b)(5), and (b)(6) as paragraphs (a)(5), (a)(6), (b)(6), and
respectively, (b)(7), amending (b)(3) by revising ``(a)(3)'' to read
``(a)(4)'' and ``(a)(4)(ii)'' to read ``(a)(5)(ii)'', amending newly
designated paragraph (b)(6) by revising ``(b)(4)'' to read ``(b)(5)'',
amending newly designated paragraph (b)(7) by revising ``(b)(5)'' to
read ``(b)(6)'', and adding new paragraphs (a)(4) and (b)(5) to read as
follows:
Sec. 1007.61 Computation of uniform price (including weighted average
price and uniform prices for base and excess milk).
(a) * * *
(4) Deduct the amount by which the amount due from the
transportation credit balancing fund pursuant to Sec. 1007.82 exceeds
the available balance in the transportation credit balancing fund
pursuant to Sec. 1007.80;
* * * * *
(b) * * *
(5) Deduct the amount by which the amount due from the
transportation credit balancing fund pursuant to Sec. 1007.82 exceeds
the available balance in the transportation credit balancing fund
pursuant to Sec. 1007.80;
* * * * *
6. Following Sec. 1007.78, a new undesignated center heading and
Secs. 1007.80, 1007.81, and 1007.82 are added to read as follows:
Marketwide Service Payments
Sec. 1007.80 Transportation credit balancing fund.
The market administrator shall maintain a separate fund known as
the Transportation Credit Balancing Fund into which shall be deposited
the payments made by handlers pursuant to Sec. 1007.81 and out of which
shall be made the payments due handlers pursuant to Sec. 1007.82.
Payments due a handler shall be offset against payments due from the
handler.
Sec. 1007.81 Payments to the transportation credit balancing fund.
(a) On or before the 12th day after the end of the month, each
handler shall pay to the market administrator a transportation credit
balancing fund assessment determined by multiplying the pounds of Class
I milk assigned pursuant to Sec. 1007.44 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 higher of the following
amounts:
(1) The total transportation credits dispensed during the prior
July-December period; or
(2) The total transportation credits dispensed during the
immediately preceding 6-month period.
(b) On or before the 13th day after the end of the month, the
market administrator shall credit the transportation credit balancing
fund, from the producer-settlement fund, any amount deducted pursuant
to Sec. 1007.61 (a)(4) or (b)(5).
(c) 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, except that for the first month
that this section is effective the assessment shall be announced no
later than [the publication date of the final rule in the Federal
Register] and for the first 3 months that this section is effective the
assessment pursuant to paragraph (a) of this section shall be 6 cents
per hundredweight.
Sec. 1007.82 Payments from the transportation credit balancing fund.
(a) 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), bulk milk
directly from producers' farms as specified in paragraph (c)(2) of this
section an amount determined pursuant to paragraph (d) of this section.
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 any
[[Page 37643]]
of the months of January through June if the market administrator
receives a written request to do so 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) The transportation credit described in paragraph (a) of this
section 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; and
(2) Bulk milk classified pro rata as Class I milk pursuant to
Sec. 1007.44 received directly from the farms of dairy farmers at pool
distributing plants under the following conditions:
(i) 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 32 days' production of the dairy farmer was received
as producer milk under this order during that period; and
(ii) 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, and, is not within 85 miles of the
plant to which its milk is delivered.
(d) Transportation credits shall be computed as follows:
(1) For milk described in paragraph (c)(1) of this section, the
market administrator shall:
(i) Determine the shortest hard-surface highway distance between
the transferor plant and the transferee plant;
(ii) Multiply the number of miles computed in paragraph (d)(1)(i)
of this section by 0.37 cents;
(iii) Subtract the other order's Class I price applicable at the
transferor plant's location from the Class I price applicable at the
transferee plant as specified in Sec. 1007.52;
(iv) Subtract any positive difference computed in paragraph
(d)(1)(iii) of this section from the amount computed in paragraph
(d)(1)(ii) of this section; and
(v) Multiply the remainder computed in paragraph (d)(1)(iv) of this
section by the hundredweight of milk described in paragraph (c)(1) of
this section.
(2) For milk described in paragraph (c)(2) of this section:
(i) Each milk hauler that is transporting the milk of producers
described in paragraph (c)(2) of this section may stop at the nearest
independently-operated truck stop with a truck scale and obtain 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. The
location of the truck stop shall be used as a starting point for the
purpose of measuring the distance to the pool plant receiving that load
of milk. If a weight certificate for a supplemental load of milk for
which a transportation credit is requested is not available, the market
administrator shall use the nearest city to the last producer's farm
from which milk was picked up for delivery to the receiving pool plant;
(ii) For each bulk tank load of milk received pursuant to paragraph
(d)(2)(i) of this section, the market administrator shall determine the
shortest hard-surface highway distance between the receiving pool plant
and the truck stop or city, as the case may be;
(iii) Multiply the number of miles computed in paragraph (d)(2)(ii)
of this section by 0.37 cents;
(iv) Multiply the number computed in paragraph (d)(2)(iii) of this
section by the hundredweight of milk described in paragraph (c)(2) of
this section;
(v) Subtract the order's Class I price applicable at the
origination point determined pursuant to paragraph (d)(2)(ii) of this
section from the Class I price applicable at the distributing plant
receiving the milk; and
(vi) Subtract any positive difference computed in paragraph
(d)(2)(v) of this section from the amount computed in paragraph
(d)(2)(iv) of this section.
PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA
7. In Sec. 1011.30, paragraphs (a) and (c) are revised to read as
follows:
Sec. 1011.30 Reports of receipts and utilization.
* * * * *
(a) Each handler, with respect to each of his pool plants, shall
report the quantities of skim milk and butterfat contained in or
represented by:
(1) Receipts of producer milk, including producer milk diverted
from the pool plant to other plants;
(2) Receipts of milk from handlers described in Sec. 1011.9(c);
(3) Receipts of milk from handlers described in 1011.9(d);
(4) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(5) Receipts of other source milk;
(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;
(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 Sec. 1011.82(c)(2);
(8) Inventories at the beginning and end of the month of fluid milk
products and products specified in Sec. 1011.40(b)(1); and
(9) The utilization or disposition of all milk, filled milk, and
milk products required to be reported pursuant to this paragraph (a).
* * * * *
(c) Each handler described in Sec. 1011.9(b), (c) and (d) shall
report:
(1) The quantities of all skim milk and butterfat contained in
receipts of milk from producers;
(2) The utilization or disposition of all such receipts; and
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1011.82, all of the
information required in paragraphs (a) (6) and (7) of this section.
* * * * *
8. Section 1011.61 is amended by redesignating paragraphs (a)(4),
(a)(5), (b)(5), and (b)(6) as paragraphs (a)(5), (a)(6), paragraph
(b)(6) and (b)(7), respectively amending paragraph (b)(3) by revising
``(a)(3)'' to read ``(a)(4)'' and ``(a)(4)(ii)'' to read
``(a)(5)(ii)'', amending newly designated paragraph (b)(6) by
revising``(b)(4)'' to read ``(b)(5)'', amending newly designated
paragraph (b)(7) by revising ``(b)(5)'' to read ``(b)(6)'', and adding
new paragraphs (a)(4) and (b)(5) to read as follows:
Sec. 1011.61 Computation of uniform price (including weighted average
price and uniform prices for base and excess milk).
(a) * * *
(4) Deduct the amount by which the amount due from the
transportation credit balancing fund pursuant to Sec. 1011.82 exceeds
the available balance in the transportation credit balancing fund
pursuant to Sec. 1011.80;
* * * * *
(b) * * *
(5) Deduct the amount by which the amount due from the
transportation credit balancing fund pursuant to Sec. 1011.82 exceeds
the available balance
[[Page 37644]]
in the transportation credit balancing fund pursuant to Sec. 1011.80;
* * * * *
9. Following Sec. 1011.78, a new undesignated center heading and
Secs. 1011.80, 1011.81, and 1011.82 are added to read as follows:
Marketwide Service Payments
Sec. 1011.80 Transportation credit balancing fund.
The market administrator shall maintain a separate fund known as
the Transportation Credit Balancing Fund into which shall be deposited
the payments made by handlers pursuant to Sec. 1011.81 and out of which
shall be made the payments due handlers pursuant to Sec. 1011.82.
Payments due a handler shall be offset against payments due from the
handler.
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 shall pay to the market administrator a transportation credit
balancing fund assessment determined by multiplying the pounds of Class
I 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 higher of the following
amounts:
(1) The total transportation credits dispensed during the prior
July-December period; or
(2) The total transportation credits dispensed during the
immediately preceding 6-month period.
(b) On or before the 13th day after the end of the month, the
market administrator shall credit the transportation credit balancing
fund, from the producer-settlement fund, any amount deducted pursuant
to Sec. 1011.61 (a)(4) or (b)(5).
(c) 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, except that for the first month
that this section is effective the assessment shall be announced no
later than [the publication date of the final rule in the Federal
Register] and for the first 3 months that this section is effective the
assessment pursuant to paragraph (a) of this section shall be 6 cents
per hundredweight.
Sec. 1011.82 Payments from the transportation credit balancing fund.
(a) 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), bulk milk
directly from producers' farms as specified in paragraph (c)(2) of this
section an amount determined pursuant to paragraph (d) of this section.
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 any of the months of January through June if the market
administrator receives a written request to do so 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) The transportation credit described in paragraph (a) of this
section 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; and
(2) Bulk milk classified pro rata as Class I milk pursuant to
Sec. 1011.44 received directly from the farms of dairy farmers at pool
distributing plants under the following conditions:
(i) 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 32 days' production of the dairy farmer was received
as producer milk under this order during that period; and
(ii) 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, and, is not within 85 miles of the
plant to which its milk is delivered.
(d) Transportation credits shall be computed as follows:
(1) For milk described in paragraph (c)(1) of this section, the
market administrator shall:
(i) Determine the shortest hard-surface highway distance between
the transferor plant and the transferee plant;
(ii) Multiply the number of miles computed in paragraph (d)(1)(i)
of this section by 0.37 cents;
(iii) Subtract the other order's Class I price applicable at the
transferor plant's location from the Class I price applicable at the
transferee plant as specified in Sec. 1011.52;
(iv) Subtract any positive difference computed in paragraph
(d)(1)(iii) of this section from the amount computed in paragraph
(d)(1)(ii) of this section; and
(v) Multiply the remainder computed in paragraph (d)(1)(iv) of this
section by the hundredweight of milk described in paragraph (c)(1) of
this section.
(2) For milk described in paragraph (c)(2) of this section:
(i) Each milk hauler that is transporting the milk of producers
described in paragraph (c)(2) of this section may stop at the nearest
independently-operated truck stop with a truck scale and obtain 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. The
location of the truck stop shall be used as a starting point for the
purpose of measuring the distance to the pool plant receiving that load
of milk. If a weight certificate for a supplemental load of milk for
which a transportation credit is requested is not available, the market
administrator shall use the nearest city to the last producer's farm
from which milk was picked up for delivery to the receiving pool plant;
(ii) For each bulk tank load of milk received pursuant to paragraph
(d)(2)(i) of this section, the market administrator shall determine the
shortest hard-surface highway distance between the receiving pool plant
and the truck stop or city, as the case may be;
(iii) Multiply the number of miles computed in paragraph (d)(2)(ii)
of this section by 0.37 cents;
(iv) Multiply the number computed in paragraph (d)(2)(iii) of this
section by
[[Page 37645]]
the hundredweight of milk described in paragraph (c)(2) of this
section;
(v) Subtract this order's Class I price applicable at the
origination point determined pursuant to paragraph (d)(2)(ii) of this
section from the Class I price applicable at the distributing plant
receiving the milk; and
(vi) Subtract any positive difference computed in paragraph
(d)(2)(v) of this section from the amount computed in paragraph
(d)(2)(iv) of this section.
PART 1046--MILK IN THE LOUISVILLE-LEXINGTON-EVANSVILLE MARKETING
AREA
10. The authority citation for part 1046 continues to read as
follows:
Authority: Secs. 1-19, 48 Stat. 31, as amended (7 U.S.C. 601-
674).
10 a. In Sec. 1046.30, paragraphs (a) and (c) are revised to read
as follows:
Sec. 1046.30 Reports of receipts and utilization.
* * * * *
(a) Each handler, with respect to each of his pool plants, shall
report the quantities of skim milk and butterfat contained in or
represented by:
(1) Receipts of producer milk, including producer milk diverted by
the handler from the pool plant to other plants;
(2) Receipts of milk from handlers described in Sec. 1046.9(c);
(3) Receipts of fluid milk products and bulk fluid cream products
from other pool plants;
(4) Receipts of other source milk;
(5) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1005, 1007, and 1011, for which a
transportation credit is requested pursuant to Sec. 1046.82;
(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 Sec. 1046.82(c)(2);
(7) Inventories at the beginning and end of the month of fluid milk
products and products specified in Sec. 1046.40(b)(1); and
(8) The utilization or disposition of all milk, filled milk, and
milk products required to be reported pursuant to this paragraph (a).
* * * * *
(c) Each handler described in Sec. 1046.9 (b) and (c) shall report:
(1) The quantities of all skim milk and butterfat contained in
receipts of milk from producers;
(2) The utilization or disposition of all such receipts; and
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1046.82, all of the
information required in paragraphs (a) (5) and (6) of this section.
* * * * *
11. Section 1046.61 is amended by redesignating paragraphs (a)(4),
(a)(5), (b)(5), and (b)(6) as paragraphs (a)(5), (a)(6), (b)(6), and
(b)(7), respectively, amending paragraph (b)(3) by revising ``(a)(3)''
to read ``(a)(4)'' and ``(a)(4)(ii)'' to read ``(a)(5)(ii)'', amending
newly designated paragraph (b)(6) by revising ``(b)(4)'' to read
``(b)(5)'', amending newly designated paragraph (b)(7) by revising
``(b)(5)'' to read ``(b)(6)'', and adding new paragraphs (a)(4) and
(b)(5) to read as follows:
Sec. 1046.61 Computation of uniform price (including weighted average
price and uniform prices for base and excess milk).
(a) * * *
(4) Deduct the amount by which the amount due from the
transportation credit balancing fund pursuant to Sec. 1046.82 exceeds
the available balance in the transportation credit balancing fund
pursuant to Sec. 1046.80;
* * * * *
(b) * * *
(5) Deduct the amount by which the amount due from the
transportation credit balancing fund pursuant to Sec. 1046.82 exceeds
the available balance in the transportation credit balancing fund
pursuant to Sec. 1046.80;
* * * * *
12. In Sec. 1046.73, paragraph (f)(2) is revised to read as
follows:
Sec. 1046.73 Payments to producers and to cooperative associations.
* * * * *
(f) * * *
(2) On or before the 10th day after the end of the following month
for milk received during the month an amount computed at not less than
the value of such milk at the minimum prices for milk in each class, as
adjusted by the butterfat differential specified in Sec. 1046.74
applicable at the location of the receiving handler's pool plant and
any transportation credit that is due the cooperative association
pursuant to Sec. 1046.82(a), less the payment made pursuant to
paragraph (f)(1) of this section.
13. Following Sec. 1046.78, a new undesignated center heading and
Secs. 1046.80, 1046.81, and 1046.82 are added to read as follows:
Marketwide Service Payments
Sec. 1046.80 Transportation credit balancing fund.
The market administrator shall maintain a separate fund known as
the Transportation Credit Balancing Fund into which shall be deposited
the payments made by handlers pursuant to Sec. 1046.81 and out of which
shall be made the payments due handlers pursuant to Sec. 1046.82.
Payments due a handler shall be offset against payments due from the
handler.
Sec. 1046.81 Payments to the transportation credit balancing fund.
(a) On or before the 12th day after the end of the month, each
handler shall pay to the market administrator a transportation credit
balancing fund assessment determined by multiplying the pounds of Class
I 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 higher of the following
amounts:
(1) The total transportation credits dispensed during the prior
July-December period; or
(2) The total transportation credits dispensed during the
immediately preceding 6-month period.
(b) On or before the 13th day after the end of the month, the
market administrator shall credit the transportation credit balancing
fund, from the producer-settlement fund, any amount deducted pursuant
to Sec. 1046.61 (a)(4) or (b)(5).
(c) 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, except that for the first month
that this section is effective the assessment shall be announced no
later than [the publication date of the final rule in the Federal
Register] and for the first 3 months that this section is effective the
assessment pursuant to paragraph (a) of this section shall be 6 cents
per hundredweight.
Sec. 1046.82 Payments from the transportation credit balancing fund.
(a) 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. 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), bulk milk
directly from producers' farms as specified in paragraph (c)(2) of this
section an amount determined pursuant to
[[Page 37646]]
paragraph (d) of this section. 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 paid 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 any of the months of January through June if the market
administrator receives a written request to do so 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) The transportation credit described in paragraph (a) of this
section 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; and
(2) Bulk milk classified pro rata as Class I milk pursuant to
Sec. 1046.44 received directly from the farms of dairy farmers at pool
distributing plants under the following conditions:
(i) 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 32 days' production of the dairy farmer was received
as producer milk under this order during that period; and
(ii) 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, and, is not within 85 miles of the
plant to which its milk is delivered.
(d) Transportation credits shall be computed as follows:
(1) For milk described in paragraph (c)(1) of this section, the
market administrator shall:
(i) Determine the shortest hard-surface highway distance between
the transferor plant and the transferee plant;
(ii) Multiply the number of miles computed in paragraph (d)(1)(i)
of this section by 0.37 cents;
(iii) Subtract the other order's Class I price applicable at the
transferor plant's location from the Class I price applicable at the
transferee plant as specified in Sec. 1046.52;
(iv) Subtract any positive difference computed in paragraph
(d)(1)(iii) of this section from the amount computed in paragraph
(d)(1)(ii) of this section; and
(v) Multiply the remainder computed in paragraph (d)(1)(iv) of this
section by the hundredweight of milk described in paragraph (c)(1) of
this section.
(2) For milk described in paragraph (c)(2) of this section:
(i) Each milk hauler that is transporting the milk of producers
described in paragraph (c)(2) of this section may stop at the nearest
independently-operated truck stop with a truck scale and obtain 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. The
location of the truck stop shall be used as a starting point for the
purpose of measuring the distance to the pool plant receiving that load
of milk. If a weight certificate for a supplemental load of milk for
which a transportation credit is requested is not available, the market
administrator shall use the nearest city to the last producer's farm
from which milk was picked up for delivery to the receiving pool plant;
(ii) For each bulk tank load of milk received pursuant to paragraph
(d)(2)(i) of this section, the market administrator shall determine the
shortest hard-surface highway distance between the receiving pool plant
and the truck stop or city, as the case may be;
(iii) Multiply the number of miles computed in paragraph (d)(2)(ii)
of this section by 0.37 cents;
(iv) Multiply the number computed in paragraph (d)(2)(iii) of this
section by the hundredweight of milk described in paragraph (c)(2) of
this section;
(v) Subtract this order's Class I price applicable at the
origination point determined pursuant to paragraph (d)(2)(ii) of this
section from the Class I price applicable at the distributing plant
receiving the milk; and
(vi) Subtract any positive difference computed in paragraph
(d)(2)(v) of this section from the amount computed in paragraph
(d)(2)(iv) of this section.
[FR Doc. 96-18227 Filed 7-15-96; 3:34 pm]
BILLING CODE 3410-02-P
