II. Discussion of Material Issues and Amendments to the Orders

A discussion and explanation of the material issues and

determinations contained in this rule are as follows:

1. CONSOLIDATION OF MARKETING AREAS

Subtitle D, Chapter 1 of the 1996 Farm Bill, entitled

“Consolidation and Reform of Federal Milk Marketing Orders,”

requires, among other things, that the Federal milk marketing

orders be limited to not less than 10 and not more than 14. 

Nearly 1,300 public comments received in response to the proposed

rule addressed the subject of order consolidation. Preceding the

proposed rule, two preliminary reports on order consolidation were

issued by the Agricultural Marketing Service’s Dairy Division, in

December 1996 and May 1997. The proposed rule, issued in January

1998, included consideration of public comments received in

response to these preliminary reports.

The 1996 Farm Bill specifically provides for the inclusion of

California as a separate Federal milk order, but the provision is

contingent upon petition and approval by California producers. 

The Omnibus Consolidated and Emergency Supplemental Appropriations

Bill, passed in October 1998, extended the time for implementing

Federal milk order reform amendments from April 4, 1999 to October

1, 1999. The legislation provides that California has from the

date of issuance of this final decision until September 30, 1999,

to become a separate Federal milk order. This additional time is

intended to allow California dairy interests the opportunity

review this final decision to determine whether a Federal milk

order for California, consistent with the provisions adopted for

the consolidated orders, would best meet their milk marketing

regulatory needs.

Over 150 comments were received that addressed the issue of a

Federal milk order for California, with approximately 120 of them

being a form letter advocating a California Federal milk order. 

These comments, and a number of additional individual comments,

came primarily from commenters outside California who expressed a

need for California and Federal order prices for milk used in

manufactured products to be in closer alignment to eliminate

California manufacturers’ perceived competitive advantage in

product prices. 

Interest in a Federal milk order has been expressed by some

California producers, but for the most part California commenters

expressed a desire to have a chance to study and comment on this

final decision before deciding whether to pursue a proposal for a

California Federal order.

The preliminary reports, the proposed rule, and this final

decision concerning order consolidation were prepared using data

gathered about receipts and distribution of fluid milk products by
all known distributing plants located in the 47 contiguous states,

not including the State of California. Data describing the

sources and disposition of fluid milk products for the month of

October 1995 were used to compile the initial Preliminary Report. 

In response to comments and questions about certain marketing area

boundaries and changes in marketing conditions in some of the

markets after publication of the initial Preliminary Report, data

concerning those markets was updated to January 1997, and more

detailed information was gathered regarding the geographic

distribution of route sales by individual handlers and their

specific sources of producer milk. The updated and more detailed

data were used in re-examining the appropriate boundaries of the

initially-suggested Northeast, Appalachian, Southeast, Mideast,

Central, and Western marketing areas for the Revised Preliminary

Report on Order Consolidation. The Revised Preliminary Report, in

turn, was modified on the basis of comments received for

development of the proposed rule.

Nearly 1,300 comments filed in response to the proposed rule

had some applicability to the topic of order consolidation. 

Approximately 750 of these comments were received as 6 form

letters, one of which (filed by approximately 120 commenters)

advocated a national marketing area map comprised of 10 order

areas covering all of the contiguous 48 states. The other form

letters advocated the addition of currently-unregulated area to

the Northeast area. Another 350 comments also addressed the

desirability of adding unregulated areas to the proposed

consolidated marketing areas (primarily the Northeast), with only

about 55 of these being opposed to the inclusion of unregulated

areas.

The comments specifically applicable to each of the

consolidated marketing areas are described in the sections dealing

with the individual consolidated areas.

In combination with consideration of the comments received,

data similar to that gathered for October 1995 were compiled for

October 1997 to determine whether the consolidated marketing areas

delineated in the proposed rule continued to represent the most

appropriate boundaries for the purpose of implementing the

requirements of the 1996 Farm Bill.

The October 1997 data allowed a “snapshot” of the marketing

patterns of fluid milk processors for that month. The regulatory

status of distributing plants for October 1997 is known, and the

regulatory status of each plant could be projected on the basis of

the plant’s receipts and dispositions, and where its milk was

distributed. The information in the sections entitled

“Distributing Plants” within the description of each marketing

area are based on the October data, as are the lists of plants and

pool plant status following the consolidation portion of this
decision. It should be understood that the regulatory status of

any plant can change whenever its operations or areas of

distribution change.

The result of the examination and analysis of the more recent

data in combination with the comments on the proposed rule was to

modify significantly from the proposed rule the marketing areas of

the proposed Northeast and Western orders, and to make very minor

modifications to the marketing areas of the proposed Southeast,

Mideast, Upper Midwest and Central orders.

As in the case of data referring to the operations of less

than three handlers or producers in the preliminary reports and

proposed rule, some of the data used to determine the consolidated

areas is restricted from use by the public because it refers to

individual fluid milk distributing plants and the origins of

producer milk supply for those plants. However, the basis for the

marketing area boundaries is described as specifically as possible

without divulging such proprietary information.

The same seven primary criteria as were used in the two

preliminary reports and the proposed rule were used to determine

which markets exhibit a sufficient degree of association in terms

of sales, procurement, and structural relationships to warrant

consolidation. The criteria are as follows:

1. Overlapping route disposition. The movement of packaged

milk between Federal orders indicates that plants from more than

one Federal order are in competition with each other for Class I

sales. In addition, a degree of overlap that results in the

regulatory status of plants shifting between orders creates

disorderly conditions in changing price relationships between

competing handlers and neighboring producers. This criterion is

considered to be the most important.

2. Overlapping areas of milk supply. This criterion applies

principally to areas in which major proportions of the milk supply

are shared between more than one order. The competitive factors

affecting the cost of a handler’s milk supply are influenced by

the location of the supply. The pooling of milk produced within

the same procurement area under the same order facilitates the

uniform pricing of producer milk. Consideration of the criterion

of overlapping procurement areas does not mean that all areas

having overlapping areas of milk procurement should be

consolidated. An area that supplies a minor proportion of an

adjoining area’s milk supply with a minor proportion of its own

total milk production while handlers located in the area are

engaged in minimal competition with handlers located in the

adjoining area likely does not have a strong enough association

with the adjoining area to require consolidation.

For a number of the consolidated areas it would be very

difficult, if not impossible, to find a boundary across which
significant quantities of milk are not procured for other

marketing areas. In such cases, analysis was done to determine

where the minimal amount of route disposition overlap between

areas occurred, and the criterion of overlapping route disposition

generally was given greater weight than overlapping areas of milk

supply. Some analysis also was done to determine whether milk

pooled on adjacent markets reflects actual movements of milk

between markets, or whether the variations in amounts pooled under

a given order may indicate that some milk is pooled to take

advantage of price differences rather than because it is needed

for Class I use in the other market.

3. Number of handlers within a market. Formation of largersize markets is a stabilizing factor. Shifts of milk and/or

plants between markets becomes less of a disruptive factor in

larger markets. Also, the existence of Federal order markets with

handlers too few in number to allow meaningful statistics to be

published without disclosing proprietary information should be

avoided.

4. Natural boundaries. Natural boundaries and barriers such

as mountains and deserts often inhibit the movement of milk

between areas, and generally reflect a lack of population

(limiting the range of the consumption area) and lack of milk

production. Therefore, they have an effect on the placement of

marketing area boundaries. In addition, for the purposes of

market consolidation, large unregulated areas and political

boundaries also are considered a type of natural barrier. 

5. Cooperative association service areas. While not one of

the first criteria used to determine marketing areas, cooperative

membership often may be an indication of market association. 

Therefore, data concerning cooperative membership can provide

additional support for combining certain marketing areas.

6. Features or regulatory provisions common to existing

orders. Markets that already have similar regulatory provisions

that recognize similar marketing conditions may have a head start

on the consolidation process. With calculation of the basic

formula price replacement on the basis of components, however,

this criterion becomes less important. The consolidation of

markets having different payment plans will be more dependent on

whether the basic formula component pricing plan is appropriate

for a given consolidated market, or whether it would be more

appropriate to adopt a pricing plan using hundredweight pricing

derived from component prices.

7. Milk utilization in common dairy products. Utilization

of milk in similar manufactured products (cheese vs. butterpowder) was also considered to be an important criterion in

determining how to consolidate the existing orders.

Comments on consolidation criteria.
Most of the comments relative to order consolidation criteria

were submitted prior to publication of the proposed rule. It was

the overall opinion of the commenters that overlapping route

disposition and milk procurement are the most important criteria

to consider in the consolidation process. In addition, Class I

use percentages and regulation on the basis of handler location

were noted as important criteria to consider. To some extent, the

consolidated marketing areas included in this final decision do

combine markets with similar Class I utilization rates rather than

markets that would result in Class I use percentages being more

uniform between markets. This result occurs because adjoining

markets, where most of the sales and procurement competition takes

place between handlers regulated under different orders, tend to

have similar utilization rates rather than because the criterion

is one that should be used to determine appropriate

consolidations. Also, Class I utilization rates are a function of

how much milk is pooled on an order with a given amount of Class I

use. Differences in rates, to the extent they result in

differences in blend prices paid to producers, provide an

incentive for milk to move from markets with lower Class I

utilization percentages to markets with higher Class I use.

Regulation of processors on the basis of their location

rather than their sales areas has largely been incorporated in the

consolidated orders by a provision that would pool a handler under

the order for the area in which the handler is located unless more

than 50 percent of the handler’s Class I route dispositions are

distributed in another order area. This provision should help to

assure that the order under which a distributing plant is pooled

will not change from month to month, and that a plant operator is

subject to the same provisions, such as producer pay prices, as

are its primary competitors.

 The consolidated orders also include provisions that lock

plants processing primarily ultra-high temperature (UHT) or

extended shelf-life milk into regulation under the order for the

area in which the plant is located. Such plants often have widely

dispersed route sales into a number of order areas, with sporadic

deliveries to different areas. Without some type of lock-in

provision, such a plant may be pooled in several different orders

in as many months. At the same time, the plant’s milk supply

generally is procured from a given group of producers located in

the same area as the UHT (or extended shelf-life) plant. Having

the plant pooled under a succession of different orders with

widely varying blend prices creates a disorderly condition for the

producers involved.

On the basis of the distributing plant pooling standards

included for all eleven orders in this final decision, there are 

three non UHT pool distributing plants that would have more sales
in an order area other than the one in which they are regulated. 

Two of these plants are the Superbrand Dairy Products distributing

plant in Greenville, South Carolina, and the Kroger Dairy

distributing plant in Winchester, Kentucky, both located in the

Appalachian order, but which likely will qualify for pooling under

the Southeast and Mideast orders. In addition, the Hiland Dairy

plant in Fayetteville, Arkansas, in the Southeast consolidated

area, likely will qualify for pooling under the Central order. In

cases in which these plants compete almost entirely for a producer

milk supply in the area in which they are located, lock-in

provisions are incorporated to assure that the plant is pooled

where located for the purpose of competitive equity.

Some changes in regulatory status are expected to occur

because of the addition of regulated area (in the Northeast), the

consolidation of marketing areas, changes in pooling standards,

and changes in the definitions of types of plants. The expected

changes are based on data collected for October 1997 and may

differ in some respects at the time the consolidated orders go

into effect.

The regulatory status of three Vermont handlers is expected

to change from partially regulated to fully regulated because a

significant percentage of their sales is in areas that will be

added to the Northeast consolidated marketing area, and a

partially-regulated New York handler is expected to meet the

pooling standards because of the consolidation of marketing areas. 

Two other currently partially regulated handlers, one in New York

and one in Vermont, are expected to become fully regulated because

the pooling provisions of the consolidated order will be more like

those of all the other orders than is currently the case in the 

New York-New Jersey order. Two plants that currently are fully

regulated on the basis of the “grandfather” clause of the New

York-New Jersey order will become partially regulated when this

provision ceases to exist.

In the consolidated Appalachian marketing area, two

distributing plants, one currently unregulated and one partially

regulated, would become fully regulated as a result of including

the marketing area of the Tennessee Valley order, terminated in

October 1997. These plants both were fully regulated under the

Tennessee Valley order, and lost their regulatory status as a

result of the termination.

A plant currently partially regulated under the Southeast

order would become fully regulated as a result of “locking in” to

regulation plants that distribute primarily UHT or extended shelflife products. Another Southeast distributing plant, currently

fully regulated, would become partially regulated because of

failure to meet the consolidated order’s pooling standards.

Two distributing plants that currently are partially
regulated under the Chicago Regional order would become fully

regulated under the consolidated Upper Midwest order because of a

change in the definition of receipts that are used in the

calculation of percentage of total receipts used in route

disposition for the determination of pool status.

Three plants, one in each of the consolidated Upper Midwest,

Central, and Pacific Northwest marketing areas, would change

regulatory status as depicted in the attached list of distributing

plants and regulatory status. These plants are distributing

plants that are listed as being fully regulated in October 1997

and becoming either partially regulated or exempt under the

consolidated orders. These plants, having small amounts of route

dispositions, actually were pooled on the basis of their

performance as supply plants or as part of supply plant units. It

is unknown whether they will continue to qualify as pool supply

plants, but will not meet the pool distributing plant standards of

the consolidated orders.

In the Pacific Northwest, the Oregon and Washington State

prison systems both operate fluid processing plants that have

route distribution in commercial channels, competing with

regulated handlers. These plants are not currently fully

regulated. Under the consolidated order, one of the plants will

be partially regulated only with respect to its commercial sales,

and the other will be exempt on the basis of size.

Several comments advocated that all of a state’s territory

should be included in one Federal order to assure that all

producers in a state are paid on an equitable basis, or to make it

easier to maintain state statistical data. One of the primary

reasons for Federal milk orders is that milk marketing occurs

readily across state boundaries, making state milk marketing

regulation more difficult to enforce. It is important that

Federal milk marketing areas continue to recognize the free

interstate movement of milk to and from milk plants. There are

cases where natural boundaries such as mountains or rivers may

result in part of a state having a closer marketing relationship

with an adjoining state than with other areas of the same state.

Although the Revised Preliminary Report suggested that

several currently non-Federally regulated areas be added to some

consolidated marketing areas, the proposed rule omitted areas in

which handlers are subject to minimum Class I pricing under State

regulation unless the affected handlers or States requested

inclusion. This final decision continues to omit such areas, and

also omits currently-unregulated areas that comprise a significant

distribution area for currently-unregulated handlers, some of

which were proposed to be included in consolidated areas.

Considering the requirements of the 1996 Farm Bill,

consolidation of the existing orders does not necessitate
expansion of the consolidated orders into unregulated areas or

areas in which handlers are subject to minimum Class I pricing

under State regulation, especially when the states’ Class I prices

exceed or equal those that would be established under Federal milk

order regulation. Such regulation could have the effect of

reducing returns to producers already included under State

regulation without significantly affecting prices paid by handlers

who compete with Federally-regulated handlers.

However, there are numerous counties and portions of counties

located within and between Federal order marketing areas that have

not been included in the defined order areas during the course of

the more than 60 years the program has developed. In some cases,

these small areas were left unregulated many years ago to maintain

the unregulated status of a small handler. In others, these areas

probably formed a “buffer” between separate smaller order areas

and were not incorporated when the smaller orders were merged. 

Some of these areas form “buffer” zones today between current

order areas that will be consolidated in the course of this

process. These areas should be included in the defined

consolidated marketing areas if their inclusion would not have the

effect of regulating any unregulated handlers who currently

distribute milk in these areas. The issue of whether to regulate

currently-unregulated areas is discussed in more detail with

regard to the individual consolidated marketing areas in the

sections of this decision dealing with those areas, especially the

Northeast area.

The occurrence of partial counties in marketing area

definitions should be minimized for the purpose of simplifying

handlers’ reporting burden. The continued existence of these

unregulated areas, partially regulated counties, and counties

split between marketing areas serves only to complicate the

reporting of route dispositions outside the marketing area by

regulated distributing plant handlers for the purpose of

determining pool qualifications and increase the costs of

administering the orders. 

In order to avoid extending Federal regulation to handlers

whose primary sales areas are outside current Federal order

marketing areas and who currently are not subject to Federal order

regulation, it has been determined that the appropriate in-area

Class I disposition percentage portion of the pool distributing

plant definition is 25 percent for all orders. Discussion of this

provision is included in the section of this decision dealing with

identical provisions. The 25-percent level of in-area sales will

assure that currently-regulated handlers retain their pool status. 

At the same time, increasing from current levels the percentage of

in-area sales required for pool status under the consolidated

orders will allow State-regulated and most other non-Federally
regulated handlers to operate at their current level of sales

within Federal order areas without being subject to full Federal

order regulation.

Cornell University Study.

In addition to AMS’ analysis of the receipt and distribution

data in the development of this decision, researchers at Cornell

University also provided input on potential consolidated marketing

areas early in the Federal order reform process. This input was

part of Cornell’s partnership agreement with AMS to provide

alternative analyses on Federal order reform issues. These

researchers used an economic model (the Cornell U.S. Dairy Sector

Simulator, or USDSS), to determine 10-14 optimal marketing areas. 

Cornell’s first options for 10-14 marketing areas were presented

at an October 1996 invitational workshop for dairy economists and

policy analysts held in Atlanta, Georgia. Based on USDSS model

results, these options would result in minimum cost flows of milk

using the known concentrations of milk production and population,

without considering the location of milk plants. The marketing

area maps that were circulated using these first results were

those referenced by interested persons who cited the Cornell

results in their comments on the Preliminary Reports on Order

Consolidation and on the proposed rule. 

A second set of options was presented by Cornell researchers

in spring 1997. These options were generated with a furtherdeveloped USDSS model. In updating the model, the researchers

enhanced the inputs to its model as a means of better reflecting

the actual structure of the national market for fluid milk

products. These model updates allowed for determination of the

minimum cost flows of: milk, intermediate and final products from

producers to plants; from plants to plants; and from plants to

consumers on the basis of the locations of milk supplies, dairy

product processing plants, and consumers. The enhanced model is

intended to provide for geographic market definition on the basis

of a resulting set of optimal, efficient simulated flows of milk

and dairy products between locations.

Although the USDSS model considers important factors such as

milk supply and demand locations and transportation constraints in

determining the optimal consolidated marketing areas, it

aggregates processing locations, sometimes at locations that are

not representative of where substantial volumes of milk are

processed. In addition, the model does not consider several

important factors such as large areas that are not Federally

regulated and certain economic factors which influence the

movement of milk.

AMS is unaware of any other analyses performed to determine

or suggest consolidated marketing areas. 

As noted before, AMS’ analysis focused initially on
distributing plant receipts and distribution information for

October 1995, updated as needed for further analysis during

development of the proposed rule. Equivalent data was gathered

for October 1997 to assure that the consolidated marketing areas

continue to represent actual marketing relationships between the

current order areas, with more current information used as needed

for further analysis. The data gathered by the Dairy Division

from Federal Milk Market Administrators reflects actual movements

of milk, both from production areas to processing plants, and from

processing plants to consumption areas. This final decision

considers this data, the seven criteria described fully above, and

information provided by the USDSS model analysis.

The consolidated marketing area options presented by Cornell

are not adopted because the USDSS model does not adequately

reflect issues or factors that strongly affect which current

marketing areas are most closely related. For this reason, this

decision is based on data reflecting actual distribution and

procurement by fluid milk processing plants.

Marketing Areas.

Following are maps of the current marketing areas and the 11

consolidated marketing areas, followed by brief descriptions of

the marketing areas (with those modified from the Proposed Rule,

and the modifications, marked by *) and the major reasons for

consolidation. A more detailed description of each consolidated

order follows this summary.

At the end of the Order Consolidation portion of this

decision is appended a list of distributing plants associated with

each consolidated marketing area, with each plant’s expected

regulatory status, determined on the basis of data describing the

plants’ operations during October 1997.
INSERT MAP OF CURRENT MARKETING AREAS

MAP -1
INSERT MAP OF CONSOLIDATED MARKETING AREAS

Map 2
ELEVEN CONSOLIDATED MARKETING AREAS.

*1. NORTHEAST - current marketing areas of the New England,

New York-New Jersey and Middle Atlantic Federal milk orders, with

the addition of: the contiguous unregulated areas of New

Hampshire, northern New York and Vermont; and the non-Federally

regulated portions of Massachusetts. *The Western New York State

order area (ten entire and 5 partial western New York counties)

proposed to be included in the expanded Northeast order area has

been omitted. The handlers who would be added to those currently

fully regulated under the three separate orders either have a

sufficient percentage of their route disposition within the

consolidated marketing area to meet the pooling requirements or

are located in the area to be added.

Reasons for consolidation include the existence of

overlapping sales and procurement areas between New England and

New York-New Jersey and between New York-New Jersey and Middle

Atlantic. An important measure of association is evidenced by

industry efforts to study and pursue consolidation of the three

Federal orders prior to the 1996 Farm Bill.

2. APPALACHIAN - Current marketing areas of the Carolina and

Louisville-Lexington-Evansville (minus Logan County, Kentucky)

Federal milk orders plus the marketing area of the former

Tennessee Valley order, with the addition of 21 currentlyunregulated counties in Indiana and Kentucky.

Overlapping sales and procurement areas between these

marketing areas are major factors for this consolidation.

3. FLORIDA - current marketing areas of the Upper Florida,

Tampa Bay, and Southeastern Florida Federal milk orders.

Natural boundary limitations and overlapping sales and

procurement areas among the three orders are major reasons for

consolidation, as well as a measure of association evidenced by

cooperative association proposals to consolidate these three

marketing areas. Further, the cooperative associations in this

area have worked together for a number of years to accommodate

needed movements of milk between the three Florida Federal orders.

*4. SOUTHEAST - current marketing area of the Southeast

Federal milk order, plus 1 county from the Louisville-LexingtonEvansville Federal milk order marketing area; plus 11 northwest

Arkansas counties and 22 entire Missouri counties that currently

are part of the Southwest Plains marketing area; plus 6 Missouri

counties that currently are part of the Southern Illinois-Eastern

Missouri marketing area; plus 16 currently unregulated southeast

Missouri counties (including 4 that were part of the former

Paducah marketing area); plus 20 currently-unregulated Kentucky

counties (including 5 from the former Paducah marketing area).

*A partial Missouri county that has been part of the Southwest

Plains marketing area will become completely unregulated to
minimize the reporting complications caused by partially regulated

counties.

Major reasons for this consolidation include sales and

procurement area overlaps between the Southeast order and these

counties.

*5. MIDEAST - current marketing areas of the Ohio Valley,

Eastern Ohio-Western Pennsylvania, Southern Michigan and Indiana

Federal milk orders, plus Zone 2 of the Michigan Upper Peninsula

Federal milk order, and most currently-unregulated counties in

Michigan, Indiana and Ohio. *One partial and 3 entire counties in

north central Ohio are left unregulated, since they represent the

distribution area of a currently-partially regulated distributing

plant (Toft Dairy in Sandusky, Ohio).

Major criteria for this consolidation include the overlap of

fluid sales in the Ohio Valley marketing area by handlers from the

other areas to be consolidated. With the consolidation, most

route disposition by handlers located within the Mideast order

would be within the marketing area. Also, nearly all milk

produced within the area would be pooled under the consolidated

order. The portion of the Michigan Upper Peninsula marketing area

included in the Mideast consolidated area has sales and milk

procurement areas in common with the Southern Michigan area and

has minimal association with the western end of the current

Michigan Upper Peninsula marketing area.

*6. UPPER MIDWEST - current marketing areas of the Chicago

Regional, Upper Midwest, Zones I and I(a) of the Michigan Upper

Peninsula Federal milk orders, and unregulated portions of

Wisconsin. *The Iowa Federal order marketing area portion of one

Illinois county, in which Chicago Regional handlers have the

preponderance of sales, is added to the consolidated Upper Midwest

marketing area, and the Chicago Regional portion of another

Illinois county, in which Iowa order handlers have the

preponderance of sales, is removed and added to the consolidated

Central area. These changes will reduce overlapping route

disposition between the two consolidated orders and reduce the

incidence of partial counties in marketing areas.

Major consolidation criteria include an overlapping

procurement area between the Chicago Regional and Upper Midwest

orders and overlapping procurement and route disposition area

between the western end of the Michigan Upper Peninsula order and

the Chicago Regional order. A number of the same cooperative

associations market member milk throughout the consolidated area.

*7. CENTRAL - current marketing areas of the Southern

Illinois-Eastern Missouri, Central Illinois, Greater Kansas City,

Southwest Plains, Eastern Colorado, Nebraska-Western Iowa, Eastern

South Dakota, Iowa (* less the portion of an Illinois county that

will become part of the consolidated Upper Midwest area) and
*Western Colorado Federal milk orders, * plus the portion of an

Illinois county currently in the Chicago Regional Federal order

area, minus 11 northwest Arkansas counties and 1 partial and 22

entire Missouri counties that are part of the current Southwest

Plains marketing area, minus 6 Missouri counties that are part of

the current Southern Illinois-Eastern Missouri marketing area,

plus 54 currently-unregulated counties in Kansas, Missouri,

Illinois, Iowa, Nebraska and Colorado, plus 8 counties in central

Missouri *(six fewer than in the proposed rule) that are not

considered to be part of the distribution area of an unregulated

handler in central Missouri, *plus 7 currently unregulated

Colorado counties located between the current Western and Eastern

Colorado order areas.

This configuration would leave 31 unregulated counties in

central Missouri that are intended to delineate the distribution

area of Central Dairy at Jefferson City, Missouri, which has

limited distribution in Federal order territory.

Major criteria on which this consolidation is based include

overlapping route disposition and procurement between the current

orders. The consolidation would result in a concentration of both

the sales and supplies of milk within the consolidated marketing

area. The consolidation would combine several relatively small

orders and provide for the release of market data without

revealing proprietary information. In addition, many of the

producers in these areas share membership in several common

cooperatives. The Western Colorado area has become more closely

associated with the Eastern Colorado area than with the Great

Basin area since issuance of the proposed rule.

8. SOUTHWEST- current marketing areas of Texas and New

Mexico-West Texas Federal milk orders, with the addition of two

currently-unregulated northeast Texas counties and 47 currentlyunregulated counties in southwest Texas.

Major criteria supporting this consolidation include sales

and procurement area overlaps and common cooperative association

membership between the Texas and New Mexico-West Texas marketing

areas, and similar marketing concerns with respect to trade with

Mexico for both orders. Addition of the currently-unregulated

Texas counties will result in the regulation of no additional

handlers, and will reduce handlers’ recordkeeping and reporting

burden and the market administrator’s administrative costs.

9. ARIZONA-LAS VEGAS - current marketing area of Central

Arizona, plus the Clark County, Nevada, portion of the current

Great Basin marketing area, plus eight currently-unregulated

Arizona counties.

The major criterion on which the consolidation is based is

sales overlap between the sole Las Vegas, Nevada, handler and

handlers regulated under the Central Arizona order in both Clark
County, Nevada, and unregulated portions of northern Arizona. The

Grand Canyon and sparsely populated areas in the northwest part of

Arizona, and the sparsely populated desert region of eastern

Arizona constitute natural barriers between this and adjacent

marketing areas. In addition, the most significant relationship

between this area and any other is represented by the substantial

volumes of bulk and packaged milk exchanged between the ArizonaLas Vegas area and Southern California.

*10. WESTERN - current marketing areas of the Southwestern

Idaho-Eastern Oregon and Great Basin Federal milk orders, minus

Clark County, Nevada. *The Western Colorado order area, proposed

to be included in the Western order area, is instead included in

the consolidated Central order. The major criteria on which the

consolidation is based include overlapping sales between

Southwestern Idaho-Eastern Oregon and Great Basin, as well as a

significant overlap in procurement for the two orders in five

Idaho counties. The two orders also have similar multiple

component pricing plans and most of the milk used in nonfluid

products under both orders is used in cheese.

Collection of detailed data for individual handlers indicates

that the strength of earlier relationships between the former

Great Basin and Lake Mead orders that justified their 1988 merger

have dwindled significantly, with the Las Vegas area now more

closely related to a combination of southern California and

Central Arizona handlers.

11. PACIFIC NORTHWEST - current marketing area of the

Pacific Northwest Federal milk order plus 1 currently-unregulated

county in Oregon. The degree of association with other marketing

areas is insufficient to warrant consolidation.
Table 1. MARKET INFORMATION: Population, Utilization, Producer Milk

and Weighted Average Utilization Value (WAUV) in

Consolidated Marketing Areas

MARKET Population1

(millions)

Class I

Utilization2

(percent)

Producer

Milk2

(1000 lbs.)

WAUV2,3

(per cwt)

Northeast 49.0 48.6 1,962,335 $ 13.97

Appalachian 17.3 85.0 410,372 $ 13.35

Florida 14.1 90.6 217,952 $ 15.69

Southeast 26.9 85.6 482,499 $ 13.60

Mideast 31.0 58.9 1,040,112 $ 13.42

Upper Midwest

18.5 24.1 1,597,232 $ 12.94

Central 21.5 50.1 868,443 $ 13.29

Southwest 21.3 53.4 649,872 $ 13.97

ArizonaLas Vegas 5.7 46.3 195,943 $ 13.84

Western 3.2 32.5 304,129 $ 13.14

Pacific

Northwest 9.0 35.6 539,987 $ 13.33

TOTAL 217.5 N/A 7,756,390 N/A

1 Based on July 1, 1997 estimates.

2 Based on October 1997 information, for plants which

would be fully regulated under assumptions used in

this decision.

3 Not a blend price -- shown solely for the purpose

of showing impact of consolidation on utilization.
Table 2. MARKET INFORMATION: Number of Plants in

Consolidated Marketing Areas

MARKET

DISTRIBUTING PLANTS1 MANUFACTURING

AND SUPPLY

PLANTS Fully 3

Regulated

(FR)

Exempt2 FR Small

Businesses 

Northeast 64 9 31 95

Appalachian 25 3 4 13

Florida 12 1 2 4

Southeast 36 1 3 37

Mideast 51 4 27 59

Upper Midwest 27 3 13 301

Central 35 3 7 84

Southwest 21 2 5 17

ArizonaLas Vegas 5 1 2 3

Western 11 1 5 18

Pacific

Northwest 19 4 12 27

TOTAL 306 32 111 669

1 Based on October 1997 information. Excludes: (1)

out-of-business plants through December 1998; and

(2) new plants since October 1997.

2 Exempt based on size (less than 150,000 lbs.

route distribution per month).

3 Based on May 1997 information.
Descriptions of Consolidated Marketing Areas.

Each of the consolidated order areas is described in the text

following this introduction. The criteria which were used to

determine which areas should be consolidated are explained. For

each consolidated area, the following information is included:

Geography. The political units (states, counties, and

portions of counties) included in each area, the topography, and

the climatic conditions are described for the purpose of

delineating the territory to be incorporated in each consolidated

marketing area and describing its characteristics pertaining to

milk production and consumption. This information was derived

principally from Microsoft® Encarta® 96 Encyclopedia, and

augmented by several U.S. atlases.

Population. The total population of each area and its

distribution within the area is included for the purpose of

identifying where milk is consumed. July 1, 1997, population

estimates were obtained from “CO-97-1 Estimates of the Population

of Counties,” Population Estimates Program, Population Division of

the U.S. Bureau of the Census.

Metropolitan Statistical Area (MSA) information is provided

by the United States Office of Management and Budget (OMB), which

defines metropolitan areas according to published standards that

are applied to Census Bureau data. To be described as an MSA, an

area (one or more counties) must include at least one city with

50,000 or more inhabitants, or a Census Bureau-defined urbanized

area (of at least 50,000 inhabitants) and a total metropolitan

population of at least 100,000 (75,000 in New England). Areas

with more than 1 million population may be described as

“consolidated metropolitan statistical areas” (CMSAs) made up of

component parts designated as primary metropolitan statistical

areas (PMSAs). For purposes of the marketing area descriptions in

this decision, the term “MSA” also includes CMSAs and PMSAs.

Per capita consumption. Available data pertaining to per

capita consumption is discussed to help describe how much milk is

needed to supply the fluid needs of the population of each

marketing area. Per capita consumption numbers were estimated by

state using data from a report on “Per Capita Sales of Fluid Milk

Products in Federal Order Markets,” published in the December 1992

issue of Federal Milk Order Market Statistics, #391, issued May

1993. This data was the most recent available.

Production. A description of the amount and sources of milk

production for the market is included for the purpose of

identifying the supply area for each consolidated marketing area. 

Production data by state and county for each Federal milk order

was compiled from information collected by the offices

administering the current Federal milk orders (market

administrators’ offices). For most of the consolidated marketing
areas, production data has been updated to October 1997. For

several of the consolidated areas, however, October 1997 data is

difficult to compile and, when compared with previously published

statistics, may yield confidential information. For these areas,

the data cited in the proposed rule has been used to describe the

sources of milk for the consolidated market.

Distributing plants. For each marketing area the number and

types of distributing plants expected to be associated with each

marketing area are included, with the locations of plants by

population centers, to identify where milk must be delivered. 

This information was collected by market administrators’ offices. 

The expected regulatory status was determined on the basis of each

plant’s receipts and route distribution of fluid milk during

October 1997. Changes in plant operations or distribution

patterns could change the expected status.

Utilization. The utilization percentages of the current

individual orders and the effect of consolidation on the

consolidated orders are described for each marketing area, with an

estimate of the effect of consolidation on each current individual

order’s blend price. The current utilization data is published

each month for each Federal milk order market. Pool data was used

to calculate the effects of consolidation on utilization.

Other plants. The presence of manufacturing and supply

plants in and near the consolidated order areas, and the products

processed at these plants, are described for each consolidated

area. This information was collected by market administrators’

offices for May 1997, and has been changed from the proposed rule

only where changes from the proposed marketing areas have

occurred.

Cooperative Associations. The number of cooperative

associations pooling member milk under each of the current

individual orders included in each consolidated area, and the

number that pool milk in more than one of the areas is identified. 

This information was obtained from market administrators’ offices,

updated to December 1997 from the proposed rule. For purposes of

the consolidation discussion, the four cooperative associations

that combined to create Dairy Farmers of America (DFA) are

considered to be a single organization.

Criteria for Consolidation. The extent to which the criteria

used in identifying markets to be consolidated are supported by

the marketing conditions present in each of the consolidated areas

is discussed.

Discussion of comments and alternatives. Comments filed in

response to the consolidation section of the proposed rule and

alternatives considered are summarized and discussed for each

consolidated area.
NORTHEAST.

The consolidated Northeast marketing area is comprised of the

current New England, New York-New Jersey, and Middle Atlantic

Federal milk order marketing areas (Orders 1, 2, and 4), with

currently-unregulated areas in northern New York, Vermont and New

Hampshire added. The entire areas of the States of Connecticut (8

counties), Delaware (3 counties), Massachusetts (14 counties), New

Hampshire (10 counties), New Jersey (21 counties), Rhode Island (5

counties), and Vermont (14 counties) are contained within the

consolidated Northeast order area. In addition, the District of

Columbia, 21 counties and the City of Baltimore in Maryland, 41

complete and 3 partial counties and the 5 boroughs of New York

City in New York, the 15 Pennsylvania counties currently included

in the Middle Atlantic marketing area, and 4 counties and 5 cities

in Virginia are included in the consolidated order. There are 156

complete and 3 partial counties and 8 cities, including the

District of Columbia, in the consolidated Northeast marketing

area.

The Western New York State order area, proposed to be

included in the consolidated Northeast area, is not included at

the request of the business entity that would be most affected by

its inclusion because the currently-unregulated portions of

Pennsylvania are not included.

Geography.

The Northeast marketing area extends from the Canadian border

on the north, south to northern Virginia, eastern Maryland and

Delaware, with its eastern edge along the western border of Maine

at the northern end of the marketing area, and along the Atlantic

Ocean for the remainder. The total northeast-southwest extent of

the marketing area is approximately 600 miles. The marketing area

extends westward to Lake Ontario in New York State (about 350

miles east to west), goes only as far west as the northern part of

New Jersey (about 60 miles), and expands westward again across the

eastern half of southern Pennsylvania, taking in a small part of

northeast Virginia, eastern Maryland, and Delaware (about 230

miles east to west). There is a large State-regulated area in

Pennsylvania just to the west of the Northeast marketing area; and

most of the State of Virginia to the south of the marketing area

also is regulated under a State order. The consolidated Northeast

marketing area is contiguous to no other consolidated marketing

areas, but parts of it, in south central New York State and south

central Pennsylvania, are very close to the consolidated Mideast

area.

The northern and northwestern parts of the Northeast area are

large areas of coniferous forests that are somewhat mountainous. 

To the south and southeast of the forested areas are areas where

dairy farming predominates as the primary type of agriculture. In
fact, for 4 of the 10 states that are located in the Northeast

marketing area (New Hampshire, New York, Pennsylvania and Vermont)

dairy products were the number 1 agricultural commodity in terms

of cash receipts during 1996. Principally along the Atlantic

coastline is a flatter area where other agricultural activities,

including greenhouse and nursery, fruit, truck and mixed farming,

take place. A near-continuous strip along the east coast of the

area, from northeast Massachusetts southwest to the Baltimore

area, is a major industrial area and is heavily populated. 

Population.

According to July 1, 1997, population estimates, the total

population in the consolidated Northeast marketing area is

49 million. The area is very densely populated, especially along

a coastal strip extending from Boston, Massachusetts, in the

northeast to Washington, D.C., in the southwest. In this

consolidated marketing area of approximately 160 counties, 106 are

included within Metropolitan Statistical Areas (MSAs). The 20

Metropolitan Statistical Areas in the consolidated Northeast

marketing area account for 93.7 percent of the total market area

population.

Almost sixty percent of the marketing area population is

located in 6 interconnected MSAs in 48 counties, extending from

central New Jersey to southern New Hampshire. The six MSAs are:

Springfield, Massachusetts; Boston-Worcester-Lawrence,

Massachusetts/New Hampshire/Maine/Connecticut; Providence-Fall

River-Warwick, Rhode Island/Massachusetts; New London-Norwich,

Connecticut/Rhode Island; Hartford, Connecticut; and New YorkNorthern New Jersey-Long Island, New York/New Jersey/Connecticut/

Pennsylvania. The population in this northeastern portion of the

marketing area is concentrated most heavily at its northern and

southern ends -- the New York City area has a population of

approximately 20 million, and the Boston area’s population is

approximately 5.5 million. Two of the other MSAs, Hartford and

Providence, each have over 1 million population. Although each of

these six MSAs is described as a separate area in the population

data, many of the counties involved are divided between separate

MSAs.

Just southwest of the New York City MSA is the PhiladelphiaWilmington-Atlantic City, Pennsylvania/New Jersey/Delaware/

Maryland MSA, with a population of 6 million. Some counties of

these two MSAs are adjacent. Southwest of the Philadelphia MSA

and separated from it by only one county is the Washington,

DC/Baltimore, Maryland/northern Virginia MSA, with a population in

the consolidated marketing area of 6.8 million.

Of the 12 other MSAs in the consolidated marketing area, 6

are located in New York State, with an average population of

nearly 400,000 each. Two are located in Pennsylvania, with
populations of .6 and .45 million. One MSA in Vermont, 1 in

Delaware, and 2 in Massachusetts have average populations of

163,000.

Fluid Per Capita Consumption.

Fluid per capita consumption estimates vary within the

Northeast from 16.7 pounds per month in the more southern parts of

the region to 20 pounds per month in New England. These rates

would result in a weighted average of 18 pounds per month, and an

estimated total fluid milk consumption rate of 882 million pounds

per month for the Northeast marketing area. Approximately 752

million pounds of this fluid milk consumption would be required

along the heavily-populated coastal area extending from northeast

Massachusetts southwest through Washington, D.C. and northern

Virginia. Handlers who would have been fully regulated under the

consolidated Northeast order during October 1997 distributed 828.1

million pounds within the consolidated marketing area. October

1997 sales within the marketing area by handlers that would be

regulated by other orders totaled 6.2 million pounds, and sales by

handlers who would have been partially regulated were 18.9 million

pounds. Sales in the marketing area by exempt and government

plants, and by producer-handlers totaled 6.6 million pounds.

Milk Production.

In October 1997, nearly 19,000 producers from 13 states

pooled 1.9 billion pounds of milk on the three orders comprising

the consolidated Northeast order. With the addition of several

currently-unregulated handlers, it is probable that approximately

2 billion pounds of milk per month will be pooled under the

Northeast order.

Eleven of the 13 states supplying milk to the three Federal

order pools are at least partly in the marketing area, and 84

percent of the producer milk pooled under the three orders in

October 1997 came from just 3 states — New York (41.5 percent),

Pennsylvania (32.2 percent), and Vermont (10.3 percent). Over 10

million pounds of milk was produced in each of fifty-one counties:

1 county in northeast Connecticut, 3 in the most northwestern of

the Maryland portion of the marketing area, 30 spread over most of

New York, 1 on the western edge of northern Virginia, and 16 in

southeast to south central Pennsylvania and in the eastern part of

the northern tier of Pennsylvania counties, with an additional

Pennsylvania county, Lancaster, accounting for over 150 million

pounds of milk. Over seventy percent of the markets’ total

producer milk was produced within the consolidated marketing area.

Less than one-third of the milk production for the

consolidated market was produced within 100 miles of the heavily

populated coastal corridor. Although the Northeast area contains

two out of the top five milk-producing states in the U.S. (New

York and Pennsylvania), the population of the marketing area is
nearly 20 million more than the next most-populated consolidated

area (the Mideast area, with 31 million people). The Northeast,

therefore, is a very significant milk production area with a very

high demand for fluid milk and dairy products.

Distributing Plants.

Using distributing plant lists included in the proposed rule,

with the pooling standards at 25 percent of route dispositions as

in-area sales, and updated for known plant closures through

December 1998, 141 distributing plants would be expected to be

associated with the Northeast marketing area. On the basis of

data collected for October 1997, the plants associated would

include 64 fully regulated distributing plants (58 currently fully

regulated, 5 currently partially regulated, and 1 currently

unregulated), 15 partially regulated (2 currently fully regulated

and 13 currently partially regulated). Nine exempt plants having

less than 150,000 pounds of total route disposition per month (3

currently fully regulated, 2 currently partially regulated, 2

currently exempt based on size, and 2 currently unregulated) and

47 producer-handlers (45 currently producer-handlers, 1 currently

partially regulated, and 1 currently unregulated) would have been

associated with the market during October 1997. Three handlers

who currently are exempt based on institutional status would

continue to be exempt on the same basis, and 3 handlers located in

the Western New York order area who would have been fully

regulated under the proposed rule would continue to be unregulated

under any Federal order.

Since October 1997, 14 distributing plants (3 in New York, 2

in each of the States of Massachusetts, Maryland, New Jersey,

Pennsylvania and Vermont, and 1 in Connecticut), have gone out of

business.

Less than half (60) of the Northeast distributing plants

which were identified as being in business as of December 1998

were located in the 6 Northeast MSAs that have over a million

people each. This number includes 31 of the pool distributing

plants. Under the consolidated order, it is anticipated that

there would be 5 pool distributing plants in the Boston-WorcesterLawrence area, 6 in the Philadelphia-Wilmington-Atlantic City

area, and 11 in the New York-Northern New Jersey-Long Island area. 

The Hartford, Connecticut, area would have 2 pool distributing

plants, Providence-Fall River-Warwick would have 3, and the

Washington-Baltimore area would have 4 pool distributing plants.

Of the remaining 81 distributing plants, 14 pool distributing

plants were located in other MSAs as follows: 8 in New York; 4 in

Pennsylvania; and 2 in Massachusetts. Sixty-seven distributing

plants, including 19 pool distributing plants, were not located in

MSAs.

Utilization.
According to October 1997 pool statistics for handlers who

would be fully regulated under this Northeast order, the Class I

utilization percentages for the New England, New York-New Jersey,

and Middle Atlantic markets were 52, 45, and 53 percent,

respectively. Based on calculated weighted average use values for

(1) the current order with current use of milk, and (2) the

current order with projected use of milk in the consolidated

Northeast order, the potential impact of this decision on

producers who supply the current market areas is estimated to be:

New England, a 9-cent per cwt decrease (from $14.09 to $14.00);

New York-New Jersey, a 8-cent per cwt increase (from $13.91 to

$13.99); and Middle Atlantic, a 10-cent per cwt decrease (from

$14.00 to $13.90). The weighted average use value for the

consolidated Northeast order market is estimated to be $13.97 per

cwt. For October 1997, combined Class I utilization for Orders 1,

2 and 4 was 47.7 percent based on 917.3 million pounds of producer

milk used in Class I out of 1.922 billion total producer milk

pounds.

The Northeast area is one of two consolidated marketing areas

that would have a significantly higher-than-average percentage of

its milk used in Class II. Currently, all three of the orders

have Class II utilization between 15 and 25 percent. When the

markets are combined the average for the consolidated market will

be approximately 18 percent.

Other Plants.

Located within the consolidated Northeast marketing area

during May 1997 were 95 supply or manufacturing plants: 13 in

Vermont (4 in the Burlington area), 1 in New Hampshire and 10 in

Massachusetts (all in the Boston-Worcester-Lawrence area), 1 in

Rhode Island (in the Providence-Fall River-Warwick area), 7 in

Connecticut (3 in the Hartford area and 4 in the New York-Northern

New Jersey-Long Island area), 12 in New Jersey (all in the New

York-Northern New Jersey-Long Island area), 2 in Delaware (one in

the Philadelphia-Wilmington-Atlantic City area), 7 in Maryland

(four in the Washington-Baltimore area), 13 in Pennsylvania (5 in

the Philadelphia-Wilmington-Atlantic City area), and 29 in New

York (9 in the New York-Northern New Jersey-Long Island area).

Fifteen of the 95 plants are pool plants. Of these pool

plants, 7 are manufacturing plants — 5 manufacture primarily

powder, 1 manufactures primarily cheese and 1 manufactures

primarily other products. There are 8 pool supply plants — 1 has

no primary product, but ships only to distributing plants; 5 are

supply plants that manufacture primarily Class II products, and 2

supply plants manufacture primarily cheese. Of the remaining 80

nonpool plants in the Northeast marketing area, 73 are

manufacturing plants — 37 manufacture primarily Class II products,

1 manufactures primarily butter, 33 manufacture primarily cheese
and 2 manufacture primarily other products. Seven of the

remaining nonpool plants are supply plants — 2 are supply plants

that manufacture primarily Class II products and 5 are supply

plants that manufacture primarily cheese.

There are also six supply or manufacturing plants in the

unregulated area of New York — one in the unregulated county of

Chautauqua, one in the unregulated portion of Cattaraugus County,

two in the unregulated portion of Allegany County, and two in the

unregulated portion of Steuben County. Two are pool supply plants

— one manufactures primarily Class II products and the other

manufactures primarily cheese. The remaining four are nonpool

manufacturing plants -- three manufacture primarily cheese and one

manufactures primarily Class II products.

Cooperative Associations.

During December 1997, 76 cooperative associations pooled

their members’ milk on the three Northeast orders. Three of the

cooperatives pooled milk on all three orders, 3 pooled milk on

both the New England and New York-New Jersey orders, and 3 others

pooled milk on both the New York-New Jersey and Middle Atlantic

orders. The 9 cooperative associations that pooled milk on more

than one of the Northeast orders represented 72.6 percent of

cooperative milk pooled under the 3 orders and 55 percent of the

total milk. Seventy-six percent of the milk pooled in the

Northeast is cooperative association milk, with 80 percent of

Federal Order 1 milk, 68.4 percent of Federal Order 2 milk, and 87

percent of Federal Order 4 milk pooled by cooperatives.

The 5 cooperatives that market milk only under Order 1

account for 26.7 percent of the milk marketed under that order by

cooperative associations, and 21.3 percent of total milk marketed

under Order 1. In Order 2, only 40.4 percent of cooperative

association milk is marketed by the 59 co-ops that market milk

only under Order 2. Milk marketed by these cooperatives

represents 27.6 percent of the total milk pooled for December

1997. Three cooperative associations that marketed milk only on

the Order 4 portion of the Northeast order marketed 8.2 percent of

the milk marketed by cooperatives under this order. This amount

of milk represented 7.2 percent of total milk pooled under Order 4

in December 1997.

Criteria for Consolidation.

The current New England, New York-New Jersey, and Middle

Atlantic Federal milk order marketing areas (Orders 1, 2, and 4)

should be consolidated because of the interrelationship between

Orders 1 and 2 and between Orders 2 and 4 regarding route

disposition and milk supply. Eighty percent of fluid milk

disposition by handlers who would be fully regulated under the

consolidated order is distributed within the consolidated

marketing area. Fully regulated handlers account for 96 percent
of the fluid milk products distributed within the consolidated

marketing area. The utilization of the three markets is similar,

and several cooperative associations market their members’ milk in

all three markets. The three markets are surrounded by Stateregulated and unregulated areas to the west and south, the

Atlantic ocean to the east, and Canada to the north. The

adjoining Maine State milk order also serves as somewhat of a

barrier to milk marketing in the northeast by limiting the

association of non-Maine milk with the Maine pool.

The merger of these markets has been previously proposed by

interested parties. A committee comprised chiefly of Northeast

region cooperatives was formed over three years ago to study a

merger of the three Federal orders. In support of a Northeast

consolidation, the committee and other interested parties,

including handlers and regulatory agencies, have noted:

overlapping sales and procurement areas; a trend toward

consolidation of cooperative processors and handlers in the region

(leaving the remaining handlers with larger distributing areas and

volumes); and regulation of plants by an order in which they are

not located. The proponents of consolidation have indicated that

consolidation would tend to solve some of the presently existing

inequities and would lead to greater efficiency for handlers and

order administration.

Discussion of Comments and Alternatives.

Prior to issuance of the proposed rule, alternatives to the

consolidation of the order areas included in the Northeast

marketing area that were considered included the addition of all

currently unregulated and State-regulated area adjoining the Order

1, 2 and 4 marketing areas. These considerations included

Pennsylvania Milk Marketing Board (PMMB) Areas 2, 3, and 6, some

or all of the non-Federally regulated part of the State of

Virginia, the unregulated areas of West Virginia and Maryland, the

Western New York State order area and northern New York, northern

Vermont and New Hampshire, pockets of unregulated area in

Massachusetts, and the State of Maine. The proposed rule would

have included in the consolidated Northeast marketing area the

unregulated areas of Vermont, New Hampshire, Massachusetts,

northern New York, and the Western New York State order area.

Nearly 1,150 comments that dealt to some extent with the

consolidation of the Northeast order area were received in

response to the proposed rule. Approximately 125 of these

comments favored adoption of a national marketing area map that

would include all U.S. territory in the 48 contiguous states in

one of ten Federal order areas. Over 950 comments favored the

expansion of the Northeast area into all of Pennsylvania, with

more than 600 of these comments also favoring expansion into some

combination of the unregulated areas of New York, Maryland, West
Virginia, Vermont, Massachusetts, New Hampshire, and Maine. More

than 50 commenters urged the continued omission of Pennsylvania

Milk Marketing Board Areas 2, 3, and 6 from any of the

consolidated Federal order areas.

Most of the comments supporting expansion of the Northeast

consolidated marketing area into non-federally regulated areas,

especially Pennsylvania, argued that handlers in the non-federally

regulated areas compete for milk supplies in the same milksheds

and for fluid milk sales in the same markets as Federallyregulated handlers, with the surrounding federal order pool(s)

carrying the necessary reserve milk supplies for the Class I sales

distributed by non-regulated handlers. In addition, the comments

argued that dairy farmers whose milk is priced in individual

handler pools at primarily-fluid handlers under PMMB regulation

have a competitive advantage over neighboring producers whose milk

is included in marketwide pools that blend the cost of balancing

milk supplies for fluid use with returns from the fluid market.

Nearly 60 comments, many from Pennsylvania dairy farmers,

opposed expansion of the consolidated Northeast order area into

Pennsylvania. Comments stated that the PMMB individual handler

pools result in greater returns to producers, and producer returns

would decline if handlers are required to pay the additional fluid

value into the marketwide pool to subsidize cheese/powder plants.

As stated in the introduction to the consolidation

discussion, consolidation of the existing orders does not

necessitate expansion of the consolidated orders into currentlyunregulated areas, especially if such expansion would result in

the regulation of currently-unregulated handlers. Handlers

located in PMMB areas 2, 3, and 6 are regulated under the State of

Pennsylvania if they do not have enough sales in any Federal order

area to meet an order’s pooling standards. These PMMB handlers are

subject to minimum Class I pricing, sometimes at price levels that

exceed those that would be established under Federal milk order

regulation. When such plants do meet Federal order pooling

standards, the State of Pennsylvania continues to enforce some of

its regulations in addition to Federal order regulations. 

Inclusion of the Pennsylvania-regulated handlers in the

consolidated marketing area would have little effect on handlers’

costs of Class I milk (or might reduce them), and would reduce

returns to a few producers. In view of these considerations, it

appears that stable and orderly marketing conditions can be

maintained without extending full Federal regulation to Stateregulated handlers.

There are significant differences between PMMB regulation and

Federal order regulation that make it difficult to determine

whether PMMB regulation gives State-regulated handlers a cost

advantage over Federally-regulated plants distributing milk in the
same areas. Some of the differences between PMMB and Federal

order regulation are: 1) the number of classes of use (two versus

four); 2) the location at which milk is priced (where it is

distributed for sale to consumers versus where it is received from

producers for processing); 3) individual handler pooling versus

marketwide pooling; and 4) State regulatory treatment of milk sold

in interstate commerce, including milk distributed outside the

State and received from outside the State. In addition to

creating different costs among similarly-located State- and

Federally-regulated handlers, PMMB regulation may result in

different costs between similarly-located PMMB-regulated handlers. 

However, since the main focus of this rulemaking process has been

to consolidate existing Federal marketing areas, it would be more

appropriate to consider this issue of marketing area expansion in

Pennsylvania at a future time.

Maine has been and continues to be excluded from Federal

order regulation. Three comments, two from New York State Dairy

Foods and one from Crowley Foods, Inc., a fluid milk processor

with distributing plants regulated under the New York-New Jersey

and New England orders, suggested including Maine in the

consolidated Northeast order on the basis that Maine regulation

depends on balancing seasonal reserves on the New England order,

and that the inclusion of Maine would allow similarly situated

handlers equal opportunities. Five comments supported Maine’s

exclusion from Federal orders because of its geographic separation

from other areas, its long history of successful milk marketing

regulation, and the limited impact of its pricing system on other

regulated areas.

There appears to be little reason to add the State of Maine

to the consolidated Northeast order area. Maine handlers with

significant distribution in the Federal order areas can be and are

pooled under Federal orders, limiting the extent of any

competitive advantage. Inclusion of Maine-regulated handlers in

the consolidated marketing area would have little effect on

handlers’ costs of Class I milk (or might reduce them), and would

reduce returns to a few producers. When not pooled under Federal

orders, Maine handlers are subject to minimum prices paid for

milk, and producers are assured minimum prices in payment for

milk. There is no compelling reason to extend Federal order

regulation to encompass this State-regulated marketing area.

The Western New York State order area, proposed to be added

to the consolidated Northeast area because the persons regulated

under that order had so requested, is not included. Upstate Milk

Producers Cooperative (Upstate), the entity that would be most

affected by the inclusion of this area, had supported its addition

prior to issuance of the proposed rule. Because the proposed rule

failed to include the State-regulated Pennsylvania areas in the
consolidated Northeast area, however, Upstate determined that it

would be faced with unfair competition from PMMB-regulated

handlers and requested that the Western New York order area be

left out of the consolidated Northeast order area.

All of the comments received that dealt with the inclusion of

unregulated area in the States of Massachusetts, New Hampshire,

and Vermont and the currently-unregulated northern area of New

York State in the consolidated Northeast order area supported the

addition of this area. According to the comments, inclusion of

the currently unregulated areas will assure that distributing

plant operators that currently are fully regulated would be placed

on an equal competitive footing with handlers currently

unregulated, while having no negative effect on the producers who

would be affected. Inclusion of these currently unregulated areas

would lighten handlers’ reporting burden and the market

administrator’s administrative burden in keeping separate data on

sales in this small unregulated area. The number of handlers who

would be affected by these additions is minimal, and the additions

would enhance the efficiency of Federal order administration while

easing the reporting burden of regulated handlers.

In addition to the northern portions of New Hampshire,

Vermont, and New York, and the small area of Massachusetts, the

offshore Massachusetts counties of Dukes and Nantucket are added

to the marketing area. The only entity currently operating in

those counties (a producer-handler on Martha’s Vineyard) would be

exempt from the pooling and pricing provisions of the order by

virtue of its status as a producer-handler and by having fewer

than 150,000 pounds of route disposition per month. Mainland

handlers distributing milk in these two counties would find their

reporting burden eased if these counties become part of the

marketing area.

APPALACHIAN.

The consolidated Appalachian marketing area is comprised of

the current Carolina (Order 5) and Louisville-Lexington-Evansville

(Order 46) marketing areas (less one Kentucky county that is

included in the consolidated Southeast marketing area) as well as

64 counties and 2 cities formerly comprising the marketing area of

the Tennessee Valley Federal Order (Order 11), terminated in

October 1997, and currently-unregulated counties in Indiana and

Kentucky. There are 297 counties and 2 cities in this

consolidated marketing area. This area remains unchanged from the

proposed rule.

Geography.

The Appalachian market is described geographically as

follows: 7 unregulated Georgia counties (formerly part of Order

11), 20 Indiana counties (17 currently in Order 46 and 3 currently
unregulated), 81 Kentucky counties (47 currently in Order 46, 16

formerly part of Order 11, and 18 currently unregulated), all

North Carolina and South Carolina counties (100 and 46,

respectively, and all currently in Order 5), 33 Tennessee counties

(formerly part of Order 11), 8 counties and 2 cities in Virginia

(formerly part of Order 11), and 2 West Virginia counties

(formerly part of Order 11).

The consolidated Appalachian market reaches from the Atlantic

coastline westward to southern Indiana and western Kentucky’s

border with Illinois. It is surrounded by Illinois on the west,

Indiana, northeastern Kentucky, West Virginia and Virginia to the

north, the Atlantic Ocean on the east, and Georgia, Alabama,

western Tennessee and southwestern Kentucky to the south. 

Measuring the extreme dimensions, this market extends about 625

miles from its northwest corner in Indiana to its southeastern

corner on the South Carolina-Georgia border, about 300 miles

south-to-north from the South Carolina-Georgia border to the North

Carolina-Virginia border, about 500 miles west-to-east from the

Appalachian-Southeast markets’ border in Tennessee to eastern

North Carolina, and about 375 miles west-to-east from the

Illinois-Indiana border to West Virginia and Virginia.

The Appalachian market is contiguous to 3 other consolidated

marketing areas: the Southeast area to the southwest and south,

the Central area to the west and the Mideast area to the north. 

Unregulated counties in West Virginia and State-regulated area in

Virginia also border this market to the north. North and South

Carolina have almost 500 miles of coastline on the Atlantic Ocean.

In terms of physical geography, similarities exist across the

states or areas included in this market. Southern Indiana and

central Kentucky are in the Interior Low Plateau region where

valleys and steep hillsides are typical. In this market, the

Appalachian or Cumberland and Alleghany Plateaus are found in West

Virginia, Virginia, Kentucky, Tennessee and northwestern Georgia

on the western edge of the Appalachian Mountains. Eastern

Tennessee and both western North and South Carolina are in the

Blue Ridge region, which is part of the Appalachian Mountain

range. Moving eastward toward the Atlantic Ocean, the central

part of the Carolinas are in the Piedmont Plateau, with the

Atlantic Coastal Plain covering approximately the remaining

eastern half of both these states.

Climatic types in this region vary somewhat. Humid

subtropical climates are typical in most of North and South

Carolina, as well as Virginia (which is affected by elevation

differences) and southern Indiana. Humid continental climates are

typical for northwestern Georgia, western North and South Carolina

and southern West Virginia. Temperate climates are common in

eastern Tennessee and central Kentucky.
Much of the consolidated Appalachian area does not provide a

hospitable climate or topography for dairy farming. As an

agricultural pursuit, dairy farming is far down the list in the

area, accounting for an average of less than five percent of all

receipts from farm commodities for the states involved. Crops

such as tobacco, corn and soybeans, and other livestock

commodities such as cattle/calves, turkeys and broiler chickens

are more prevalent in this region.

Population.

According to July 1, 1997, population estimates, the total

population in the Appalachian marketing area is 17.3 million. 

There are 24 Metropolitan Statistical Areas (MSAs) within the

consolidated marketing area, containing 62.3 percent of the area’s

population. The largest 17 contain 57 percent of the population

of the market. Charlotte, North Carolina, is the largest MSA in

the marketing area with a population of 1.35 million. Charlotte is

located near the South Carolina border about at the mid point of

the North and South Carolina border, and about 250 miles west of

the Atlantic coast. Less than 100 miles to the north lies the

second-largest MSA of Greensboro-Winston-Salem-High Point, North

Carolina, with a population of 1.15 million. About 50 miles east

of Greensboro is the third-largest MSA, Raleigh-Durham-Chapel

Hill, with 1.05 million people. The Raleigh MSA abuts the

Greensboro MSA. An additional four North Carolina MSAs are among

the largest of the 17 MSAs containing 57 percent of the population

of the consolidated marketing area, for a combined population of

one million. North Carolina is the most populous state in the

consolidated marketing area with 7.4 million; over sixty percent

of the population of North Carolina is located in these seven

MSAs.

South Carolina is the second-most populous state in the

consolidated area, with 3.8 million people. The Carolinas contain

nearly two-thirds of the consolidated market’s population. 

Greenville is the largest MSA in the state with a population of

905,000. Greenville is located in the northwest corner of the

state. Charleston, the second-largest MSA in South Carolina, with

over half a million people, is approximately at the midpoint of

South Carolina’s coast.

The Tennessee portion of the consolidated Appalachian market

has a population of 2 million, with three MSA’s that are included

in the largest 17 in the market. These three areas contain 1.6

million, or just under 80 percent of the population in that part

of Tennessee that is included in the Appalachian marketing area. 

The largest Tennessee MSA is Knoxville, which is in the eastern

end of Tennessee near North Carolina. Six counties make up the

Knoxville MSA with a combined population of 650,000. The Johnson

City-Kingsport-Bristol area, the second-largest Tennessee MSA, is
located in the northeastern tip of Tennessee along the Virginia

and North Carolina border, and contains 460,000 people. 

Chattanooga, the third-largest MSA in Tennessee, is located on the

Tennessee-Georgia border, and has a population of 447,000. The

three MSAs run northeast to southwest just west of the North

Carolina border.

The Kentucky portion of the consolidated Appalachian market

contains 2.7 million people. There are two MSAs within the state

that are included in the largest 17 in the market. The largest is

Louisville, which lies on the border with Indiana and has a

population of one million. Lexington, the second-largest Kentucky

MSA, is located in the center of the state and has just under half

a million people. Generally, the Kentucky counties in the

Appalachian marketing area are not heavily populated. Only two

have populations over 100,000. They are Jefferson county, where

Louisville is located, and Fayette county, home to Lexington.

Indiana counties in the Appalachian market have a population

of .8 million. Only Vanderburgh county has a population over

100,000. Evansville, the only MSA in the portion of Indiana

included in the Appalachian market, is in Vanderburgh county. 

Evansville’s MSA contains 289,000 and is located on the IndianaKentucky border, near the Illinois state line.

There are seven Georgia counties within the consolidated

Appalachian marketing area, with a total population of .3 million. 

Three of them, Catoosa, Dade, and Walker, are part of the

Chattanooga MSA. These three counties have a combined population

of 124,000. The 10 Virginia counties in the Appalachian market

have a population of .3 million. Three of the counties, Scott,

Washington and Bristol City, are part of the Johnson CityKingsport-Bristol MSA. The two West Virginia counties within the

Appalachian market have a total population of .1 million.

Fluid Per Capita Consumption.

Estimates of fluid per capita consumption within the

consolidated Appalachian marketing area vary from 15.8 per month

for South Carolina to 20.4 pounds per month for Indiana. Use of

17 pounds per month as a weighted average results in an estimated

294 million pounds of fluid milk consumption for the Appalachian

marketing area. Appalachian handlers’ route disposition within

the area during October 1997 totaled 283 million pounds, with

another 21 million distributed by other order plants, partially

regulated plants, and plants exempt both for reasons of both size 

and institutional status.

Milk Production.

Milk production data for the Appalachian consolidated order

area has not been updated from December 1997 to October 1997 as

have the data for most of the other consolidated order areas. The

Tennessee Valley order was terminated October 1997. As a result,
on the basis of 10 percent of receipts distributed within the

Southeast order area, three of the Tennessee Valley-regulated

handlers became pool plants under the Southeast order. 

Consequently, milk production data for the consolidated

Appalachian and Southeast orders based on October 1997 pool data

would not be representative of the milk that would be pooled on

those consolidated orders. Available information indicates that

the sources of milk for the consolidated Appalachian market have

not changed in any significant way from the December 1996 data.

In December 1996, over 4,000 producers from 359 counties in

15 states pooled 443.3 million pounds of producer milk on Orders

5, 11 and 46. Approximately 71 percent of the milk pooled on the

three orders was produced within the proposed consolidated

marketing area.

North and South Carolina are the only States that are located

entirely within the consolidated marketing area, and provided

nearly all of their producers’ milk to Order 5 (encompassing the

entire States of North and South Carolina), with 103.7 and 34

million pounds, respectively. Neither of these states produces

enough milk to meet even the fluid milk requirements of its

population. Kentucky producers pooled 101.1 million pounds on the

three orders, with 89 percent produced within the consolidated

marketing area. Tennessee producers pooled 69.9 million pounds on

the three orders, principally on Order 11, with 84 percent

produced within the consolidated marketing area. Although

Virginia is primarily outside the marketing area, producers from

40 Virginia counties supplied 68.5 million pounds of milk for the

Tennessee Valley and Carolina order markets in December 1996. 

Georgia producers pooled 27.6 million pounds and Indiana producers

pooled 21 million pounds in December, with the balance of the milk

pooled on the three orders originating in Alabama, Connecticut,

Illinois, Maryland, Massachusetts, New Mexico, Pennsylvania, and

West Virginia.

Thirty-four counties each supplied over 3 million pounds of

milk to the three markets consolidated in this area. One such

county was located in New Mexico, and another in Pennsylvania. 

Eight were located in Kentucky, south and southwest of Lexington,

and southeast of Louisville. Eleven were located in North

Carolina west of the Raleigh-Durham area, with all but one located

near Greensboro, Winston-Salem, Asheville, Charlotte or Durham. 

Of the two South Carolina counties that supplied over 3 million

pounds each, one was located northwest of Columbia, and the other

northwest of Charleston. The five Tennessee counties that pooled

over 3 million pounds of milk on the three orders are located in

northeast and southeast Tennessee; two in the Johnson CityKingsport-Bristol area and three southwest of Knoxville. Only one

of the six counties in Virginia that supplied over 3 million
pounds to Orders 5 and 11 is located within the marketing area. 

Five of the six are located in southwest Virginia, with the other

in the northwest part of the State.

Distributing Plants.

Using distributing plant lists included in the proposed rule,

with the pooling standards adjusted to 25 percent of route

dispositions as in-area sales and updated for known plant closures

through December 1998, 31 distributing plants would be expected to

be associated with the Appalachian marketing area, including 25

fully regulated distributing plants (23 currently fully regulated,

1 currently partially regulated, and 1 currently unregulated), 2

partially regulated (both currently partially regulated), 3 exempt

plants, on the basis of having less than 150,000 pounds of total

route disposition per month (2 currently fully regulated and 1

currently unregulated), and 1 government agency plant (currently a

government agency plant).

Four of the 31 distributing plants expected to be associated

with the consolidated area are located in Virginia, with only one

located within the marketing area. The plant in the marketing

area currently is fully regulated and is expected to remain so,

and one of the other Virginia plants, currently partially

regulated, also is expected to be fully regulated. The other two

Virginia plants, both currently partially regulated, are expected

to be remain in that status. Since October 1997, 2 distributing

plants in the marketing area have gone out of business.

Under the consolidated Appalachian order, there would be 18

distributing plants in the largest Appalachian MSAs having

distributing plants. There would be 3 pool distributing plants in

the Greensboro-Winston-Salem-High Point area. The Charleston area

would have 2 pool distributing plants. The Johnson CityKingsport-Bristol, Tennessee, area would have 2 pool distributing

plants. The Greenville-Spartanburg-Anderson, South Carolina, area

would have 2 pool distributing plants. The Knoxville area would

have 1 pool distributing plant and 1 exempt plant, with less than

150,000 pounds of total route disposition per month. The

Charlotte, Chattanooga, Lexington, Louisville, and Evansville

areas would each have 1 pool distributing plant. The RaleighDurham area would have one government agency plant and one plant

exempt on the basis of size. 

Of the remaining 13 distributing plants associated with the

market, one pool plant would be located in a North Carolina MSA

and one pool plant would be located in a South Carolina MSA. The

eleven remaining distributing plants, eight of which are expected

to be pool plants, would not be located in MSAs. Three (2 pool, 1

exempt) would be in North Carolina, and 3 would be in Virginia (1

pool and 2 partially regulated). Three plants in Kentucky, 1 in

Indiana, and 1 in Tennessee are expected to be pool plants.
The 25 plants expected to be fully regulated under the

Appalachian order had distribution totaling 365 million pounds in

October 1997, with 78 percent within the consolidated marketing

area.

A South Carolina plant included above in the description of

fully regulated distributing plants -- Superbrand Dairy Products,

Inc., in Greenville (about 140 miles northeast of Atlanta)-- has a

greater proportion of its sales in the Southeast market than in

the Appalachian market. This plant currently is locked into

regulation under the Carolina order based on its need to procure a

milk supply in the Carolina order, although it has greater route

disposition in the Southeast. This lock-in is included in the

Appalachian order provisions.

Utilization.

As in the case of milk production data, October 1997 data for

the three markets consolidated in the Appalachian order are not

available because of the termination that month of the Tennessee

Valley order. Instead of using October 1995 data from the

proposed rule, however, September 1997 data is used as

representative for this section.

According to September 1997 pool statistics for handlers who

would be fully regulated under this Appalachian order, the Class I

utilization percentages for the Carolina and Louisville-LexingtonEvansville markets and the former Tennessee Valley market were 86,

80, and 87 percent, respectively. Based on calculated weighted

average use values for (1) the current order with current use of

milk, and (2) the current order with projected use of milk in the

consolidated Appalachian order, the potential impact of this

decision on producers who supply the current market areas is

estimated to be: Carolina, unchanged (from $13.59); LouisvilleLexington-Evansville, a 3-cent per cwt increase (from $12.73 to

$12.76); and Tennessee Valley, a 6-cent per cwt decrease (from

$13.38 to $13.32). The weighted average use value for the

consolidated Appalachian order market is estimated to be $13.35

per cwt. For September 1997, combined Class I utilization for

Orders 5, 11 and 46 was 85.0 percent based on 349.0 million pounds

of producer milk used in Class I out of 410.4 million total

producer milk pounds pooled.

Other Plants.

Also located within the consolidated Appalachian marketing

area during May 1997 were 13 supply or manufacturing plants: 4 in

Kentucky (1 in the Louisville area), 5 in North Carolina (1 in the

Charlotte-Gastonia-Rock Hill area and one in the GreensboroWinston-Salem-High Point area), 1 in Tennessee, and 3 nonpool

cheese plants in Indiana (1 in the Lexington area and one in the

Louisville area). Three of the 13 plants are pool plants, or have

a “pool side.” Two of the three pool plants (one in Kentucky and
the one in Tennessee) are “split plants,” that is, one side of a

plant is a manufacturing facility, and the other side receives and

ships Grade A milk, and accounting is done separately. Of these

pool plants, the pool sides of the 2 split plants have no primary

product, shipping only to distributing plants. The nonpool side

of one of these plants manufactures cheese, while the nonpool side

of the other manufactures powder. The other pool plant is a

supply plant that manufactures primarily Class II products. Of

the other nonpool plants in the Appalachian marketing area, 5

manufacture primarily cheese and 5 manufacture primarily Class II

products.

Cooperative Associations.

Using September 1997 cooperative association information for

the former Tennessee Valley order area and December 1997

information for the Carolina and Louisville-Lexington-Evansville

(Order 46) orders, it can be estimated that approximately 75

percent of the milk in the consolidated Appalachian area was

supplied by 12 cooperatives. Dairymen’s Marketing Cooperative,

Inc., and cooperative associations that merged to form Dairy

Farmers of America supplied nearly half of the milk pooled on all

three markets during these months. Carolina-Virginia Milk

Producers Association, Inc., supplied approximately 20 percent of

the milk pooled on both the Carolina and Tennessee Valley markets.

Five cooperative associations supplied 16 percent of the milk

pooled under the Carolina order in December 1997, but supplied no

milk to the other two markets. Three of these cooperatives pooled

no milk on any other Federal order market, while one also pooled

milk on the two Ohio orders, the New York-New Jersey order, and

the Middle Atlantic order. In addition to the Carolina order, the

fifth cooperative pooled the milk of Texas producers on the Texas,

Southern Illinois-Eastern Missouri, Chicago, and Southeast orders.

In addition to the 55 percent of the September 1997 Tennessee

Valley milk supply from cooperative associations pooling milk on

the other two Appalachian markets, one cooperative that also

pooled milk on the Southeast order in December 1997 supplied

approximately 15 percent of the milk pooled on the Tennessee

Valley order.

Three cooperative associations that supplied less than 2

percent of the milk pooled under Order 46 did not supply milk to

either the Carolina or Tennessee Valley markets.

Criteria for Consolidation.

Overlapping route disposition and procurement are the primary

criteria on which this consolidation is based. There is a

stronger relationship between the three marketing areas involved

than between any one of them and any other marketing area on the

basis of both criteria. Route dispositions within the Appalachian

area by handlers who would be regulated under this order account
for 93 percent of the total fluid milk products distributed in the

area. The primary sources of the remaining 7 percent are four

other consolidated order areas, with no more than 3 percent

distributed by any of the four. Handlers to be regulated under

the Appalachian order distributed nearly 80 percent of their route

dispositions within the marketing area.

Over two-thirds of the milk supply for the Appalachian market

is produced within the marketing area, with a large part of the

rest of the milk supply coming from unregulated areas to the north

(Virginia and Pennsylvania). The Appalachian order area supplies

a significant minority of the milk supply for the Southeast

market, but in October 1997 this amount was less than the amount

supplied to the Southeast area from the Southwest area. In

addition, a large proportion of the milk produced in the

Appalachian order area that was pooled on the Southeast order in

October 1997 was received at plants that formerly were pooled

under the terminated Tennessee Valley order, and will be pooled

under the consolidated Appalachian order. There is also common

cooperative association affiliation between the markets.

Discussion of Comments and Alternatives.

Prior to issuance of the proposed rule, alternatives that

were considered included combining all of the current Florida,

Carolina, Tennessee Valley and Southeast order areas,

consolidating the Southeast and proposed Appalachian areas, and

including all of the State of Kentucky in one order, specifically

the Southeast. These alternative consolidations were examined at

length and were found to have less overlap in sales and

procurement than the Appalachian marketing area.

Thirteen comments that pertained specifically to the proposed

Appalachian area were filed by 12 commenters in response to the

proposed rule. Six of these comments supported the consolidation

of the Appalachian marketing area as described in the proposed

rule, including comments filed by several affected dairy farmers,

the North Carolina Department of Agriculture, the North Carolina

Dairy Producers Association, and a comment filed on behalf of

Piedmont Milk Sales, Inc., Hunter Farms, Land O’Sun Dairies and

Milkco, Inc. This last comment stated that the Appalachian and

Southeast areas should not be combined because a separate milk

order area should exist between the consolidated Northeast and

Southeast order areas. The comment argued that existence of the

Appalachian area would be expected to result in blend price

differences between and among the Northeast, Mideast, Appalachian,

Southeast and Florida orders such that milk supplies will move

South and East as needed.

Seven comments supported the combination of the Appalachian

and Southeast areas, or at least the inclusion of more territory

in the Appalachian area. The Kentucky Farm Bureau Federation
urged that all Kentucky counties and the proposed Appalachian area

be combined with the Southeast. The comment stated that this

further consolidation would make milk utilization rates more

similar across the order, would facilitate and encourage milk flow

to deficit areas and minimize any negative price impacts on

producers. According to the Carolina-Virginia Milk Producers

Association, the existence of separate Southeast and Appalachian

order areas could result in disorderly marketing conditions on the

eastern side of the proposed Southeast order area. Comments filed

by Trauth Dairy urged the inclusion of the northern areas of

Kentucky, including the Newport, Kentucky, area containing Louis

Trauth Dairy, Inc., in the proposed Appalachian area rather then

in the proposed Mideast area.

A comment filed by DFA supported the inclusion of Charleston,

West Virginia, and areas of West Virginia south of Charleston, as

well as the Ohio counties surrounding Cincinnati and the northern

counties of Kentucky, in the Appalachian market rather than the

Mideast market to promote orderly marketing of milk. The DFA

comment stated that adequate milk supplies do not exist in close

proximity to processors in the greater Cincinnati, Ohio, and

Charleston, West Virginia, markets, and that an economic incentive

must be provided to assure a milk supply to those processors. A

second DFA comment recommended that the Southeast and Appalachian

order areas be combined because the primary supplemental milk

supply for both areas is in more western states (Texas, New Mexico

and Missouri). The comment stated that it is likely that these

supplemental supplies would be likely to be associated with the

Southeast order because of its greater proximity, and eastern

Southeast milk would be “stair-stepped” across to the Appalachian

order to reduce hauling costs. According to DFA, during the

market’s flush production month, the Appalachian order would not

bear the burden of surplus milk since the distant surplus milk

would be associated with the Southeast order in addition to the

eastern Southeast milk supplies that also would be associated with

the Southeast order to avoid inefficient milk movements, resulting

in a disproportionate burden of surplus milk pooled on the

Southeast order.

For the month of October 1997, a month when some supplemental

supplies usually are required for short markets, nearly onequarter of the producer milk pooled on the current Southeast order

originated in the States of Missouri, New Mexico, and Texas. For

the same month, just over 1 percent of the producer milk pooled on

the Louisville-Lexington-Evansville and Carolina orders was

produced in those more western States. It is clear that the

western milk is a much more important source of supply for the

Southeast area than for the Appalachian area, and that the

magnitude of this difference is an indication of how much these
two consolidated markets differ. The ability to pool surplus milk

on the Southeast order is directly related to the addition of the

southern Missouri/northwest Arkansas area to the Southeast

marketing area, an addition that was strongly urged by DFA. 

Concerns about the ability of handlers in the eastern part of the

Southeast area to attract a supply of milk could be addressed more

appropriately by the inclusion of transportation credits in the

Southeast order than by consolidation with the Appalachian area.

A dairy farmer in West Virginia urged that the State of West

Virginia be added to the Appalachian order area because milk usage

for Class I milk and cost of production would then become similar

to the other states in the Appalachian area. Another dairy farmer

referred to a comment filed earlier to include Maryland in the

Appalachian area instead of the Northeast.

As discussed in the proposed rule, consolidating the Carolina

and Tennessee Valley markets with the Southeast does not

represent the most appropriate consolidation option because of the

minor degree of overlapping route disposition and producer milk

between these areas. That conclusion continued to be supported by

data gathered for distributing plants for October 1997. 

The northern Kentucky/southern Ohio and West Virginia area

was examined in painstaking detail with updated data to determine

whether or where this area could be divided to reflect handlers’

sales areas and supply procurement areas better than in the

proposed rule. No support for such a modification to the proposed

rule could be found. Only one Appalachian handler has significant

route disposition within the Ohio Valley order area, while a very

small volume of Class I sales moves from the Ohio Valley area into

the Order 46 area. There is even less overlap between either West

Virginia or Maryland and the Appalachian area, and no

justification for changing the marketing area of either of these

States.

FLORIDA.

The consolidated Florida marketing area is comprised of the

three current Federal order marketing areas contained wholly in

the state of Florida: Upper Florida (Order 6), Tampa Bay (Order

12) and Southeastern Florida (Order 13). There are 63 counties in

this consolidated area (40 in Order 6, 13 in Order 12, and 10 in

Order 13). This area remains unchanged from the proposed rule.

Geography.

The consolidated Florida marketing area is described

geographically as all counties in the State of Florida, with the

exception of the four westernmost counties in the Florida

Panhandle. This marketing area is a large peninsula, ranging from

about 140 miles in width in the north to about 50 miles in width

in the south, that extends south from the southeast U.S. about 400
miles between the Atlantic Ocean and the Gulf of Mexico. Also

included in the Florida market is approximately 150 miles of the

Panhandle, a narrow strip of land extending west along the Gulf of

Mexico from the northern part of the peninsula. The water

surrounding most of Florida’s peninsula constitutes a natural

boundary, as east-to-west travel is limited.

Almost all of Florida has a humid subtropical climate. The

southern end of the state and the islands south of the peninsula

have a tropical wet and dry climate. In general, the state’s

climate can and does affect levels of milk production negatively. 

Seasonal variation in production for this market typically is

greater than for most other U.S. regions. The importance of dairy

farming as an agricultural pursuit in Florida is relatively minor

(7 percent of total receipts from agricultural commodities), with

several crops contributing more total receipts to the State’s

income. However, no livestock commodity is as important in

Florida as dairy farming.

Population.

According to July 1, 1997, population estimates, the total

population in the consolidated Florida marketing area is 14.1

million. Ninety-three percent of the population of the marketing

area is located in Metropolitan Statistical Areas (MSAs). The two

largest MSAs are Miami-Fort Lauderdale (Miami) on the eastern side

of the southern end of the peninsula, and Tampa-St. PetersburgClearwater (Tampa) midway on the western side of the peninsula. 

Broward and Dade Counties comprise the Miami population center

(currently in Order 13) with a population of 3.5 million. The

Tampa population center (currently in Order 12) is comprised of

Hernando, Hillsborough, Pasco and Pinellas counties with a

population of 2.2 million. The six counties in these two

population centers represent about 41 percent of the total

marketing area population.

Fluid Per Capita Consumption.

Florida customarily is considered a deficit milk production

state. For much of the year, milk needs to be imported from other

states in order to meet the demand for fluid consumption. Based

on the population figure of 14.1 million and an estimated per

capita fluid milk consumption rate of 17 pounds of fluid milk per

month, total fluid milk consumption in the Florida marketing area

is estimated at 239.7 million pounds per month.

During October 1997, 216 million pounds of milk were disposed

of in the consolidated marketing area by all Florida distributing

plants expected to be fully regulated under the Florida order. 

Other order plants had route disposition within Florida of 14.2

million pounds. Another 1.3 million pounds of milk was

distributed within the consolidated area by partially regulated

handlers, producer-handlers, and exempt plants. The discrepancy
between the actual total route disposition of 231.5 million pounds

and the estimated consumption level of 239.7 million pounds may be

explained by the older than average population in Florida.

Milk Production.

In October 1997, 175.8 million pounds of milk produced in

Florida were pooled in four Federal orders; 98.5 percent of this

milk was pooled on the three current Florida orders. About 340

producers located in Florida (96 percent of all Florida producers

having association with Federal orders) had producer milk pooled

on at least one of the three Florida markets. A small number of

Florida producers had producer milk associated with Order 7, while

more than 100 Georgia producers had producer milk associated with

the Florida markets. Additionally, 44.7 million pounds of Georgia

milk was pooled on the three Florida markets; 89 percent of this

milk went to Order 12.

There are 40 counties in Florida that pooled milk in at least

one of the three current Florida orders. Eight of these counties

produced 66.5 percent of the milk pooled. 

Three counties (Gilchrist, Lafayette and Suwannee, about 75

miles west of Jacksonville) had 42.3 million pounds of producer

milk. For these three counties, 72.6 percent of the October 1997

producer milk was pooled on the Tampa Bay order, which is located

approximately 150 miles southeast of the counties. 

Nearly 90 percent of Clay County’s producer milk was pooled

in Order 6. This county is in the Jacksonville MSA, which is the

largest population center in Order 6.

Twenty-two and one-half million pounds of producer milk came

from Hillsborough, Highlands, and Manatee Counties, all part of

the Order 12 market. However, 64 percent of this milk was pooled

on Order 13, with the rest pooled on Order 12.

Okeechobee County, located in the Order 13 marketing area

about 125 miles northwest of the Miami area, is by far the largest

milk producing county in Florida. The county had 43.8 million

pounds of producer milk in October 1997, almost all of which was

pooled on Order 13.

Distributing Plants.

Using plant lists included in the proposed rule, with pooling

standards adjusted to 25 percent of route dispositions as in-area

sales, updated for known plant closures through December 1998, 12

plants would be expected to be fully regulated under the

consolidated Florida market. Four of these plants are located in

the Miami MSA and three in the Tampa MSA. Three plants are

located in mid-Florida, one in the Orlando area and two in the

Lakeland-Winter Haven area. Two more are located in northeast

Florida: one in the Jacksonville area, and one in Daytona Beach. 

One plant in the Tampa MSA, currently fully regulated, would be

exempt on the basis of size. One partially regulated plant in the
Jacksonville area would be expected to continue its partially

regulated status, and one producer-handler is not located within

an MSA.

Slightly less than two-thirds of the consolidated market’s

population is contained in the MSAs where fully regulated plants

are located.

Utilization.

According to October 1997 pool statistics for handlers who

would be fully regulated under this Florida order, the Class I

utilization percentages for the Upper Florida, Tampa Bay, and

Southeastern Florida markets were 91, 88, and 94 percent,

respectively. Based on calculated weighted average use values for

(1) the current order with current use of milk, and (2) the

current order with projected use of milk in the consolidated

Florida order, the potential impact of this rule on producers who

supply the current market areas is estimated to be: Upper Florida,

a 4-cent per cwt decrease (from $15.39 to $15.35); Tampa Bay, a 8-

cent per cwt increase (from $15.54 to $15.62); and Southeastern

Florida, a 13-cent per cwt decrease (from $16.03 to $15.90). The

weighted average use value for the consolidated Florida order

market is estimated to be $15.69 per cwt. For October 1997,

combined Class I utilization for the three Florida markets was

90.6 percent based on 197.5 million pounds of producer milk used

in Class I out of 218.0 million total producer milk pounds. 

Other Plants.

Also located within the Florida marketing area during May

1997 were four supply or manufacturing plants, three of which are

not associated with the current markets’ pools. Three ice cream

plants are located in the Tampa area and one pool supply plant is

in the Jacksonville area. 

Cooperative Associations.

In December 1997, three cooperatives marketed milk in the

Florida markets, representing nearly 100 percent of the milk

marketed. Effective October 1, 1998, Florida Dairy Farmers

Association, which marketed milk under all three Florida orders,

and Tampa Independent Dairy Farmers’ Association, Inc., which

marketed milk only under the Tampa Bay order, merged to create

Southeast Milk, Inc. The December 1997 production marketed by

these two cooperatives in all three Florida orders comprised 93

percent of the producer milk associated with the three markets. 

Dairy Farmers of America, Inc. (DFA), members marketed nearly 7

percent of producer milk associated with the three Florida orders

on the Tampa Bay and Southeastern Florida pools.

Criteria for Consolidation.

The consolidated Florida market should encompass the current

marketing areas of the Upper Florida, Tampa Bay and Southeastern

Florida Federal milk orders. Natural boundary limitations and
overlapping sales and procurement areas among the three orders are

major reasons for consolidation, as well as a measure of

association evidenced by cooperative association proposals to

consolidate these three marketing areas. Further, the cooperative

associations in this area have worked together for a number of

years to accommodate needed movements of milk between the three

Florida Federal orders, and into and out of the area.

Discussion of Comments and Alternatives.

Prior to the issuance of the proposed rule, the inclusion of

other Federal order marketing areas with the consolidated Florida

area was considered because of the existence of some overlap of

sales, procurement of producer milk, and dispositions of surplus

milk. However, because of the closeness of the relationship

between the current Florida markets and the lack of significant

overlap of sales or production with other order areas no basis was

seen for expanding the consolidation any further.

Only three comments were received that pertained specifically

to the consolidated Florida area. These comments, filed by the

three cooperative associations with membership in the consolidated

Florida marketing area, supported the consolidation of the current

three Florida order areas without any additional territory.

SOUTHEAST.

The consolidated Southeast marketing area is comprised of the

current Southeast (Order 7) marketing area, portions of the

current Southwest Plains (Order 106) marketing area in northwest

Arkansas and southern Missouri, and six southeastern Missouri

counties from the current Southern Illinois-Eastern Missouri

(Order 32) marketing area. Also included are 16 currently

unregulated Missouri counties, 21 currently unregulated Kentucky

counties, and 1 Kentucky county that currently is part of the

Louisville-Lexington-Evansville (Order 46) marketing area. There

are 572 counties in this consolidated area. A partial county in

Missouri that was proposed to be included in the Southeast area

has been omitted.

Geography.

The Southeast market is described geographically as follows:

all counties or parishes in Alabama, Arkansas, Louisiana, and

Mississippi (67, 75, 64 and 82 counties, respectively), 4 in

Florida, 152 in Georgia, 44 in Missouri, 62 in Tennessee and 22 in

Kentucky (one --Logan County-- currently is in Order 46, and 21

currently are unregulated). Of these 21 counties, 14 were part of

the former Paducah, Kentucky (Order 99) marketing area. Eleven

Arkansas and 22 Missouri counties are part of the current Order

106 marketing area. Six Missouri counties are part of the current

Order 32 marketing area. Sixteen southeastern Missouri counties

currently are unregulated (4 of these were part of the former
Paducah Federal milk order). A partial Missouri county that was

proposed to be part of the Southeast area is omitted for the

purpose reducing the incidence of partially regulated counties. 

The Southeast market spans the southeastern area of the

United States from the Gulf of Mexico and the Alabama/GeorgiaFlorida border north to central Missouri, Kentucky, Tennessee and

South Carolina, and from the Atlantic Ocean west to Texas,

Oklahoma, and Kansas. Measuring the extreme dimensions, this

market extends about 575 miles north to south from central

Missouri to southern Louisiana and 750 miles west to east from

Louisiana’s border with Texas to the Atlantic Ocean coast in

southern Georgia.

The Southeast marketing area is contiguous to 4 other

consolidated marketing areas: Florida to the southeast, the

Southwest to the west, the Central to the northwest and the

Appalachian to the northeast and east. Georgia’s coastline on the

Atlantic Ocean is about 100 miles in length, while western

Florida, Alabama, Mississippi and Louisiana extend about 600 miles

along the Gulf of Mexico coastline. Also contiguous to the

current Southeast market are currently unregulated counties in

Texas, Missouri, Kentucky (and as of October 1, 1997, the

Tennessee Valley [Order 11] marketing area). The consolidated

marketing areas would encompass all of these counties in the

Southwest, Central, Appalachian or Southeast marketing areas, with

some currently-unregulated counties in central Missouri remaining

unregulated under this proposal.

In terms of physical geography, the Southeast region is

generally flat or gently rolling low-lying land. Relatively

higher elevations which might potentially form natural barriers or

obstruct easy transportation exist in northwest Arkansas and

northeast Georgia.

Moving from the south to the north of the Southeast market,

climates range from humid subtropical in coastal areas to warm and

humid or humid continental to temperate in Tennessee and Kentucky. 

Warm, humid summers and mild winters are typical in the Southeast. 

These types of climates can severely limit the production level of

dairy herds in the summer.

Population.

According to July 1, 1997, population estimates, the total

population in the consolidated Southeast marketing area is 26.9

million. The 42 Metropolitan Statistical Areas (MSAs) in the

market account for 62.3 percent of the total marketing area

population. Almost half of the Southeast population is located in

the 17 most populous MSAs. Eight MSAs have populations greater

than 500,000 each; their total population is about 36 percent of

the Southeast population. Because of the large number of MSAs in

the Southeast market and also because no large (i.e., greater than
500,000) population centers are added to this market, only those

areas with populations greater than 500,000 are described in

greater detail.

Over 25 percent of the Southeast market’s population is

located in Georgia, the most populous of the Southeast market

states, with 7.2 million people. Almost half of Georgia’s

population is concentrated in the Atlanta MSA, located about 60

miles south of the Southeast-Appalachian marketing area boundary

in the northwest portion of the state. Atlanta is the largest

city in the Southeast market with a population of 3.6 million.

With 4.3 million people, Alabama is the Southeast market

area’s third most populous state. Birmingham and Mobile, the

state’s two largest MSA regions, are among the top eight in

population in the Southeast. The Birmingham area has a population

of about 900,000 and ranks 5th in size among all Southeast area

MSAs. Birmingham is located about 150 miles west of Atlanta in

north central Alabama. The Mobile area is a Gulf of Mexico port

city in southwestern Alabama. With a population of 527,000,

Mobile is the 8th largest population center in the Southeast market

area.

Louisiana is the second most populated state in the Southeast

market area with 4.4 million people. Two of the Southeast’s 8

largest MSAs are located in Louisiana --New Orleans, the second

largest MSA with 1.3 million people and Baton Rouge, the 6th

largest MSA with almost .6 million people. New Orleans is located

in the state’s “toe” in southeastern Louisiana. Baton Rouge also

is located in Louisiana’s “toe,” about 80 miles west of New

Orleans.

Arkansas has a total population of 2.5 million -- 2 million

from the current Southeast marketing area and an additional

500,000 from the Arkansas portion of the Southwest Plains

marketing area. The Little Rock-North Little Rock, Arkansas

(Little Rock) MSA, in the center of Arkansas, has the 7th largest

population concentration in the Southeast market area with

552,000.

The portion of Tennessee in the Southeast marketing area is

the fourth most populated with 3.4 million people and is home to

the third and fourth largest MSAs in the Southeast. The Nashville

area, with a population of 1.1 million, is located in central

Tennessee. The Memphis, Tennessee/Arkansas/Mississippi MSA, also

with a population of 1.1 million, is located near these three

states’ borders. 

Other states or portions of states in the Southeast marketing

area do not have MSAs with greater than 500,000 population. 

Mississippi, the Southeast’s 5th most populous state, has a total

population of 2.7 million. The Missouri, Florida and Kentucky

counties in the Southeast market have populations of 1.3 million,
602,000 and 529,000, respectively.

Fluid Per Capita Consumption.

Fluid per capita consumption estimates vary throughout the

Southeast market from a low of 16 pounds of fluid milk per month

in Mississippi to a high of 19 pounds in Arkansas and Kentucky. 

Multiplying the individual states’ consumption rates by their

population results in an estimated fluid milk consumption rate of

468 million pounds of fluid milk per month for the Southeast

marketing area.

Route distribution in the consolidated Southeast area by

handlers expected to be regulated under the consolidated Southeast

order (including the 3 Arkansas and Missouri plants) equaled 380

million pounds within the Southeast marketing area in October

1997. Other fluid milk dispositions in the consolidated Southeast

marketing area came from plants expected to be regulated under

other orders (66.7 million pounds) and from partially regulated,

exempt and producer-handler plants (2 million pounds).

Milk Production.

Milk production data for the Southeast consolidated order

area have not been updated from January 1997 to October 1997 as

have the data for most of the other consolidated order areas. As

a result of terminating the Tennessee Valley order as of October

1997, three of the Tennessee Valley-regulated handlers became pool

plants under the Southeast order, on the basis of having at least

10% of their sales in the Southeast order marketing area. These

handlers will become regulated under the consolidated Appalachian

order when the consolidated orders become effective. 

Consequently, milk production data for the consolidated Southeast

order area based on October 1997 pool data would not be

representative of the consolidated Southeast market. Available

information indicates that the sources of milk for the

consolidated Southeast market have not changed significantly from

the January 1997 data.

In January 1997, 4,180 producers from 388 counties pooled

477.4 million pounds of producer milk on the current Southeast

market. Over 85 percent of the Southeast’s producer milk came

from Southeast market area counties. Of the 388 counties, 19

pooled over 5 million pounds each, accounting for 39 percent of

Order 7's producer milk. Of these 19 counties, 2 Texas counties

are located outside the Southeast marketing area. Because of the

large number of counties, only the locations for those top 19

production counties are described in greater detail. However, the

volume of producer milk, number of producers (farms) and number of

counties is provided for each state within the market area.

Almost 73 million pounds of milk were pooled on the Southeast

market from 581 producers in 28 Louisiana parishes in January

1997. Top production parishes are Tangipahoa, Washington and St.
Helena, all located in the state’s “toe,” north of New Orleans and

northeast of Baton Rouge, each bordering Mississippi. Another

high production area is centered on De Soto Parish in northwestern

Louisiana. These four parishes account for over 62 million pounds

of producer milk, with 76 percent coming from Tangipahoa and

Washington parishes. 

Almost 67 million pounds of milk were pooled on the Southeast

market from 331 producers in 68 Georgia counties in January 1997. 

Of this volume, 64 million came from 312 producers in 64 Georgia

counties in the Order 7 marketing area. The balance is associated

with Georgia producers located in the marketing area of the former

Order 11 (Tennessee Valley). Top production counties are Putnam,

Morgan and Macon, which pooled 27 million pounds of producer milk

on Order 7.

About 65 million pounds of milk were pooled on the Southeast

market from 580 producers in 46 Tennessee counties in January

1997. Of this volume, 62 million came from 562 producers in 42

Tennessee counties in the Order 7 marketing area. The balance is

associated with Tennessee producers located in the marketing area

of the former Federal Order 11. Two high production counties in

the state are Marshall and Lincoln, located in south central

Tennessee. These counties contributed over 12 million pounds of

producer milk to the Order 7 pool in January 1997.

About 61 million pounds of milk were pooled on the Southeast

market from 443 producers in 48 Mississippi counties in January

1997. Top production counties are Walthall and Pike, in southern

Mississippi on the state’s border with Louisiana. These two

counties adjoin the heavy milk production area in Louisiana. The

counties contributed 15 million pounds of producer milk to the

Order 7 pool in January 1997.

About 32 million pounds of milk were pooled on the Southeast

market from 408 producers in 19 Kentucky counties in January 1997. 

Additionally, 116 producers in 15 of these counties pooled almost

9 million pounds of producer milk on Orders 11 and 46 (LouisvilleLexington-Evansville). Two counties, Barren and Monroe,

contributed over 13 million pounds of producer milk. These

contiguous counties are in south central Kentucky about 80 miles

northeast of Nashville, Tennessee. 

Four Missouri counties -- Wright, Texas, Laclede and Howell--

pooled 33 million pounds of producer milk on Order 7. All of

these counties currently are located in the Order 106 (Southwest

Plains) marketing area in southern Missouri.

Other Southeast marketing area states or areas contribute

producer milk to the Southeast marketwide pool. About 37 million

pounds of milk were pooled on the Southeast market from 205

producers in 51 Alabama counties, and 25 million pounds were

pooled from 343 producers in 39 Arkansas counties. Sixteen
Florida producers from 6 counties (2 in the Southeast market area)

pooled 3.5 million pounds on Order 7 in January 1997.

In January 1997, Order 7 producer milk also originated in

Missouri counties not included in the Southeast marketing area,

Texas, New Mexico, Indiana and Oklahoma. Large amounts of milk

from Missouri (21 million pounds in addition to the 33 million

described previously) and Texas (46 million pounds -- 20 million

from Hopkins and Erath Counties) were associated with the Order 7

pool.

Distributing Plants.

Using distributing plant lists included in the proposed rule,

with the pooling standards adjusted to 25 percent of route

disposition as in-area sales, updated for known plant closures

through December 1998, 48 distributing plants located in the

consolidated Southeast marketing area would be expected to be

associated with the Southeast market (including the added

territory in northwestern Arkansas and southern Missouri). These

plants include 36 fully regulated distributing plants, 3 of which

are currently regulated under the Southwest Plains order and one

of which is currently partially regulated. In addition, it is

expected that 3 plants would be partially regulated (one of which

currently is fully regulated and two of which are partially

regulated), and 7 plants that are, and are expected to be, exempt

-- 1 on the basis of size and 6 on the basis of institutional

status. An additional currently regulated plant is expected to be

exempt on the basis of institutional status. Of the 36 fully

regulated plants, 16 are located in the largest eight MSA regions. 

One distributing plant located in the consolidated Appalachian

marketing area that has more than half of its route disposition

within the Southeast marketing area would be locked into

regulation under the Appalachian order.

Since October 1997, it is known that 2 pool distributing

plants have gone out of business. One of these plants was located

in Louisiana and the other in Missouri

Of the 48 distributing plants, Georgia has 9; Louisiana, 10;

Mississippi, 6; Alabama, 8; Arkansas, 6; Tennessee, 5; Missouri,

2; and Kentucky, 2. No distributing plants are located in the

Florida counties included in the Southeast market area. 

In Georgia, three pool distributing plants and one producerhandler are located in the Atlanta area, with 3 others elsewhere

in the State. Georgia also has 1 partially regulated handler and

1 government agency (state prison) plant.

Eight of Louisiana’s 10 distributing plants currently are and

would continue to be fully regulated (pool plants) in this

consolidated marketing area. Four of these 8 are located in

either the New Orleans or Baton Rouge areas (2 in each). Four

other pool distributing plants are located in Louisiana. The
remaining two plants are affiliated with educational institutions.

Four of Mississippi’s 6 currently operational distributing

plants would be fully regulated pool plants in the Southeast

market. Two educational institutions also have plants.

Seven of Alabama’s distributing plants are fully regulated. 

One is located in the Birmingham area and 2 are located in the

Mobile area. Of the remaining four, 2 are in northern Alabama,

one is in central Alabama, and one is in the state’s southeastern

corner.

Four of Arkansas’ 6 currently operational distributing plants

are fully regulated; two are in the Little Rock area, and the

other 2 are located in northwest Arkansas. Also located within

Arkansas are 2 exempt distributing plants — one on the basis of

size and one that is a state prison plant. Four of Tennessee’s 5

distributing plants are, and are expected to be, fully regulated. 

Three of the 4 are located in the Nashville area and one fully

regulated plant and one partially regulated plant are located in

the Memphis area.

Two distributing plants that would be fully regulated under

the Southeast market are located in the currently unregulated

Kentucky counties that are added to this marketing area. One is

located in Fulton in the southwest corner of Kentucky on the

Tennessee border, and the other about 30 miles east of Fulton.

Two Missouri distributing plants are located in the

consolidated Southeast area. One is a pool plant located in

Springfield, and the other a plant exempt on the basis of

institutional status located just south of the Springfield MSA.

Utilization.

As in the case of milk production data, October 1997 data for

the consolidated Southeast order are not used because of the

termination that month of the Tennessee Valley order. Instead of

using October 1995 data from the proposed rule, however, September

1997 data is used as representative for this section.

According to September 1997 pool statistics for handlers who

are expected to be fully regulated under the Southeast order, the

Class I utilization for the Southeast market was 84 percent. 

Based on calculated weighted average use values for (1) the

current order with current use of milk, and (2) the current order

with projected use of milk in the consolidated Southeast order,

the potential impact of this rule on producers who supply the

current market area is estimated to be a 3-cent per hundredweight

increase (from $13.60 to $13.63).

For September 1997, Class I utilization for the Southeast

market was 83.9 percent based on 357.2 million pounds of producer

milk used in Class I out of 426 million total producer milk

pounds.

Other Plants.
Also located within the Southeast marketing area during May

1997 were 37 supply or manufacturing plants: 1 in Kentucky, 5 in

Alabama (including 1 in the Birmingham area), 5 in Arkansas

(including 1 in the Little Rock area), 7 in Georgia (including 4

in the Atlanta area), 3 in Louisiana (including 1 in the Baton

Rouge area), 11 in Missouri, 2 in Mississippi, and 3 in Tennessee

(including 1 each in the Memphis and Nashville areas). Eight of

the 37 plants are pool plants. Of these pool plants, 2 primarily

ship to distributing plants, 3 manufacture cheese, 1 manufactures

Class II products, 1 manufactures powder and 1 primarily

manufactures other products. Of the Southeast marketing area’s 28

nonpool plants, 13 manufacture primarily Class II products, 3

manufacture cheese, 10 manufacture primarily other products, and 1

each manufacture primarily butter and cheese. One plant is a

“split plant,” with one side serving as a manufacturing facility

primarily for Class II products, while the other side receives and

ships Grade A milk.

Cooperative Associations.

In December 1997, thirteen cooperative associations,

including 3 of those that merged to become Dairy Farmers of

America (DFA), represented members marketing 73 percent of the

milk pooled on the Southeast market.

This number of cooperative associations is more than twice

the number (six) that pooled milk on the Southeast order in

December 1995. Of those six, National Farmers Organization (NFO)

ceased marketing milk in the Southeast. Milk Marketing, Inc.,

headquartered in Strongsville, Ohio, and one of the cooperatives

that formed DFA, marketed a small amount of milk in the Southeast

in December 1997, and two cooperatives began marketing milk after

December 1995. In addition, 5 cooperative associations

representing Texas and New Mexico producers pooled milk on the

Southeast order in December 1997.

The DFA cooperatives represented 71 percent of co-op milk and

52 percent of the total milk supply pooled under the Southeast

order during December 1997. For the same month, Carolina-Virginia

Milk Producers Association, Inc., represented 9 percent of the

milk pooled by cooperative associations; the two new cooperatives

pooled 8 percent of co-op milk; and the five Texas/New Mexico

cooperatives pooled 7 percent.

Criteria for Consolidation.

Retention of the Southeast marketing area as a single area is

based on overlapping route dispositions within the marketing area

to a greater extent than with other marketing areas. Procurement

of producer milk also overlaps between states within the market. 

There is also a seasonal need for milk from outside the marketing

area. However, the amount of supplemental seasonal supplies is

not as great as the amount of milk that is actually pooled under
the order from distant areas. There is common cooperative

association membership within the marketing area.

As noted in the proposed rule, the addition of northwest

Arkansas and southern Missouri to the marketing area is primarily

in response to comments received during the public comment period.

Discussion of Comments and Alternatives.

Prior to issuance of the proposed rule, alternatives that

were considered included incorporating all of the State of

Kentucky in the Southeast area, dividing the Southeast area on the

state line between Mississippi and Alabama, combining the Florida,

Carolina, Tennessee Valley and Southeast order areas, and adding

the eastern part of the Texas order area to the Southeast. These

alternatives were analyzed in detail for the proposed rule and

determined not to result in a configuration of marketing areas as

appropriate as those proposed for reasons discussed in the

proposed rule.

Seven comments filed in response to the proposed rule

specifically addressed the consolidated Southeast marketing area. 

A comment filed on behalf of Piedmont Milk Sales, Inc., Hunter

Farms, Land O’Sun, and Milkco, Inc., supported and endorsed the

portion of the proposed rule that would maintain separate order

areas for the Southeast and Appalachian areas. Comments filed by

DFA and by Carolina-Virginia Milk Producers Association favored

combining the proposed Southeast and Appalachian order areas. In

addition, the Kentucky Farm Bureau Federation urged that all

Kentucky counties and the proposed Appalachian order be combined

with the Southeast. The comment stated that such a configuration

would make milk utilization rates more similar across the order,

would facilitate and encourage milk to flow to deficit areas and

minimize any negative price impacts on producers. These comments

were considered in the discussion of comments and alternatives

under the Appalachian area.

Comments from Carolina-Virginia Milk Producers Association

and Missouri Farm Bureau Federation support the inclusion, as

proposed, of southern Missouri/northwest Arkansas in the Southeast

marketing area. The Carolina-Virginia Milk Producers’ comment

noted that this area is a crucial part of the supply area for the

southeast region, and that the exclusion of the area from the

consolidated Southeast order area could have a detrimental impact

on the over-order premium structure of that area. The comment

stated that the correction of producer blend prices and creation

of a unified marketing area in that part of the southeast region

is justified. With regard to southern Missouri, a representative

of the Subcommittee on Livestock of the U.S. House of

Representatives Committee on Agriculture supported adding

southeastern Missouri to the Southeast order area, as proposed. A

comment filed by Barber Pure Milk Company opposed adding northwest
Arkansas/southern Missouri to the Southeast marketing area on the

basis of the minimal overlapping route disposition and potential

of diluting the Southeast pool.

A substantial share of the milk production from the portions

of Missouri and Arkansas that are added to the Southeast marketing

area is pooled under the Southeast order, and this milk represents

a substantial share of the total milk production that is pooled

under the Southeast market. 

Route disposition by distributing plants located within this

area would become in-area dispositions from Southeast pool

distributing plants. More than half of the dispositions from the

three plants that would become Southeast pool distributing plants

would be within the consolidated Southeast marketing area.

MIDEAST

The consolidated Mideast marketing area is comprised of the

current Ohio Valley (Order 33), Eastern Ohio-Western Pennsylvania

(Order 36), Southern Michigan (Order 40), part of the Michigan

Upper Peninsula (Order 44), and Indiana (Order 49) marketing areas

plus 6 currently unregulated Indiana counties, 2 whole and 3

partial currently unregulated Michigan counties, and 3 whole and 2

partial currently unregulated Ohio counties. There would be 301

whole and 1 partial county in this consolidated area. Three whole

and one partial currently-unregulated Ohio counties that were

proposed to be part of the Mideast area are not included.

Geography.

The Mideast market is described geographically as follows:

Indiana - 72 counties (64 currently in Order 49, 2 currently

in Order 33, and 6 currently unregulated on the western edge of

the State, just south of the northwest corner)

Kentucky - 18 counties (all currently in Order 33)

Michigan - 77 counties. Two whole and 3 partial counties

currently are unregulated. The rest of the area currently is

included in Orders 40, 44, 49, and 33. Of the total 83 Michigan

counties, only 6 in the western end of the Upper Peninsula are not

included in the consolidated Mideast marketing area.

Ohio - 84 whole and 1 partial county. Three whole and 2

partial counties to be included currently are unregulated. All of

the State currently is included in Orders 33 and 36, except for 3

partial and 6 whole counties.

Pennsylvania - 12 whole and 2 partial counties, currently in

the Order 36 area.

West Virginia - 37 counties; 20 currently in Order 33, 17

currently in Order 36.

The consolidated Mideast marketing area lies directly south

of the Great Lakes, with the State of Michigan enclosed on the

east and west sides by Lakes Huron and Michigan. On the eastern
border of the marketing area, between the Mideast and Northeast

marketing areas, is Pennsylvania State-regulated territory and the

Allegheny and Appalachian Mountains. On the northeast border is

the Western New York State order area.

The east-to-west distance across the consolidated marketing

area is approximately 450 miles, from locations on the eastern

edge of the area in western Pennsylvania to the border of Indiana

and Illinois. Northwest to southeast, from Marquette, Michigan,

in the Upper Peninsula to the northeast area of Kentucky in the

marketing area is just over 800 miles. From the northern tip of

lower Michigan to southern Indiana the more direct north-south

distance is 530 miles.

The consolidated Mideast marketing area is contiguous to 3

other consolidated marketing areas. The consolidated Central

marketing area would provide the western border of the Mideast

marketing area along the Indiana-Illinois border, and the

consolidated Appalachian area would provide the southern boundary. 

The western end of Michigan’s Upper Peninsula, part of the

consolidated Upper Midwest area, would adjoin the Mideast portion

of the Upper Peninsula.

In terms of physical geography, most of the consolidated

Mideast marketing area is at low elevations, and relatively flat. 

The climate and topography are favorable to milk production, with

dairy being the number one agricultural commodity in terms of

financial receipts in the State of Michigan in 1996. Dairy also

ranks high in terms of financial receipts in the rest of the area;

3

rd in Ohio and West Virginia, and 5th in Indiana.

Population.

According to July 1, 1997, population estimates, the total

population in the consolidated marketing area is 31 million. The

34 MSAs in the consolidated Mideast marketing area include

79.8 percent of the area’s population. Over 55 percent of the

area’s population is contained in the 8 most populous MSAs, which

each have over 950,000 people. Two-thirds of the population is

located in the states of Michigan and Ohio.

The Mideast area’s largest and 7th largest of the 34 MSAs are

located in Michigan. Detroit-Ann Arbor-Flint, with 5.4 million

population, is the largest MSA, and is located in the southeast

portion of the state between Lakes Huron and Erie. Grand RapidsMuskegon-Holland is the 7th largest Mideast MSA, is located

approximately 150 miles west-northwest of Detroit, and has a

population of 1 million. These two MSAs contain two-thirds of the

population of Michigan. There are 5 other MSAs in Michigan. Two

have approximately 450,000 population each, one has approximately

400,000 population, and the other two average approximately

160,000 apiece. Eighty-four percent of the population of Michigan

is located in these 7 MSAs, all in the lower half of southern
Michigan.

Four of the 8 largest Mideast MSAs are located in the State

of Ohio. These are: (1) Cleveland-Akron, the second-largest,

with a population of 2.9 million, located on Lake Erie in

northwestern Ohio; (2) Cincinnati-Hamilton, OH-KY-IN, the 4th

largest, with a population of 1.9 million, located in the

southwest corner of Ohio; (3) Columbus, the 6th largest, with a

population of 1.5 million, located approximately midway between

Cincinnati and Cleveland; and (4) Dayton, the 8th largest, with a

population of .95 million.

There are 6 additional MSAs in Ohio, 2 with populations of

approximately .6 million each, 1 with a population of .4 million,

and 3 that average just over 150,000 each. Eighty-two percent of

the population of Ohio is located in MSAs, most in the northern

part of the State.

The third-largest MSA in the Mideast area is Pittsburgh,

Pennsylvania, with a population of 2.4 million. Pittsburgh is 127

miles southeast of Cleveland. There are two smaller MSAs in the

Pennsylvania portion of the consolidated Mideast marketing area,

having an average population of about 200,000 each. Eighty-seven

percent of the population of the Pennsylvania portion of the

Mideast area is located in MSAs.

Indianapolis, Indiana, is the 5th largest MSA in the

consolidated Mideast marketing area, with a population of 1.5

million. Indiana contains 9 additional MSAs, 2 with populations

of .5 and .6 million, and 7 others that average 155,000

population. All but 2 of the 9 smaller MSAs are located north of

Indianapolis. Seventy-four percent of the population of the

portion of Indiana that is in the consolidated Mideast area is

located in MSAs.

The portion of West Virginia that is within the consolidated

Mideast area contains 4 MSAs, 3 of which are located on the West

Virginia-Ohio border, along the Ohio River. The population of

these MSAs averages just over 200,000. Forty-five percent of the

population of the West Virginia portion of the consolidated

Mideast area is located in MSAs.

Fluid Per Capita Consumption.

Estimates of fluid per capita consumption within the

consolidated Mideast area vary from 18.75 pounds per month for

Michigan to 20.4 pounds per month for Indiana. Use of 19 pounds

per month as a weighted average results in an estimated 589

million pounds of fluid milk consumption for the Mideast marketing

area. Mideast handlers’ route disposition within the area during

October 1997 totaled 544 million pounds, with another 36 million

distributed by 23 handlers fully regulated under other orders. An

additional 4.5 million pounds was distributed by partially

regulated handlers, producer-handlers, and handlers that would be
exempt under this rule on the basis of each having less than

150,000 pounds of route disposition per month.

Milk Production.

In October 1997, nearly 11,000 producers from 335 counties in

12 states pooled 1 billion pounds of milk on Federal Orders 33,

36, 40, 44 and 49. Over 90 percent of this producer milk came

from Mideast marketing area counties. The States of Indiana,

Michigan, Ohio and Pennsylvania supplied 95 percent of the milk

(13%, 39.6%, 30.6% and 11.9%, respectively), with 90 percent

coming from counties that would be in the consolidated Mideast

area. Just over two-thirds of the milk pooled under these orders

was produced in Michigan and Ohio counties located within the

consolidated marketing area.

Other states pooling milk on the orders consolidated in the

Mideast area were Illinois (0.5%), Iowa (0.1%), Kentucky (0.1%),

Maryland (0.4%), New York (2.7%), Virginia (0.1%), West Virginia

(1.0%), and Wisconsin (0.1%). These states contributed a total of

4.9 percent of the milk pooled on the 5 orders.

Sixty-two of the counties that had production pooled under

the five current orders supplied more than 5 million pounds of

milk each during October 1997. Six of the counties were in

northern and northeast Indiana, over 100 miles from Indianapolis;

11 were in western Pennsylvania - 7 of them within 100 miles of

Pittsburgh, and the others, including those with the most

production (10-22 million pounds), in the northwest corner of the

state, within 100 miles of Cleveland, Ohio. Twenty-eight Michigan

counties pooled more than 5 million pounds each under the 5

orders, including 14 counties with more than 10 million pounds and

4 counties with more than 20 million pounds. All of these

counties are located within 110 miles of Detroit or Grand Rapids,

the two largest MSAs in Michigan. The heaviest milk production

area of Ohio is the northeast quadrant of the State and within 50

miles of the Akron-Cleveland MSA, including 5 counties supplying

over 10 million pounds each during October 1997, and 1 county

pooling over 40 million pounds. A smaller production area in Ohio

is located in the central portion of the western edge of the State

within 80 miles of the Dayton MSA, and includes two counties with

over 10 million pounds production and 1 county with over 20

million. The only population centers of the marketing area that

do not appear to have adequate supplies of nearby milk are

Indianapolis and Cincinnati, in the southern portion of the area.

Distributing Plants.

Using distributing plant lists included in the proposed rule,

with the pooling standards adjusted to 25 percent of route

disposition as in-area sales, updated for known plant closures

through January 1998, 72 distributing plants would be expected to

be associated with the Mideast marketing area, including 51 fully
regulated distributing plants (all currently fully regulated), 4

partially regulated (all currently partially regulated), 4 exempt

plants that would have less than 150,000 pounds of total route

disposition per month (all currently fully regulated), and 13

producer-handlers (all currently producer-handlers). Since

October 1997, 5 distributing plants (1 fully regulated plant in

Indiana and 1 in Michigan; 2 partially regulated plants in

Pennsylvania; and a producer-handler in Pennsylvania), have gone

out of business.

There would be 40 distributing plants in the 8 Mideast MSA’s

that each have over a million people (including Dayton-Springfield

which has .95 million). Twenty-seven of these plants would be

pool plants -- 5 in the Pittsburgh area, 6 in the Detroit area, 4

in the Cleveland area, 3 each in the Grand Rapids, Indianapolis

and Cincinnati areas, 2 in Columbus and 1 in Dayton. Nine of the

plants in the large MSA areas would be producer-handlers, 3 would

be exempt on the basis of having less than 150,000 pounds of milk

per month in Class I route dispositions, and 1 would be partially

regulated.

Of the remaining 29 distributing plants located in the

marketing area, 18 would be located in other MSA’s as follows: 5

pool plants and 1 producer-handler in Ohio; 4 pool plants in

Indiana; 4 pool plants in Michigan; 2 pool plants in Pennsylvania;

1 pool plant in Kentucky; and 1 pool plant in West Virginia. The

ten remaining distributing plants located in the marketing area

would not be located in MSA’s. Three of these pool plants and 2

producer-handlers would be located in Michigan; 2 pool plants and

1 plant exempt on the basis of size would be located in Ohio; 2

pool plants would be located in Indiana; and 1 producer-handler

would be located in West Virginia.

There are 3 distributing plants that would be outside the

marketing area. These would be 1 partially regulated plant in

Pennsylvania, and 1 in Virginia. In addition, a small pocket of

unregulated area within Ohio would contain one partially regulated

plant.

The in-area route disposition standard, proposed to be 30

percent of route dispositions, will instead be 25 percent -- the

same percentage as in other consolidated orders. This percentage

should not result in the full regulation of any handler not

currently fully regulated unless they increase sales in the

marketing area.

Utilization.

According to October 1997 pool statistics for handlers who

would be fully regulated under this Mideast order, the Class I

utilization percentages for the Ohio Valley, Eastern Ohio-Western

Pennsylvania, Southern Michigan, Michigan Upper Peninsula, and

Indiana markets were 58, 58, 55, 89, and 70 percent, respectively. 
Based on calculated weighted average use values for (1) the

current order with current use of milk, and (2) the current order

with projected use of milk in the consolidated Mideast order, the

potential impact of this consolidation on producers who supply the

current market areas is estimated to be: Ohio Valley, a 4-cent per

cwt increase (from $13.46 to $13.50); Eastern Ohio-Western

Pennsylvania, a 4-cent per cwt decrease (from $13.51 to $13.47);

Southern Michigan, a 6-cent per cwt increase (from $13.27 to

$13.33); Michigan Upper Peninsula, a 25-cent per cwt decrease

(from $13.34 to $13.09); and Indiana, a 11-cent per cwt decrease

(from $13.52 to $13.41). The large decrease for Michigan Upper

Peninsula is a result of changing from its current individual

handler pool provisions to a marketwide pool (very little reserve

milk is pooled under Order 44 -- instead, it is pooled on the

Southern Michigan order). For October 1997, combined Class I

utilization for Orders 33, 36, 40, 44 and 49 was 58.7 percent

based on 601.6 million pounds of producer milk used in Class I out

of 1.025 billion total producer milk pounds pooled. The weighted

average use value for the consolidated Mideast market is estimated

to be $13.42 per hundredweight.

The Mideast is one of two consolidated marketing areas that

has a significantly higher-than-average percentage of its milk

used in Class II. Currently, the Southern Michigan, Ohio Valley

and Indiana markets have Class II utilization over 20 percent. 

When the markets are combined the average for the consolidated

market will be just under 20 percent.

Other Plants.

Also located within the Mideast marketing area during May

1997 were 59 supply or manufacturing plants: 1 in Charleston, West

Virginia, 4 in Pennsylvania, 18 in Michigan, 9 in Indiana and 27

in Ohio. Nine of the 59 plants are pool plants. Of these pool

plants, 6 are supply plants -- 1 manufactures primarily Class II

products, 3 manufacture primarily powder, and 2 have no primary

product, only shipping to distributing plants. Three pool plants

are manufacturing plants, manufacturing primarily cheese. Of the

50 nonpool plants in the Mideast marketing area, one is a supply

plant that manufactures primarily cheese. The other 49 nonpool

plants are manufacturing plants. In this area of high Class II

use, 28 of the nonpool plants manufacture primarily Class II

products. In addition, 1 manufactures primarily butter, 1

manufactures primarily powder, 27 manufacture primarily cheese,

and 2 manufacture primarily other products.

There are also two manufacturing plants in the currentlyunregulated area of Ohio — a nonpool plant that manufactures

primarily Class II products in the unregulated county of Erie,

Ohio and a nonpool plant that manufactures primarily cheese in the

unregulated area of Sandusky, Ohio.
Cooperative Associations.

In December 1997, 20 cooperative associations pooled member

milk under the 5 orders to be consolidated (considering Milk

Marketing, Inc., and Mid-America Dairymen, Inc., as one entity -

DFA). Two of the cooperatives pooled milk on the four principal

orders, 3 cooperatives had member milk pooled on 3 of the

principal orders, 3 cooperatives pooled milk on 2 of the principal

orders, and 12 of the cooperatives pooled milk on only one of the

orders. The percentage of cooperative member milk pooled on each

of the orders varied from 44 percent under Order 36 to 86.5

percent under Order 40. Of the total milk pooled on the 5 orders

in December 1997, 68 percent was marketed by cooperative

associations.

Criteria for Consolidation.

Overlapping route disposition, overlapping production areas,

natural boundaries, and multiple component pricing are all

criteria that support the consolidation of these current order

areas into a consolidated Mideast marketing area. Handlers who

would be fully regulated under the consolidated order distribute

approximately 90 percent of their route dispositions within the

consolidated marketing area, and 93 percent of the milk

distributed within the marketing area is from handlers who would

be regulated under the order.

Many of the counties from which milk was pooled on the

individual orders supplied milk to three or four of those orders. 

For instance, milk from a number of the same Michigan counties was

pooled on the Ohio Valley, Indiana and Southern Michigan orders;

milk from several of the same Indiana counties was pooled on the

Ohio Valley, Southern Michigan and Indiana counties; and milk from

some of the same Ohio counties was pooled on the Ohio Valley,

Indiana, and Southern Michigan orders.

The Great Lakes serve as natural boundaries on the northern

edge of the area and on the eastern and western sides of Michigan,

as do the mountains in central Pennsylvania. All of the orders

involved in the consolidated Mideast area contain multiple

component pricing provisions. Instead of the Southern Michigan

component pricing plan, proposed for the consolidated Mideast

order in the proposed rule, the same component pricing provisions

adopted for the other consolidated orders have been incorporated

in the Mideast order.

Discussion of Comments and Alternatives.

Prior to issuance of the proposed rule, alternatives to the

consolidation of the Ohio Valley, Eastern Ohio-Western

Pennsylvania, Southern Michigan, Indiana, and partial Michigan

Upper Peninsula marketing areas that were considered included 

the addition of Pennsylvania Milk Marketing Board (PMMB) Area 6 to

the consolidated Mideast area, with some consideration being given
to the addition of currently-unregulated areas of Maryland and

West Virginia, and moving the southern part of Ohio and part of

West Virginia to the Appalachian order area.

Ten comments that pertained specifically to the consolidated

Mideast marketing area were filed by 8 commenters in response to

the proposed rule. Three of the comments, from Michigan Milk

Producers Association, United Dairy, Inc., and DFA, plus a very

large number of comments that did not specifically mention the

Mideast area, addressed the inclusion of unregulated areas in

consolidated Federal order areas. The DFA comment included the

signatures of 600 producers to a “Petition to Eliminate all

Unregulated Market Areas in Pennsylvania.” Although the large

number of comments that did not specifically mention the Mideast

area were unclear about exactly what additional area should be

added to the marketing area, they appeared to favor the addition

of PMMB Area 6, with perhaps some western Maryland and West

Virginia territory, to the eastern edge of the Mideast area.

As stated in the introduction to the consolidation

discussion, consolidation of the existing orders does not

necessitate expansion of the consolidated orders into currentlyunregulated areas, especially if such expansion would result in

the regulation of currently-unregulated handlers. Therefore, PMMB

Area 6 and the unregulated portions of Maryland and West Virginia

should not be added to the consolidated Mideast order area.

Two comments from DFA recommended including Charleston, West

Virginia, and areas of West Virginia south of Charleston, as well

as the Ohio counties surrounding Cincinnati and the northern

counties of Kentucky, in the Appalachian market to help provide an

economic incentive through the expected higher blend prices to

producers to supply milk to the plants in that area. A comment by

Trauth Dairy in Newport, Kentucky, also urged the inclusion of the

northern areas of Kentucky in the Appalachian area instead of the

Mideast area. These comments are addressed in the description of

comments and alternatives considered for the Appalachian order

area.

Schneider’s Dairy suggested that a pass-through provision

similar to that of the current New York-New Jersey order be

incorporated in the Mideast order to assure that regulated

handlers distributing fluid milk products in unregulated areas

where they compete with unregulated handlers are not

disadvantaged. As discussed in the section of this decision

dealing with Northeast regional issues, Class I prices are

determined by the need to attract milk supplies to the location of

the processing plant, and not by where the fluid products are

distributed. Therefore, a pass-through provision is not

incorporated in either the Northeast order or this order.

Independent Cooperative Milk Producers Association and
Schneider’s Dairy supported the consolidation of order areas to

form the Mideast area as proposed.

UPPER MIDWEST.

The consolidated Upper Midwest marketing area is comprised of

the current Upper Midwest (Order 68) and Chicago Regional (Order

30) marketing areas, with the addition of the western portion of

the Michigan Upper Peninsula (Order 44) marketing area. There are

204 counties in this consolidated area. One partial Illinois

county proposed to be part of the Central order area has been

added to this area, and another partial Illinois county proposed

to be part of this area has been changed to the Central order

area.

Geography.

The consolidated Upper Midwest marketing area is described

geographically as follows: 15 counties in Illinois (all currently

in Order 30), 6 counties in Iowa (all currently in Order 68), 6

counties in Michigan (all currently in Zones I and IA of Order

44), 83 counties in Minnesota (all currently in Order 68), 16

counties in North Dakota (all currently in Order 68), 8 counties

in South Dakota (all currently in Order 68), and 70 counties in

Wisconsin (43 currently in Order 30, 20 currently in Order 68, and

7 currently unregulated). This market is about 600 miles east to

west and about the same distance north to south.

The area described above is contiguous to the consolidated

Central market to the south, a small corner of the consolidated

Mideast market to the southeast, and the eastern portion of

Michigan’s Upper Peninsula, also part of the consolidated Mideast

market, to the northeast. North of the Upper Midwest market is

Lake Superior and the Canadian border, and west of the market is a

large sparsely-populated and unregulated area. Most of the

eastern border of the marketing area is Lake Michigan.

The consolidated Upper Midwest marketing area is generally

low-lying, with some local differences in elevation in Wisconsin

and the upper peninsula of Michigan. Natural vegetation in the

western part of the area is tall-grass prairie, with the eastern

two-thirds of the northern portion being broadleaf forest,

coniferous forest, and mixed broadleaf and coniferous forest. 

Annual precipitation averages 30-35 inches per year. Most of the

area experiences summer temperatures that average about 75

degrees; the northern and western portions average winter

temperatures are in the low ‘teens, while the southern and more

eastern portions experience average winter temperatures in the

20's. The far western part of the market predominantly grows

mixed field crops, with cattle and soybeans more to the southwest. 

Both Minnesota and Wisconsin are included in the top five milkproducing states, and dairy is the number 1 agricultural
enterprise in Wisconsin, generating over half of the State’s

income derived from agricultural commodities. 

Population.

According to July 1, 1997, population estimates, the total

population of the consolidated Upper Midwest marketing area is

approximately 18.5 million. Using Metropolitan Statistical Areas

(MSAs), there are 3 population centers over 1 million. The

Chicago-Gary-Kenosha area, primarily in northeastern Illinois, is

the largest, with a 7.9 million population in the marketing area. 

The Minneapolis-St. Paul area, located mostly in Minnesota, is

next with 2.8 million; and the third-largest MSA is MilwaukeeRacine, Wisconsin, with a population of 1.6 million. The Chicago

area is located in the southeast corner of the marketing area, on

the west side of the southern end of Lake Michigan, with Milwaukee

approximately 85 miles north, also along Lake Michigan. 

Minneapolis is located 400 miles northwest of Chicago, along the

Minnesota-Wisconsin border.

Approximately two-thirds of the population of the

consolidated marketing area is within the three largest MSAs, with

81 percent of the population contained within the area’s 17 MSA’s

(with the 14 smaller MSAs averaging 196,000 population).

Sixty percent of the population of the market is concentrated

in the Illinois and southeast Wisconsin portion of the marketing

area. In Wisconsin, nearly 90 percent of the population is

located in the southern two-thirds of the state, and in Minnesota

85 percent of the population is in the southern half of the state.

Fluid Per Capita Consumption.

Based on the population figure of 18.5 million and an

estimated per capita fluid milk consumption rate of 20 pounds of

fluid milk per month, total fluid milk consumption in the

consolidated Upper Midwest marketing area is estimated at 370

million pounds per month. Plants that would be fully regulated

distributing plants under the Upper Midwest order had route

disposition within the market of 343 million pounds in October

1997. Handlers fully regulated under other Federal orders

distributed 43 million pounds in the consolidated marketing area

during October 1997, while partially regulated plants distributed

1.7 million pounds. Producer-handlers and exempt plants operating

in the combined marketing areas during this month had a combined

route disposition of less than .5 million pounds.

Milk Production.

In October 1997, 2.4 billion pounds of milk were associated

with the Chicago Regional and Upper Midwest markets, but only 1.6

billion pounds of milk were pooled because of class price

relationships. The 2.4 billion pounds were produced by 27,250

producers located in 13 states from Tennessee to Minnesota, and

from New Mexico to Michigan. However, over 93 percent of the
producer milk was produced within the consolidated marketing area,

and 91.4 percent was produced within the states of Wisconsin and

Minnesota. As with population density and milk plant density,

most milk production in Minnesota and Wisconsin occurs in the

southern parts of these states. Over 85 percent of Wisconsin milk

associated with the combined Chicago Regional-Upper Midwest orders

in October 1997 was produced in the southern two-thirds of the

State, while 84 percent of the Minnesota milk associated with the

two orders was produced in the southern half of Minnesota.

Fifty-two counties, 10 in Iowa, 15 in Minnesota, and 27 in

Wisconsin supplied milk to both the current Chicago Regional and

Upper Midwest orders during October 1997. The largest part of the

common production area is in Wisconsin, where 27 counties supply

25 percent of the milk associated with Order 30, and 30 percent of

the milk associated with Order 68. When data for the 52 counties

is combined, 26 percent of the Chicago Regional market and 42

percent of the Upper Midwest market is supplied by this common

production area.

Distributing Plants.

Using distributing plant lists included in the proposed rule,

with the pooling standards adjusted to 25 percent of route

disposition as in-area sales, updated for known plant closures

through December 1998, 35 distributing plants would be expected to

be associated with the Upper Midwest marketing area, including 

27 fully regulated distributing plants (2 currently partially

regulated and 25 currently pool plants), 4 partially regulated (3

currently partially regulated and 1 currently fully regulated), 1

producer-handler, and 3 exempt plants, based on distributing less

than 150,000 pounds of total route disposition per month (1 new, 1

currently partially regulated, and 1 currently unregulated). 

Since October 1997, one pool distributing plant and one partially

regulated plant have gone out of business.

There would be 6 distributing plants in the Chicago area (5

pool plants and 1 exempt plant). The Milwaukee-Racine area would

have 2 pool distributing plants. There would be 7 distributing

plants in the Minneapolis-St. Paul area (6 pool plants and 1

partially regulated plant). Of the remaining 20 distributing

plants, 16 are located in other MSAs as follows: 4 pool plants in

Minnesota, 2 pool plants and 2 partially regulated plants in North

Dakota, 1 pool plant in Illinois, and 5 pool plants, 1 partially

regulated plant, and 1 exempt plant in Wisconsin. Four of the

remaining distributing plants are not located in MSAs: 1 pool

plant and 1 exempt plant in Minnesota, 1 producer-handler in

Wisconsin and 1 pool plant in Michigan.

Utilization.

According to October 1997 pool statistics for handlers who

would be fully regulated under this Upper Midwest order, the Class
I utilization percentages for the Chicago Regional and Upper

Midwest were 29 and 19 percent, respectively. Based on calculated

weighted average use values for (1) the current order with current

use of milk, and (2) the current order with projected use of milk

in the consolidated Upper Midwest order, the potential impact of

this consolidation on producers who supply the current market

areas is estimated to be: Chicago Regional, a 3-cent per cwt

decrease (from $12.98 to $12.95), and Upper Midwest, a 2-cent per

cwt increase (from $12.89 to $12.91). The weighted average use

value for the consolidated Upper Midwest market, based on October

1997 data, is estimated to be $12.94 per hundredweight. However,

a substantial amount of milk was omitted from both pools for

October 1997 because of unusual class price relationships. Annual

Class I utilization percentages may be considered more

representative for these markets. For the year 1997, the annual

Class I utilization percentage for the Chicago Regional market was

21.5, with 18.7 for the Upper Midwest. The Class I use percentage

for the entire Michigan Upper Peninsula market, which has a

individual handler pool and represents a very small portion of the

producer milk that would be expected to be pooled under the

consolidated Upper Midwest order, was 89 percent. It is estimated

that the Class I use percentage for the consolidated order would

be in the neighborhood of 20 percent.

Other Plants.

Located within the consolidated Upper Midwest marketing area

during May 1997 were 301 supply or manufacturing plants: 1 in

South Dakota, 3 in Iowa, 28 in Illinois (12 in the Chicago area),

39 in Minnesota (over three-quarters of which are located in the

southeastern quarter of the State), and 230 in Wisconsin (over 90

percent of which are scattered throughout the southern threequarters of the state). One hundred five of the plants are pool

plants, or have a “pool side.” Eighty-five of the 105 pool plants

(1 in Iowa, 4 in Illinois, 16 in Minnesota and 64 in Wisconsin)

are “split plants;” that is, one side of a plant is a

manufacturing facility and the other side receives and ships Grade

A milk, and accounting is done separately. In most cases, the

nonpool portion of such a plant is a manufacturing operation,

primarily cheese-making. Most of the other pool plants are pool

supply plants, located primarily in Wisconsin, that ship milk to

pool distributing plants.

The 196 nonpool plants in the consolidated Upper Midwest

marketing area are manufacturing plants -- 103 manufacture

primarily cheese, 16 manufacture primarily Class II products, 15

manufacture primarily butter, 23 manufacture primarily milk

powders, and 39 manufacture primarily other products.

Also associated with the Upper Midwest order, but not within

the marketing area, are 2 pool supply plants and 6 manufacturing
plants (3 manufacturing primarily cheese, 2 making Class II

products, and 1 butter plant) in North Dakota.

Cooperative Associations.

In December 1997, 67 cooperative associations pooled member

milk on the Chicago Regional and Upper Midwest orders, providing

99 percent of the milk pooled under each of the two orders. Nine

of the cooperatives marketed milk in both orders, accounting for

nearly half of the milk pooled in the Upper Midwest (and 42.9

percent of the cooperative member milk), and 66.8 percent of the

milk pooled in the Chicago Regional market (67.5 percent of total

cooperative member milk). In the two markets, 16 cooperatives

pooled milk only under Order 30, and 42 cooperatives pooled milk

only under Order 68.

Criteria for Consolidation.

As in the proposed rule, the Chicago Regional, Upper Midwest,

and the western end of the Michigan Upper Peninsula marketing

areas should be combined into a consolidated Upper Midwest Federal

order marketing area. Although these areas do not have a

considerable degree of overlapping fluid milk disposition, they do

have an extensive overlapping procurement area. Handlers

regulated under the Chicago Regional and Upper Midwest markets

(the predominant markets in this consolidation) distribute milk

into markets further south, and approximately 10 percent of the

fluid milk distributed within the consolidated area is distributed

by handlers regulated under other orders. However, these other

orders are more closely related to markets to the south than to

the consolidated Upper Midwest order area. On that basis, it is

more appropriate to include them in other consolidated marketing

areas.

Other aspects of the consolidation also fit the criteria set

forth. The consolidated Upper Midwest area is bounded on three

sides by Lakes Michigan and Superior, the international border

with Canada, and a large unregulated area. A significant portion

of both the Chicago Regional and Upper Midwest markets’ milk is

supplied by the same cooperative associations. The two

predominant markets have identical multiple component pricing

plans, and both have large reserves of milk that normally is used

in manufactured products, primarily cheese. Approximately 90

percent of the milk used in manufacturing in these markets is used

to make cheese. The amount of cheese manufactured from milk

pooled under these milk orders is enough to supply a population 3

times greater than that of the consolidated marketing area. Fluid

milk handlers in both markets must compete with cheese

manufacturers for a milk supply, and marketing order provisions

for both markets must provide for attracting an adequate supply of

milk for fluid use.

Discussion of Comments and Alternatives.
Prior to issuance of the proposed rule, alternatives to the

consolidation of the order areas included in the Upper Midwest

marketing area that were considered included combining the Iowa,

Nebraska-Western Iowa, and Eastern South Dakota order areas with

those of the Chicago Regional and Upper Midwest areas in a

consolidated Upper Midwest order. Also considered was a

consolidation of even more marketing areas (up to 10; including

Indiana, Illinois, parts of Kentucky, Missouri, and Kansas) that

would increase the population and Class I use of the consolidated

Upper Midwest area.

Over 160 comments received in response to the proposed rule

concerned the proposed consolidated Upper Midwest marketing area. 

Nearly 140 of these comments (including approximately 120 form

letters) supported a consolidation of 10 marketing areas for the

purpose of increasing the Class I utilization of the consolidated

Upper Midwest order area to a level closer to the U.S. national

average or, at the very least, including the Iowa, Eastern South

Dakota, and Nebraska-Western Iowa marketing areas in the

consolidated Upper Midwest area.

No justification on the basis of the criteria of overlapping

sales and procurement areas could be found for any increase in a

consolidated marketing area that would be comprised of the Chicago

Regional and Upper Midwest order areas beyond the addition of the

Iowa, Eastern South Dakota, and Nebraska-Western Iowa marketing

areas. The collection of more detailed data concerning the

overlap in route disposition and milk procurement showed clearly

that those three areas are more closely related to markets to the

south than to the north, with approximately 85 percent of the

total fluid milk distributed by handlers regulated under the three

orders disposed of in the consolidated Central market.

The numerous markets recommended by upper midwest producer

groups to be consolidated with the Chicago Regional and Upper

Midwest order areas have very little distribution or procurement

overlap with those areas, aside from occasional need for reserve

milk supplies. When reserve supplies are needed by the other

markets, upper midwest milk can be, and is, pooled on the more

southern markets and shares in their pools. The potential gain of

adding areas recommended by upper midwest producer groups would be

much less than the loss to producers whose milk is pooled under

orders to be consolidated in the Central, Mideast and Appalachian

marketing areas.

Approximately 10 comments, including some from cooperative

associations representing large numbers of producers, advocated

the addition of the northeast portion of the Iowa marketing area

to the consolidated Upper Midwest area based on the extensive

overlap of producers, Class I sales, and geographic similarities

between that area and the adjoining consolidated Upper Midwest
area. An equivalent number of comments, most from Iowa interests,

argued that the consolidated Upper Midwest order should remain as

proposed. This issue is more fully discussed in the “Comments and

Alternatives” section of the description of the Central order

area, as is the assignment to consolidated areas of 3 counties,

each in its entirety, that currently are split between orders.

One comment advocated the addition of the Gary, Indiana, area

to the consolidated Upper Midwest area instead of the Mideast area

on the basis that Gary, Indiana, is part of the greater Chicago

market. This portion of the current Indiana order area

historically has been part of the Indiana marketing area, and

there is no data supporting its separation from that area. The

single pool distributing plant located in Gary has ceased to

process milk. Any distribution in the Gary area acquired by

Chicago handlers as a result will be pooled as Class I use under

the consolidated Upper Midwest order.

Based on the considerations of the most recent data

available, comments received, and the stated consolidation

criteria, limiting the extent of the consolidated Upper Midwest

marketing area to the areas of the current Chicago Regional and

Upper Midwest marketing areas, with the addition of the western

part of the Michigan Upper Peninsula marketing area, represents

the most appropriate marketing area configuration for the north

central area of the U.S.

CENTRAL.

The consolidated Central order marketing area merges the

current 9 Federal order marketing areas of Central Illinois, most

of Southern Illinois-Eastern Missouri, most of Southwest Plains,

Greater Kansas City, Iowa, Eastern South Dakota, Nebraska-Western

Iowa, Western Colorado, and Eastern Colorado (Federal orders 50,

32, 106, 64, 79, 76, 65, 134, and 137, respectively). Moving to

the consolidated Southeast marketing area are 6 Missouri counties

currently in Federal order 32 and, from Order 106, 11 northwest

Arkansas counties and 22 southern Missouri counties. Order 106

counties in Kansas and Oklahoma remain in the Central market. In

addition, some counties in Colorado, Illinois, Iowa, Kansas,

Missouri and Nebraska that currently are not part of any order

area are included in the consolidated Central market. There are

543 counties and the City of St. Louis, Missouri, in this

consolidated area. The marketing area has changed from the

proposed rule by the addition of the Western Colorado marketing

area and seven currently-unregulated Colorado counties, the

elimination of 6 currently-unregulated Missouri counties, the

addition of two partial counties and the deletion of one partial

county for the purpose of eliminating the inclusion of partial

counties.
Geography.

The consolidated Central marketing area would include the

following territory:

Colorado - 44 counties, including the 30 Colorado counties 

currently in the Eastern Colorado marketing area and the 4

Colorado counties in the Western Colorado marketing area. Ten

currently-unregulated counties, 3 in the southeast corner of the

state between the Eastern Colorado and Southwest Plains marketing

areas, and 7 in the central part of the State between the Eastern

Colorado and Western Colorado marketing areas, are added.

Illinois - 87 counties, including the 5 of the 6 counties

currently in the Iowa marketing area (of the 2 partial Illinois

counties in the Iowa marketing area, all of Whiteside and none of

Jo Daviess are included in the Central area), the 19 counties

currently in the Central Illinois marketing area, the 49 counties

currently in the Southern Illinois-Eastern Missouri marketing area

and 8 currently-unregulated adjacent counties in southern

Illinois, and 6 currently-unregulated counties in western Illinois

located between the current Central Illinois and Southern

Illinois-Eastern Missouri order areas and the Mississippi River.

Iowa - 93 counties, including the 68 counties currently in

the Iowa marketing area, the 17 counties currently in the

Nebraska-Western Iowa marketing area, the 1 county currently in

the Eastern South Dakota marketing area, 6 currently unregulated

counties in the northwestern part of Iowa, and 1 currently

unregulated county in the southeastern corner of Iowa.

Kansas - the entire State (105 counties).

Minnesota - the 4 southwestern Minnesota counties that

currently are in the Eastern South Dakota marketing area.

Missouri - 39 counties and 1 city, including 6 of the

counties and 1 city that currently are in the Southern IllinoisEastern Missouri marketing area, the 20 counties that currently

are in the Greater Kansas City marketing area, the 5 counties that

currently are in the Iowa marketing area; and 8 currentlyunregulated counties distributed around the center area proposed

to remain unregulated.

Nebraska - 66 counties in the southern and eastern parts of

Nebraska; omitting the 11 counties in the panhandle that currently

are part of the Nebraska-Western Iowa marketing area, and adding 5

currently-unregulated counties in the southwest corner of the

State between the Nebraska-Western Iowa and Eastern Colorado

marketing areas and 3 currently-unregulated counties in the

southeast corner of the State between the Nebraska-Western Iowa

and Greater Kansas City marketing areas.

Oklahoma - the entire State (77 counties).

South Dakota - the 26 eastern South Dakota counties

(including the portion of Union County that currently is in the
Nebraska-Western Iowa marketing area) that currently are in the

Eastern South Dakota marketing area.

Wisconsin - the 2 southwest Wisconsin counties that currently

are in the Iowa marketing area.

The consolidated Central marketing area is adjacent to the

consolidated Upper Midwest order area on the north and northeast,

the consolidated Mideast and Appalachian areas on the east, and

the northwest corner of the Southeast order area and the

consolidated Southwest area on the south and the consolidated

Western order area on the west. The area north of approximately

the western half of the consolidated Central area also is

unregulated. The north-south distance covered by the area is

approximately 800 miles, from Watertown, South Dakota, to Ardmore,

Oklahoma. The east-west extent of the area, from the IndianaIllinois border to the Colorado/Utah border, is approximately

1,200 miles.

Geographically, the Central marketing area includes a wide

range of topography and climate types, ranging from the Colorado

Plateau and the Rocky Mountains in the west to the central section

of the Mississippi River Valley toward the eastern part of the

area. Precipitation ranges from less than 15 inches per year in

Denver, Colorado, to more than 30 inches at St. Louis, Missouri. 

Most of the area experiences fairly hot summer temperatures, while

winter temperatures vary somewhat more than summer, with colder

winter temperatures occurring in the northern and western parts of

the Central area. The natural vegetation ranges from desert and

desert scrub in western Colorado through coniferous forest in the

Rocky Mountains to short grass prairie in eastern Colorado through

tall grass prairie in eastern South Dakota, Nebraska, Kansas and

Oklahoma, and much of Illinois; to broadleaf forest on both sides

of the Mississippi River.

Population.

According to July 1, 1997, population estimates, the total

population in the consolidated Central marketing area is

approximately 21.5 million. Using Metropolitan Statistical Areas

(MSAs), there are four population centers over 1 million. The St.

Louis, Missouri/Illinois, area is the largest, with over 2.6

million population, and the Denver-Boulder-Greeley, Colorado, area

is next with approximately 2.3 million. Kansas City,

Missouri/Kansas, has a population of 1.7 million, and Oklahoma

City, Oklahoma, is just over 1 million. Approximately thirty-five

percent of the population of the consolidated marketing area is

within these four largest MSAs, with nearly two-thirds of the

population contained within the area’s 32 MSA’s (with the 28

smaller MSAs averaging 228,559 population). The Colorado portion

of the marketing area has 91.3 percent of its population

concentrated in 5 MSA’s. The Missouri portion has 94.4 percent
concentrated in 3 MSA’s.

Fluid Per Capita Consumption.

Based on the population figure of 21.5 million and a per

capita fluid milk consumption rate of 19 pounds of fluid milk per

month (a weighted average based on state populations in the

marketing area and fluid per capita consumption estimates for each

state), total fluid milk consumption in the consolidated Central

marketing area would be approximately 408.5 million pounds per

month. Plants that would be fully regulated distributing plants

in the Central order had route disposition within the nine

marketing areas included in the consolidated Central area of 366

million in October 1997. It is likely that most of the milk

distributed within formerly unregulated areas by Central order

handlers would be distributed within the consolidated Central

marketing area. The 11 producer-handlers and 3 exempt plants

operating in the Central market during October 1997 had a combined

in-area route disposition of 3 million pounds, partially regulated

plants distributed 2 million pounds in the marketing area, and

plants that are expected to be fully regulated under other

consolidated orders distributed 59 million pounds in the Central

marketing area during October 1997.

Milk Production.

In October 1997, 996.7 million pounds of milk were associated

with the orders consolidated in the Central market (including all

of the milk pooled under Orders 32 and 106). However, because of

class price relationships in the Iowa and Nebraska-Western Iowa

markets, only 893.2 million pounds of the milk was pooled. The

996.7 million pounds were produced by 9,900 producers located in

17 states from Idaho to Kentucky, and from Texas to Minnesota. 

Three-quarters of the milk associated with the Central market was

produced within the consolidated marketing area. The states

contributing the most producer milk were, in descending order of

volume, Iowa, Colorado, Missouri, Kansas, Illinois and Oklahoma. 

However, 68 percent of the Missouri producer milk came from farms

in counties which are included in the consolidated Southeast

marketing area. These 6 States accounted for 71 percent of the

producer milk associated with the nine current orders to be

consolidated. All of the states having substantial portions of

their areas in the consolidated Central market contribute producer

milk to at least two of the current nine individual orders, with

five of the states (Iowa, Kansas, Minnesota, Missouri, and

Nebraska) supplying milk to five of the order areas each.

Distributing Plants.

Using distributing plant lists included in the proposed rule

and the pooling standards adjusted to 25 percent of route

dispositions as in-area sales, updated for known plant closures

through December 1998, 57 distributing plants would be expected to
be associated with the Central marketing area, including 35 fully

regulated distributing plants (all currently pool plants), 1

partially regulated (currently partially regulated), 3 plants

exempt on the basis of size (currently pool plants but have less

than 150,000 pounds of total route disposition per month), 13

producer-handlers (all currently producer-handlers), 1 unregulated

plant (located in the unregulated central portion of Missouri),

and 4 government agency plants (all currently government agency

plants). Since October 1997, it is known that 1 pool distributing

plant (in Illinois) and 1 partially regulated plant (in Wyoming)

have gone out of business.

There would be 10 distributing plants in the Denver area (7

pool plants and 3 producer-handlers). The Kansas City area would

have 1 pool distributing plant. The St. Louis area would have 6

distributing plants (4 pool plants, 1 exempt plant, and one

producer-handler). There would be 1 pool distributing plant and 2

producer-handlers in the Oklahoma City area. Of the remaining 37

distributing plants, 19 are located in other MSAs as follows: 1

pool plant, 1 exempt plant (on the basis of size) and 1 producerhandler in Colorado; 1 pool plant in Illinois; 4 pool plants, 1

producer-handler and 1 exempt plant in Iowa; 1 pool plant in

Kansas; 3 pool plants in Nebraska; 1 pool plant and 1 producerhandler in Oklahoma; 1 pool plant and 1 partially regulated plant

in South Dakota, and 1 pool plant in Wyoming.

Eighteen of the remaining distributing plants are not located

in MSAs. They are: 1 pool plant and 1 government agency plant in

Colorado; 4 pool plants and 1 government agency plant in Illinois;

1 pool plant and 1 producer-handler in Iowa; 1 pool plant and 1

government agency plant in Kansas; 1 unregulated and 2 producerhandlers in Missouri; 1 producer-handler in Nebraska; 2 pool

plants in Oklahoma; and 1 government agency plant in South Dakota.

Utilization.

According to October 1997 pool statistics for handlers who

would be fully regulated under this Central order, the Class I

utilization percentages for the individual markets ranged from 38

percent for the Southwest Plains market to 87 percent for the

Central Illinois market. Class I (and Class II) receipts and

utilization data for Iowa and the combination of Greater Kansas

City and Eastern South Dakota markets are restricted to protect

the confidentiality of individual handler information. Data for

Eastern Colorado and Western Colorado markets are combined in

order to mask restricted data. Combined utilization for the nine

markets would result in a Class I percentage of 50 percent. 

Based on calculated weighted average use values for (1) the

current order with current use of milk, and (2) the current order

with projected use of milk in the consolidated Central order, the

potential impact of this consolidation on producers who supply the
current market areas is estimated to be: Southern Illinois-Eastern

Missouri, a 27-cent per cwt decrease (from $13.49 to $13.22);

Central Illinois, a 50-cent per cwt decrease (from $13.56 to

$13.06); Greater Kansas City, a 69-cent per cwt decrease (from

$13.91 to $13.22); Nebraska-Western Iowa, a 10-cent decrease (from

$13.23 to $13.13); Eastern South Dakota, a 

32-cent decrease (from $13.33 to $13.01); Iowa, a 5-cent decrease

(from $13.08 to $13.03); Southwest Plains, a 70-cent increase

(from $12.94 to $13.64); Western Colorado, a 65-cent decrease

(from $13.88 to $13.23); and Eastern Colorado, an 11-cent decrease

(from $13.70 to $13.59). The weighted average use value for the

consolidated Central order market is estimated to be $13.29 per

cwt. 

Other Plants.

Located within the Central marketing area during May 1997

were 84 supply or manufacturing plants: 8 in Colorado (4 in the

Denver area), 15 in Illinois (2 in the Decatur area), 23 in Iowa

(2 in the Des Moines area and 1 in the Dubuque area), 6 in Kansas,

7 in Missouri (5 in the St. Louis area), 7 in Nebraska, 7 in South

Dakota (1 in the Sioux Falls area), 4 in Oklahoma (1 in the Tulsa

area), and 7 in Wisconsin. Twenty-two of the 84 plants are pool

plants, or have a “pool side.” Twelve of the 22 pool plants (6 in

Iowa, 1 in Nebraska, 2 in South Dakota, and 3 in Wisconsin) are

“split plants;” that is, one side of a plant is a manufacturing

facility, and the other side receives and ships Grade A milk, and

accounting is done separately. In most cases, the nonpool portion

of such a plant is a manufacturing operation, primarily cheesemaking. Of the pool plants, 8 have no primary product, but are

only shipping to distributing plants, and 6 are pooled

manufacturing plants.

Of the 62 nonpool plants in the consolidated Central

marketing area, 59 are manufacturing plants -- 24 are plants that

manufacture primarily Class II products, 3 manufacture primarily

butter, 6 manufacture primarily powder, 25 manufacture primarily

cheese, and 1 manufactures primarily other products. 

Also associated with the consolidated Central order, but not

within the marketing area, are 2 nonpool cheese plants and a

nonpool supply plant located in South Dakota.

Cooperative Associations.

Twenty-five cooperative associations pooled milk in December

1997 under the nine orders consolidated in the Central market. Of

these cooperatives, 1 pooled milk under 7 of the orders, 5

cooperatives associated producer milk with 3 orders each, and 2

others pooled milk under 2 orders each. Seventeen of the 25

cooperatives pooled milk under only one order, and for 10 of these

organizations that was the Iowa order.

The percentage of cooperative milk pooled under the eight
orders was 95, with a range of 80.7 percent cooperative milk under

the Southwest Plains order to 100 percent cooperative member milk

under the Central Illinois, Greater Kansas City and Eastern South

Dakota orders.

Criteria for Consolidation.

Most of the criteria used in determining the optimum

consolidation of order areas apply to the Central marketing area. 

The Federal order markets consolidated in the Central area are

strongly related to each other through overlapping route

disposition. The great majority of sales by handlers who would be

regulated under the consolidated Central order are distributed

within the marketing area, and the consolidated markets have a

greater relationship in terms of overlapping sales areas than with

any other markets. In addition, sales within the currentlyunregulated areas included in the consolidated Central area are

overwhelmingly from handlers that would be pooled under the

Central order. Inclusion of these areas would reduce handlers’

burden of reporting out-of-area sales and take in pockets of

currently-unregulated counties that occur between the current

order areas. As discussed above, the milk procurement areas for

the consolidated markets also have a significant degree of

overlap.

The Western Colorado order is included because the more

recent data collected for this final decision indicates that since

the proposed rule the Western Colorado marketing area has

developed a closer relationship with the Eastern Colorado market

than with any other market, even across the Continental Divide. A

benefit of combining Western Colorado with other markets is that

it is a small market where data cannot be released without

revealing confidential information unless combined with data

pertaining to another marketing area. Consolidation of the area

will allow publication of meaningful statistics without disclosing

proprietary information. In addition, several comments supported

the combination of the Western Colorado area with the consolidated

Central market in view of the large negative effect of lower

producer pay prices on the small number of producers involved if

the Western Colorado area were consolidated with the Southwestern

Idaho-Eastern Oregon and Great Basin marketing areas.

Some of the currently-unregulated counties in western

Illinois and central Missouri have been added to the Central

marketing area. The omission from the marketing area of the

counties in central Missouri that are not included in the

consolidated Central marketing area are based on an estimation of

the marketing area of Central Dairy, located in Jefferson City,

Missouri. This handler has not been previously regulated. As

discussed earlier, it is not the intent of this decision to

include currently-unregulated area in the consolidated order areas
where such inclusion would have the effect of regulating

previously-unregulated handlers.

An additional benefit of the consolidation of these nine

order areas is that data will be able to be made public without

disclosing proprietary information. Four of the current Federal

order markets (Central Illinois, Greater Kansas City, Eastern

South Dakota, and Western Colorado) included in this consolidated

area have too few pool plants to be able to publish market data

without revealing confidential information. In addition to these

three markets, the number of handlers regulated under each of the

Nebraska-Western Iowa, Iowa and Eastern Colorado orders is in the

single digits.

Discussion of Comments and Alternatives.

Prior to issuance of the proposed rule, alternatives to the

consolidation of the order areas included in the Central marketing

area that were considered included combining the Iowa, NebraskaWestern Iowa, and Eastern South Dakota order areas with those of

the Chicago Regional and Upper Midwest areas in a consolidated

Upper Midwest order. The collection of more detailed data

concerning the overlap in route disposition and milk procurement

showed clearly that these marketing areas are more closely related

to markets to the south than to the north.

Approximately 85 percent of the total fluid milk dispositions

distributed by handlers regulated under the three order areas that

were suggested to be included in the Central area in the initial

Preliminary Report, and in the Upper Midwest area in the Revised

Preliminary Report, are disposed of in the consolidated Central

market. The disposition by other Central marketing area handlers

within the consolidated Central area is somewhat greater than the

proportion for the three more northern order areas.

Also considered was the exclusion of 14 Nebraska counties, in

addition to the 11 already excluded, from the Central marketing

area to expand the unregulated area in which Gillette Dairy could

distribute milk without becoming regulated. There was no data

indicating that Gillette distributes milk in those counties. In

the early stages of the study of appropriate order consolidation,

it was assumed that the southern Missouri and northwest Arkansas

portions of the Southwest Plains order area would remain with the

rest of that area. This area was included with the consolidated

Southeast order area in the proposed rule, and remains there.

Eighteen comments that pertained specifically to the proposed

Central marketing area were filed by 17 commenters in response to

the proposed rule. Four of these comments advocated moving the

Western Colorado order area from the consolidated Western order to

the consolidated Central order. These comments expressed concern

about the expected reduction in the blend price to Western

Colorado producers under the Western order. An examination of
updated data on route dispositions and bulk milk movements

resulted in making this change which is explained in greater

detail in the description of comments and alternatives 

under the section of this decision dealing with the Western area.

A comment filed by the American Farm Bureau Federation

recommended that the central area of Missouri that was proposed to

be unregulated be included in the Central order area. A comment

filed on behalf of Central Dairy, the handler who is located and

distributes milk in the unregulated Missouri area opposed the

addition of any presently unregulated territory to Federal order

marketing areas, and specifically opposed the addition of six

currently-unregulated northeast Missouri counties into which the

handler expects to expand its distribution. There is no

intention of causing the regulation of this handler. As discussed

earlier with regard to the Northeast and Mideast marketing areas,

consolidation of the existing orders does not necessitate

expansion of the consolidated orders into currently-unregulated

areas, especially if such expansion would result in the regulation

of currently-unregulated handlers. At the same time, minimizing

the extent of the unregulated counties in the middle of the

consolidated marketing area would help to reduce the reporting

burden on handlers in determining which route dispositions are

inside, and which are outside the marketing area. The

administrative burden of verifying such reporting also would be

eliminated. Six currently-unregulated northeast Missouri counties

that were proposed to be added to the Central order area have been

removed on the basis of comments received from the Jefferson City

handler, who indicated that regulation of the six counties may

result in a change in the handler’s regulatory status. No urgency

on the part of regulated handlers having sales in the unregulated

area to include that area in the consolidated order area was

apparent from comments. In fact, none of the comments received

from affected handlers advocated that the unregulated area be

included in the consolidated area.

A comment by Gillette Dairy, a handler located in Rapid City,

South Dakota, in the former Black Hills Federal order area,

supported excluding the 11 counties of the Nebraska panhandle,

currently part of the Nebraska-Western Iowa order area, from the

consolidated Central area. Gillette has some sales in this area

and competes there with regulated handlers, but requested that the

panhandle area be excluded to lessen Gillette’s likelihood of

becoming fully regulated under the Central order. This area was

excluded in the proposed rule, and its exclusion was unopposed by

any interested persons who filed comments before the deadline for

doing so. Although Gillette’s sales in the panhandle area do not

represent an overwhelming majority of the total sales there, the

volume of sales in this sparsely-populated area should not affect
the competitive status of any regulated handlers. Therefore, the

area will be excluded from the consolidated area as proposed.

Several comments, from the Iowa Department of Agriculture,

Wells’ Dairy, and Anderson-Erickson Dairy, as well as Swiss Valley

Farms, supported the inclusion of the Iowa order area in the

consolidated Central area, stating that the attraction of a supply

of milk for fluid needs requires such a consolidation. 

Comments were received on dividing the current Iowa marketing

area by adding the eastern edge of the Iowa marketing area to the

proposed consolidated Upper Midwest order. Such a division would

result in the Swiss Valley Farms distributing plant in Dubuque,

Iowa, qualifying as a pool plant under the consolidated Upper

Midwest order (as it now does during some months under the current

Chicago Regional order). The Swiss Valley plant comprises a large

majority of the Iowa market sales in the Chicago Regional and

Upper Midwest order areas, and the movement of a half-dozen

counties would assure its pool status in the consolidated Upper

Midwest order and its location in that order area.

Comments by Lakeshore Federated Dairy Cooperative argued that

the extensive overlap of producers, Class I sales, and geographic

similarities between the northeast portion of the Iowa marketing

area and the adjoining consolidated Upper Midwest area should be

considered compelling reasons for making such a change. 

Lakeshore’s comments were supported by Prairie Farms, Foremost

Farms, and DFA. In addition, Grande Cheese Company, a Wisconsin

cheesemaker, filed comments supporting Lakeshore’s position.

In its comments, Swiss Valley argued that the 2 southwest

Wisconsin counties proposed to be included in the consolidated

Central marketing area were removed from the Chicago Regional area

and added to the Iowa area on the basis of a formal rulemaking

proceeding in the late 1980's, at which time it was determined

that the principal competition for fluid sales and milk supply in

this area occurred between Iowa handlers rather than with Chicago

Regional handlers. It is therefore Swiss Valley’s position that

the two counties should remain with the rest of the Iowa area, in

the consolidated Central marketing area.

On the basis of data gathered for this decision, the primary

source of route disposition in Grant and Crawford Counties,

Wisconsin, and Dubuque County, Iowa, is the Swiss Valley plant in

Dubuque, and most of the rest of the milk distributed in these

counties is from handlers regulated under the Chicago Regional

order. The data also shows that the Dubuque plant procures most

of its milk supply from counties that also supply milk to the

Chicago Regional and Upper Midwest orders, as well as to other

plants pooled under the Iowa order.

One of the problems in this marketing area has been the

ability of the Swiss Valley plant to choose the order under which
it is regulated. As a result of differences between the current

pool plant definitions of the two orders, Swiss Valley has been

able to switch regulation between the Iowa and Chicago Regional

orders as its price advantage shifted, and has done so frequently

during 1997 and 1998. The pool plant definitions of the

consolidated Upper Midwest and Central orders, which are very

similar, will require that the Swiss Valley plant be regulated

under the order for the area in which it has the greater volume of

route disposition.

If, under the consolidated orders, the Dubuque plant

distributes a greater share of its sales in the consolidated Upper

Midwest area than in the consolidated Central area, the plant will

be pooled under the Upper Midwest order. The only appropriate

change to be made to the current Iowa marketing area is to

eliminate the partial counties from the marketing area definitions

of the consolidated Central and Upper Midwest orders.

The Illinois Counties of Jo Daviess and Whiteside currently

are split between the Iowa and Chicago Regional order areas. More

than half of the sales in Whiteside County are supplied by Iowa

handlers (including Swiss Valley), so Whiteside County will be

located entirely within the consolidated Central area. More than

half of the sales in Jo Daviess County are supplied by Chicago

Regional handlers (not including Swiss Valley), and that county

will be located entirely within the consolidated Upper Midwest

area. The Iowa County of Mitchell currently is located in the

Upper Midwest area except for the City of Osage, which is defined

as part of the current Iowa marketing area. All of Mitchell

County will be included in the consolidated Upper Midwest area.

After considering all comments and other relevant

information, it is determined that the territory encompassed in

the Central marketing area best meets the criteria used.

SOUTHWEST.

The consolidated Southwest marketing area is comprised of the

current Texas (Order 126) and New Mexico-West Texas (Order 138)

marketing areas as well as 49 currently unregulated Texas

counties. There are 290 counties in this area. This area remains

unchanged from the proposed rule.

Geography.

The consolidated Southwest market is described geographically

as follows: three counties in Colorado (currently in Order 138),

all New Mexico counties (33, currently in Order 138) and all 254

Texas counties (162 currently in Order 126, 43 currently in Order

138, and 49 currently unregulated). Two currently unregulated

counties are located in northeast Texas, while the remaining 47

are in southwest Texas.

The Southwest market spans the south central area of the
United States. It is surrounded by Arizona on the west, Colorado

and Oklahoma on the north, Arkansas, Louisiana and the Gulf of

Mexico in the northeast, east, and southeast, and Mexico to the

south. Measuring the extreme dimensions, this market extends

about 800 miles north to south from southern to northern Texas and

about 875 miles east to west from Texas’ border with Louisiana and

Arkansas to New Mexico’s border with Arizona.

The Southwest market is contiguous to 3 consolidated

marketing areas: Arizona-Las Vegas to the west, Central to the

north and Southeast to the east. Unregulated counties in Colorado

also form a relatively small border in the northwest corner of the

market. Texas has over 350 miles of coastline on the Gulf of

Mexico, while Texas and New Mexico share about 970 miles of

boundary with northern Mexico.

In terms of physical geography, diverse topographic relief

exists in the Southwest market area, particularly in New Mexico

(ranging from deserts to high mountain ranges). Northwest New

Mexico is part of the Colorado Plateau, an area of broad valleys

and plains as well as deep canyons and mesas. The Rocky Mountains

extend into the north central area of the state. The Basin and

Range region, generally characterized by ranges or isolated

mountains interspersed with valleys, desert basins or high plains,

is located in central and southwestern New Mexico, as well as

western Texas. The Great Plains cover the eastern third of New

Mexico and extend through the Texas Panhandle in north Texas and

much of central Texas. This area is characteristically dry and

treeless and also encompasses Texas hill country and the Edwards

Plateau. The Osage Plains covers the area in Texas from the

Oklahoma-Texas border into the south central part of the state and

the low and flat West Gulf Coastal Plain covers the eastern twofifths of the state.

Climates in this region also vary. The western part of the

region, including New Mexico, southwest Texas and the Texas

Panhandle, is semi-arid to arid with wide ranges in both daily and

annual temperatures. The southern tip of Texas and the Gulf coast

are more humid and subtropical. For some of the area there are

few agricultural uses other than dairy farming. Dairy products

were the 2nd and 3rd highest revenue-producing agricultural

commodities in New Mexico and Texas, respectively, in 1996,

accounting for nearly one-third of agricultural receipts in New

Mexico, but less than 10 percent in Texas.

Population.

According to July 1, 1997, population estimates, the total

population in the consolidated marketing area is 21.3 million. 

The 26 Metropolitan Statistical Areas (MSA) in the consolidated

Southwest market account for 81.3 percent of the total market area

population. About 55 percent of the Southwest population is
located in the 4 most populous MSAs. Seven MSAs have populations

greater than 500,000; their total population is 63.4 percent of

the Southwest population. Because of the large number of MSAs in

the Southwest market, only those areas with populations greater

than 500,000 are described in detail.

Almost 92 percent of the Southwest market’s population is

located in Texas, which has 19.5 million people. Twenty-three of

the 26 Southwest market MSAs are in Texas. About 66 percent of

Texas’ population is concentrated in 6 areas, which include the

Southwest area’s top 5 population centers: the Dallas-Fort Worth

(Dallas) MSA in northeastern Texas, with a population of 4.7

million; the Houston-Galveston-Brazoria (Houston) MSA in

southeastern Texas near the Gulf of Mexico, with a population of

4.3 million; the San Antonio MSA in south central Texas, with a

population of 1.5 million; the Austin-San Marcos (Austin) MSA in

central Texas, with a population of 1 million; the El Paso MSA

located in the far western corner of Texas on the Texas-New

Mexico-Mexico border, with a population of 702,000; and the

McAllen-Pharr-Edinburg MSA located at the southern tip of Texas,

with a population of 511,000.

New Mexico’s population is about 1.7 million. The remaining

3 of the 26 Southwest market MSAs are located in New Mexico. 

About 40 percent of the state’s population is located in the

Albuquerque area, just northwest of central New Mexico.

In the remainder of the Southwest marketing area, the 3

Colorado counties have a population of about 71,000.

Fluid Per Capita Consumption.

Estimates of fluid per capita consumption vary from 17.1

pounds of fluid milk per month per person in Texas to 17.5 in New

Mexico to 18.8 in Colorado. Multiplying the individual states’

consumption rate by its population in the consolidated marketing

area results in a fluid milk consumption rate of 364.5 million

pounds of fluid milk per month for the consolidated Southwest

marketing area.

In October 1997, the fully regulated plants in Orders 126 and

138 had route distribution totaling 342.5 million pounds. Ninetyeight percent, or 328 million pounds, was distributed within the

consolidated Southwest marketing area. Handlers fully regulated

under other Federal orders had about 21 million pounds of route

distribution into the Southwest market area. Producer-handlers in

the Southwest area distributed about 5 million pounds of route

distribution in the Southwest marketing area in October 1997,

while partially-regulated plants and plants that would be exempt

on the basis of size distributed approximately .5 million pounds.

Production.

In October 1997, 1,570 producers from 144 counties in 5

states pooled 650 million pounds of producer milk on Orders 126
and 138. Over 99 percent of this producer milk came from counties

included in the consolidated Southwest marketing area. About 55

percent of the combined market’s producer milk was provided by

producers in six counties.

About 455 million pounds of milk were pooled on either Order

126 or 138 from 1,345 producers in 118 Texas counties in October

1997. Three Texas counties were among the top 6 in volume pooled: 

Erath (1st), Hopkins (4th) and Comanche (6th). Erath County --

located about 75 miles west of Dallas -- pooled 104.5 million

pounds on Order 126 (and an additional 9 million pounds on 3 other

Federal orders). Hopkins County -- located about 50 miles east of

Dallas -- pooled 34 million pounds on Order 126 and another 15

million pounds on 4 other Federal orders. Contiguous to and lying

southwest of Erath County, Comanche County pooled 33 million

pounds on Order 126 and about .5 million pounds on 3 other Federal

orders.

Of the 271 million pounds of milk pooled on either Order 126

or 138 from 185 producers in 12 New Mexico counties, 69 percent

was produced in the following three counties, all among the top 6

in volume pooled: Chaves (2nd), Dona Ana (3rd) and Roosevelt (5th). 

Chaves County -- located about 200 miles southeast of Albuquerque

-- pooled 92 million pounds on Orders 126 and 138 in October 1997

and an additional 28 million pounds on 3 other Federal orders. 

Dona Ana County, located over 200 miles south of Albuquerque,

contiguous to El Paso County, TX, and the U.S.-Mexico border,

pooled 61 million pounds of producer milk on Order 138. 

Contiguous to and lying northeast of Chaves County, Roosevelt

County pooled 33 million pounds on Orders 126 and 138 and another

6.6 million on 4 other Federal orders.

In October 1997, producer milk for Orders 126 and 138 also

originated in one of the Colorado counties in the Southwest

marketing area, and in counties in Arkansas and Oklahoma. 

However, the combined amount of producer milk pooled from these

areas is less than 1 percent of the total producer milk pooled in

these Orders.

Distributing Plants.

Using distributing plant lists included in the proposed rule,

with the pooling standards adjusted to 25 percent of route

disposition as in-area sales, updated for known plant closures

through December 1998, 31 distributing plants located in the

consolidated Southwest marketing area would be expected to be

associated with the Southwest market, including 21 fully regulated

distributing plants, 2 partially regulated, 2 exempt and 6

producer-handlers. None of these plants’ regulatory status is

expected to change as a result of the consolidation process. Of

the 21 fully regulated plants, 17 are located in the top six MSA

regions.
Since October 1997, it is known that 3 plants (2 fully

regulated and 1 producer-handler) have gone out of business. The

fully regulated plants were located in El Paso, Texas, and in

Albuquerque, New Mexico. The producer-handler was located in

Hobbs, New Mexico.

Of the 31 distributing plants that would be located in the

consolidated Southwest marketing area, 24 are in Texas, and 7 are

in New Mexico. Twenty of the Texas plants would be fully

regulated. They are as follows: 6 in the Dallas area, 3 in the

Houston area, 2 in the San Antonio area, 1 in the Austin area, and

2 in the El Paso area, and 6 located throughout the state. One

of the Texas distributing plants was associated with Order 30

(Chicago Regional) in October 1997, and is expected to be

partially regulated in the Southwest market. Two producerhandlers are located in Texas, one in the El Paso area and the

other in the central part of the state.

Just over half of New Mexico’s 7 distributing plants are

located in the Albuquerque area. One fully regulated handler and

3 producer-handlers are located in this population center. Of the

remaining 3 plants located in New Mexico, there are 2 plants that

would be exempt on the basis of size (both located in central New

Mexico) and 1 producer-handler (located southeast of Albuquerque).

Utilization.

According to October 1997 pool statistics, the Class I

utilization percentages for the Texas and New Mexico-West Texas

markets were 56 and 44 percent, respectively. Based on calculated

weighted average use values for (1) the current order with current

use of milk, and (2) the current order with projected use of milk

in the consolidated Southwest order, the potential impact of this

consolidation on producers who supply the current market areas is

estimated to be: Texas, a 5-cent per cwt decrease (from $14.09 to

$14.04), and New Mexico-West Texas, a 10-cent per cwt increase

(from $13.51 to $13.61). The weighted average use value for the

consolidated Southwest order market is estimated to be $13.97 per

cwt. For October 1997, combined Class I utilization for Orders

126 and 138 was 53.4 percent based on 347.0 million pounds of

producer milk used in Class I out of 649.9 million total producer

milk pounds.

Other Plants.

Located within the Southwest marketing area during May 1997

were 17 manufacturing plants: 11 in Texas (2 in the Dallas MSA

and 1 in the El Paso MSA) and six in New Mexico. Six of the 17

plants were pool plants. All of these pool plants were

manufacturing plants -- one manufactured primarily Class II

products, two manufactured primarily powder, two manufactured

primarily cheese and one manufactured primarily other products. 

Of the 11 nonpool plants in the Southwest marketing area, all were
manufacturing plants -- one manufactured primarily powder, four

manufactured primarily cheese, one manufactured primarily other

products and five manufactured primarily Class II products.

Cooperative Associations.

In December 1997, three cooperative associations marketed

about 95 percent of the milk pooled under both of the orders

consolidated in the Southwest area: Dairy Farmers of America

(DFA); and Select Milk Producers, Inc. (Select); and Elite Milk

Producers, Inc. (Elite).

Criteria for Consolidation.

Nearly all of the route disposition by Order 126 and 138

handlers is distributed within the consolidated marketing area. 

In addition, nearly all of the milk that would be pooled under the

consolidated order, based on October 1997 data, originates within

the marketing area. Two cooperatives market the vast majority of

milk within the consolidated area.

Discussion of Comments and Alternatives.

Prior to issuance of the proposed rule, alternatives to the

consolidation of the Texas and New Mexico-West Texas order areas

that were considered included the consolidation of east Texas with

the Southeast area. This alternative consolidation was examined

at length and found to have little overlap of either fluid milk

product disposition or producer milk movements.

Only one comment pertained specifically to the consolidated

Southwest marketing area. This was a comment from DFA that

discussed general support for the marketing areas proposed by

USDA, with no objection to the Southwest marketing area, as

proposed.

ARIZONA-LAS VEGAS.

The consolidated Arizona-Las Vegas marketing area is

comprised of the current Central Arizona (Order 131) marketing

area, one county in Nevada which currently is in the Great Basin

(Order 139) marketing area, and currently unregulated counties in

Arizona. There are 16 counties in this consolidated marketing

area. This area remains unchanged from the proposed rule.

Geography.

The Arizona-Las Vegas market is described geographically as

follows: All counties (15) in Arizona (6 whole and 1 partial

currently are part of Order 131, and 8 whole and 1 partial

currently are unregulated) and Clark County, Nevada, which

currently is part of the Great Basin marketing area. The market

extends about 400 miles north to south from Arizona’s border with

Utah (and Nevada’s southernmost county) to the U.S.-Mexico border. 

The market ranges from 300 to 375 miles east to west from the

Arizona-New Mexico border to the Arizona/southern NevadaCalifornia border. 
The Arizona-Las Vegas marketing area is contiguous to two

other consolidated marketing areas, the Great Basin portion of the

Western area to the north and the New Mexico-West Texas portion of

the Southwest area to the east. California, which is not part of

the Federal order system, lies to the west and Mexico is south of

this marketing area.

Arizona can be divided into three geographic regions -- the

Sonoran Desert, in the southwest; the Colorado Plateau, in the

north; and the Mexican Highland, mainly in the central and

southeastern parts of the state. With each of these regions,

three distinct climatic zones exist: the Sonoran Desert is hot in

the summer but can experience frost in the winter; the Colorado

Plateau is hot and dry in the summer and cold and windy in the

winter; and the Mexican Highland receives significant

precipitation in both summer and winter. This region is cooler in

both summer and winter than the Sonoran Desert region.

These topographical and climatic conditions apparently are

conducive to milk production. Dairy products represent one of the

principal agricultural commodities (2nd and 3rd) in the States of

Arizona and Nevada, respectively, representing 16.6 and 21.7

percent of total agricultural receipts of the two States in 1996.

Population.

Arizona is one the fastest-growing states in the United

States. According to July 1, 1997, population estimates, the

total population in the consolidated marketing area is 5.7

million. Using Metropolitan Statistical Areas (MSAs), the largest

population center is the Phoenix-Mesa (Phoenix) area, located in

central Arizona approximately 125 miles north of the U.S.-Mexico

border in the Sonoran Desert region. About 250 miles to the

northwest of Phoenix is the Las Vegas, Nevada, area, the secondlargest population center in this marketing area. The Las Vegas

MSA is comprised of three counties: Clark and Nye counties in

Nevada and Mohave County in Arizona. Almost half of this market’s

population is in the Phoenix area, and over 70 percent is

accounted for when Las Vegas is added.

Fluid Per Capita Consumption.

Based on the population figure of 5.7 million and an

estimated per capita fluid milk consumption rate of 20 pounds of

fluid milk per month, total fluid milk consumption in the ArizonaLas Vegas marketing area is estimated at 114 million pounds per

month. In October 1997, plants that would have been fully

regulated distributing plants in the Arizona-Las Vegas order had

route disposition within the market of approximately 95 million

pounds, representing 94 percent of their route disposition. 

Another 6.5 million pounds of milk was distributed in the

consolidated marketing area by 2 handlers expected to be fully

regulated under the consolidated Western Federal order and by 10
California plants that are partially regulated under the Central

Arizona and Great Basin orders.

Milk Production.

In October 1997, almost 196 million pounds of milk was pooled

in the Central Arizona market, supplied by over 100 producers

located in fewer than 10 counties in Arizona and California. Over

95 percent of the Central Arizona milk was produced within the

marketing area. Further, over 90 percent of the producer milk

produced within the Order 131 area was produced in Maricopa

County, Arizona, where Phoenix, this market’s largest city, also

is located. With 177 million pounds of producer milk for October

1997, Maricopa County produces almost twice the amount of milk

required to meet the fluid milk needs of the entire marketing

area. Arizona producers did not supply milk to any other Federal

order; however, it is known that producer milk moves from both

Arizona and Clark County, Nevada, to southern California. These

figures do not reflect the producer milk associated with Anderson

Dairy, the Las Vegas handler who has been pooled on Order 139. 

There is only one producer located in Clark County, Nevada. 

Anderson’s milk supply comes from a cooperative association in

southern California.

Distributing Plants.

Using distributing plant lists included in the proposed rule,

with the pooling standards adjusted to 25 percent of route

disposition as in-area sales, updated for known plant closures

through December 1998, 8 distributing plants would be expected to

be associated with the consolidated Arizona-Las Vegas marketing

area, including 5 fully regulated distributing plants (all

currently pool plants), 1 exempt plant and 2 producer-handlers. 

There are 4 distributing plants in the Phoenix area (all pool

plants). Located in the Las Vegas MSA are one pool plant and a

producer-handler. Another producer-handler is located in the Yuma

area and the exempt plant is located in a currently-unregulated

Arizona county, and has total route disposition of less than

150,000 pounds. All of the plants that are expected to be fully

regulated under this consolidated order are located in areas that

contain over 70 percent of the market’s population.

Utilization.

According to October 1997 pool statistics, the Class I

utilization for the Central Arizona market was 46 percent. Due to

restricted information, this calculation excludes receipts for the

Las Vegas handler who currently is regulated under Order 139, but

would be regulated under this order. Because the degree of

consolidation for this market is very minor, little change in the

Class I utilization percentage, and thus little change in producer

returns, is expected in the Arizona-Las Vegas area as a result of

the consolidation. For October 1997, Class I utilization for the
Central Arizona market was 46.3 percent based on the use of 90.8

pounds of producer milk in Class I out of 195.9 total pounds of

producer milk. The weighted average use value for the Arizona-Las

Vegas market is estimated to be $13.84 per hundredweight.

Other Plants.

For May 1997, 3 supply or manufacturing plants were located

within the Arizona-Las Vegas marketing area: 2 in Arizona (both

in the Phoenix area) and 1 in Nevada (in the Las Vegas area). One

Arizona plant was a pool plant operated by the cooperative,

manufacturing primarily cheese, while the other plants were

nonpool plants manufacturing primarily Class II products.

Cooperative Associations.

For December 1997, the only cooperative pooling milk under

the Central Arizona order was United Dairymen of Arizona, which

represented over 90 percent of the milk pooled under the Central

Arizona order. Security Milk Producers Association, a cooperative

based in California, supplies milk to the Las Vegas handler.

Criteria for Consolidation.

Market data indicate that there are sales into the Las Vegas

area by Central Arizona pool plants, and sales by both Phoenix and

Las Vegas handlers into the unregulated areas along the southern

part of the Nevada-Arizona border. Rapid population growth in the

area between the two areas has greatly increased competition

between the handlers in Phoenix and Las Vegas. In addition, both

areas exchange significant volumes of bulk and packaged milk with

Southern California. At the same time, the strength of the

earlier relationship between the Las Vegas area and Utah clearly

has declined since the merger of the Lake Mead and Great Basin

order areas in 1988, which was based on data compiled up to 1986.

The Grand Canyon serves as a natural barrier in northwestern

Arizona between this area and Great Basin. Although the actual

consolidated order area extends to the Utah border, the portion of

Arizona between the Grand Canyon and Utah is very sparsely

populated, and is included in the consolidated marketing area

primarily for the purpose of simplifying the marketing area

description and easing handlers’ burden of reporting out-of-area

sales. The Colorado River forms much of the western boundary with

California and Nevada. A north-south strip along the eastern edge

of Arizona constituting approximately 30 percent of the State’s

territory is very sparsely populated, containing just over 5

percent of the population of the consolidated marketing area. 

This lightly populated desert area can be seen as another form of

natural barrier to the movement of bulk and packaged milk.

Discussion of Comments and Alternatives.

Prior to issuance of the proposed rule, alternatives to the

consolidation of the Central Arizona marketing area and the

southern Nevada portion of the Great Basin order area included
retaining the Las Vegas area with the rest of the current Great

Basin order area in the consolidated Western marketing area.

Twelve comments that pertained specifically to the proposed

Arizona-Las Vegas area were filed by 10 commenters in response to

the proposed rule. Anderson Dairy in Las Vegas advocated that

Clark County, Nevada, in which Las Vegas is located, be left out

of any consolidated marketing area to better enable Anderson to

compete with milk distributed from California and from the Salt

Lake City area. Two comments from the Nevada Dairy Commission,

suggesting that prices could be set within the State, and from a

U.S. Senator from Nevada, requested that Clark County be excluded

from any Federal order marketing area. Security Milk Producers

Association, a cooperative that supplies milk to Anderson, first

filed a comment supporting the proposed Arizona-Las Vegas area,

and then filed a later comment urging that if Clark County cannot

be deregulated and California does not become a Federal order,

Clark County should be reunited with the rest of the consolidated

Western order area. A commenter in the southern Nevada dairy

industry supported the cooperative’s view.

A comment from DFA suggested that the Great Basin marketing

area be consolidated with the proposed Arizona-Las Vegas area

rather than the proposed Western area, arguing that the

price/utilization relationships of the Great Basin area are more

similar to the Arizona-Las Vegas area than to the rest of the

Western area. Darigold, Inc., urged that Las Vegas be reunited

with Utah due to its proximity to the major production areas in

Utah. Darigold suggested that if there is a linkage between the

Phoenix and Las Vegas markets, those areas both should be included

in the Western area.

A comment filed by the American Farm Bureau Federation

recommended that the consolidation of the Central Arizona and

Clark County areas be reconsidered in favor of a return to the

consolidation of the Central Arizona area with the Southwest area,

suggested in the Initial Preliminary Report on Order

Consolidation. 

A comment filed by the Dairy Institute of California

supported the consolidation of the Las Vegas area with Arizona

because such a combination would eliminate competitive distortions

between these areas and California caused by the Las Vegas raw

milk price levels. The Utah Farm Bureau stated that it does not

oppose removing the Clark County, Nevada, area from the Great

Basin order area and combining it with Arizona.

An increase in sales by Central Arizona pool plants into the

Las Vegas area, and increased sales by both Phoenix and Las Vegas

handlers into the unregulated area of rapidly-increasing

population along the southern part of the Nevada-Arizona border,

are factors that have greatly increased overlapping route
distribution in these two areas. Mohave County, Arizona

(currently-unregulated), and Clark County, Nevada, are two of the

fastest-growing areas in the United States in terms of population. 

These two counties adjoin each other in southern Nevada and

northwestern Arizona, and both are increasing in population

significantly faster than the growth rates for their states. From

1990 to 1997, a period during which the population of the United

States increased by 7.6 percent, the population of Arizona

increased by 24.3 percent, while Mohave County’s population

increased by 37.8 percent. Over the same period, Clark County,

Nevada, experienced a population increase of 49.2 percent, while

the Nevada population increased by 39.5 percent. The rapidlygrowing area between Phoenix and Las Vegas represents a growing

market which can be expected to be served by both of the major

population centers.

 Ninety-five percent of the route dispositions of handlers who

would be regulated under this order were distributed within the

consolidated marketing area in October 1997, and approximately the

same percentage of route disposition within the marketing area was

by handlers who would be regulated under this consolidated order. 

Similarly, over 95 percent of the milk pooled under the current

Central Arizona order is produced within the marketing area, and

there is no indication of movements of producer milk between Utan

and Nevada, as was the case when the Great Basin and Lake Mead

orders were merged.

In addition, both areas exchange significant volumes of bulk

and packaged milk with Southern California, a relationship that

does not pertain to any of the other areas in the region. The Las

Vegas area’s earlier relationship with southern Utah was based

primarily on Utah as an important milk supply area for Las Vegas

at the time of the merger of the Lake Mead and Great Basin order

areas in 1988. That relationship clearly has ceased to exist. 

Therefore, the assertion by commenters that the Las Vegas, Nevada,

area should continue to be included in the same marketing area

with Utah or be unregulated does not reflect current marketing

conditions.

WESTERN.

The consolidated Western marketing area is comprised of the

current Southwestern Idaho-Eastern Oregon (Order 135) and Great

Basin (Order 139) marketing areas, less one Nevada county (Clark)

in Order 139 that is added to the Arizona-Las Vegas marketing

area. There are 67 counties in this consolidated area. The

Western Colorado (Order 134) marketing area, proposed to be part

of the Western consolidated area, was changed to become part of

the Central consolidated area.

Geography.
The Western market is described geographically as follows: 

28 counties in Idaho (18 currently in Order 135 and 10 in Order

139), 3 in eastern Nevada (all currently in Order 139), 5 in

eastern Oregon (all currently in Order 135), all counties (29) in

Utah (currently in Order 139) and 2 in the southwest corner of

Wyoming (currently in Order 139). Measuring the extreme

dimensions, this market extends about 625 miles north to south

from Oregon and Idaho to Utah’s boundary with Arizona. This

market’s east-to-west dimension is approximately 550 miles from

the westernmost edge in central/eastern Oregon to the easternmost

edge o the Utah/Colorado border. 

The consolidated Western marketing area is contiguous to four

of the consolidated marketing areas, the Pacific Northwest to the

west and north of the Oregon portion of this market, Arizona-Las

Vegas to the south, the Central market on the east, and the

Southwest to the extreme southeast corner. Non-Federally

regulated territory borders the Western market on the westsouthwest (Nevada) and the north-northeast (Idaho and Wyoming). 

In terms of physical geography, the Western marketing area

has several regions: the Columbia Plateau in southern Idaho and

northeastern Nevada, characterized by fertile soils; the Great

Basin in southeast Idaho, nearly all of Nevada and the western

third of Utah, described by ranges and parallel valleys; and the

Colorado Plateau in the eastern half of Utah, characterized by

gorges. In general, the Western market is quite dry, with

temperatures tending to be extreme and affected by elevation.

Population.

According to July 1, 1997, population estimates, the total

population in the consolidated marketing area is 3.2 million. 

Using Metropolitan Statistical Areas (MSAs), the largest

population center is the Salt Lake City-Ogden, Utah area (Salt

Lake City). Salt Lake City is located in north central Utah. The

Boise City, Idaho, area (Boise), the second largest population

center in this marketing area, is located about 300 miles to the

northwest of Salt Lake City. Provo-Orem, Utah, (Provo) the third

largest population center, lies 40 miles south of Salt Lake City. 

Forty percent of the market’s population is in the Salt Lake City

area, and over 60 percent is accounted for when Boise and Provo

are added.

Fluid Per Capita Consumption.

Based on the population figure of 3.2 million and an

estimated per capita fluid milk consumption rate of 23 pounds of

fluid milk per month, total fluid milk consumption in the Western

marketing area is estimated at 73.6 million pounds per month. 

Plants that would have been fully regulated distributing plants in

the Western order had route disposition within the market of 74

million pounds in October 1997; approximately 80 percent of this
total is from Order 139 pool plants. The 7 producer handlers

operating during this month had a combined route disposition of

1.6 million pounds. Additionally, 1.1 million pounds of route

disposition came from other order plants, with about .5 million

from partially regulated handlers and exempt plants. 

Milk Production.

In October 1997, over 457 million pounds of milk was

associated with the Great Basin and Southwestern Idaho-Eastern

Oregon markets, but only 304 million pounds of this milk was

pooled because of class price relationships. The 457 million

pounds of milk were produced by 952 dairy farmers located in 51

counties in California, Idaho, Nevada, Oregon, Utah and Wyoming. 

Over 95 percent of the milk associated with the market was

produced within the marketing area. Four counties produced more

than 50 percent of the milk available to be pooled. The three top

producing counties in Idaho, Jerome, Gooding and Twin Falls

counties, are all located in southwestern Idaho, about 130 miles

southeast of Boise and 230 miles northwest of Salt Lake City. 

Jerome and Gooding counties each provided approximately twice as

much milk as Twin Falls County, the third-largest county in terms

of milk production in the Western market. The fourth-largest

production county was Cache County in northeastern Utah, located

about 80 miles north of Salt Lake City. 

The three Idaho counties, part of the marketing area of the

current Southwestern Idaho-Eastern Oregon order, are the top three

milk-producing counties for Order 135 and among the top seven

milk-producing counties for Order 139 in October 1997. Five

counties in the current Southwestern Idaho-Eastern Oregon

marketing area supplied one-quarter of the milk associated with

the Great Basin order in October 1997.

Distributing Plants.

Using the distributing plant list included in the proposed

rule, with the pooling standards adjusted to 25 percent of route

disposition as in-area sales, updated for known plant closures

through December 1998, 25 distributing plants would be expected to

be associated with the Western marketing area, including 11 fully

regulated distributing plants (all currently pool plants), 2

partially regulated (currently partially regulated), 1 exempt

plant based on size (currently a pool plant), 7 producer-handlers,

and 4 exempt plants based on institutional status (all were exempt

as defined under current federal orders). Since October 1997, it

is known that 2 distributing plants (1 fully regulated and 1

exempt plant) in Utah and 1 producer-handler in Arizona have gone

out of business.

There would be 9 distributing plants in the Salt Lake City

area (5 pool plants, 2 producer-handlers and 2 exempt plants). 

The Boise area would have 2 pool distributing plants, the Provo
area would have 1 exempt plant and the Pocatello area would have 1

pool plant. The remaining 12 distributing plants are located in

Idaho (4 plants: 2 pool, 1 exempt, and 1 producer-handler),

Nevada (1 partially regulated plant), and Utah (7 plants: 1 pool,

1 partial, 1 exempt, 4 producer-handlers). 

Fully regulated distributing plants are located in MSAs

containing about half of the consolidated market’s population,

including the Pocatello, Idaho, MSA, with 2.2 percent of this

market’s population.

Utilization.

According to October 1997 pool statistics, the Class I

utilization percentages for the Southwestern Idaho-Eastern Oregon

and Great Basin markets were 16 and 41 percent, respectively. 

Based on calculated weighted average use values for (1) the

current order with current use of milk, and (2) the current order

with projected use of milk in the consolidated Western order, the

potential impact of this market consolidation on producers who

supply the current market areas is estimated to be an 11-cent per

cwt increase (from $12.92 to $13.03) for Southwestern IdahoEastern Oregon, and a 9-cent per cwt decrease (from $13.25 to

$13.16) for Great Basin. The weighted average use value for the

consolidated Western order market is estimated to be $13.14 per

cwt. For October 1997, combined Class I utilization for Orders

135 and 139 was 32.5 percent based on 98.8 million pounds of

producer milk used in Class I out of 304.1 million total producer

milk pounds.

A substantial amount of milk was omitted from the

Southwestern Idaho-Eastern Oregon pool for October because of

unusual price relationships. The annual Class I utilization

percentage may be considered more representative for this market. 

For the year 1997, the annual Class I utilization for Southwestern

Idaho-Eastern Oregon was 8.3 percent. It is estimated that the

Class I use percentage for the consolidated market would be about

23 percent.

Other Plants.

Eighteen supply or manufacturing plants were located within

the consolidated Western marketing area during May 1997: 8 in

Idaho (3 in the Boise area), 9 in Utah (2 in the Salt Lake City

area) and 1 in Wyoming. Two of the 18 plants were pool plants;

both manufacture primarily cheese. Of the 16 nonpool plants, 12

manufacture primarily cheese and 5 manufacture primarily soft or

Class II products (including ice cream). Of the 8 Idaho plants,

all but one manufacture cheese, while of the 9 Utah plants, 6

manufacture cheese and 3 manufacture soft products.

Cooperative Associations.

For December 1997, four cooperatives representing 77 percent

of the milk pooled under the two orders had membership in the
consolidated Western marketing area. Western Dairymen

Cooperative, Inc., a cooperative association that became part of

Dairy Farmers of America, Inc., had membership in both the

Southwestern Idaho-Eastern Oregon and Great Basin marketing areas. 

Magic Valley Quality Milk Producers, Inc., also had membership in

Orders 135 and 139; Darigold Farms had membership in Order 135,

and Security Milk Producers’ Association had membership in Order

139.

Criteria for Consolidation.

The consolidated Western market is composed of the current

marketing areas of the Southwestern Idaho-Eastern Oregon and Great

Basin markets, minus the Clark County, Nevada, portion of the

Great Basin area. Sales overlap exists between Southwestern

Idaho-Eastern Oregon and Great Basin, as well as a significant

overlap in procurement for the two orders in Idaho. The two

orders also share similar multiple component pricing plans. The

Western Colorado order, proposed for inclusion in the Western

area, was shown on the basis of October 1997 data to have

developed a closer relationship with the Eastern Colorado area

than with the Great Basin order, and has been included in the

consolidated Central area instead of the Western area.
Discussion of Comments and Alternatives.

Prior to issuance of the proposed rule, alternatives to the

consolidation of the Southwestern Idaho-Eastern Oregon, Great

Basin (minus Clark County, Nevada) and Western Colorado marketing

areas that were considered included leaving the Southwestern

Idaho-Eastern Oregon area as a separate order and consolidating

the Great Basin market with the Central Arizona, Western Colorado,

and Eastern Colorado marketing areas, leaving both the

Southwestern Idaho-Eastern Oregon and Great Basin areas as

separate order areas, and combining the Western Colorado area with

the Eastern Colorado area and other areas to the east. These

alternative consolidations were examined at length and found to be

less appropriate than the marketing areas delineated in the

proposed rule in terms of overlap of either fluid milk product

disposition or producer milk movements.

Fifteen comments that pertained specifically to the proposed

Western marketing area were filed by 12 commenters in response to

the proposed rule. Several of these comments objected to the

separation of the Las Vegas area from the Great Basin portion of

the Western area. These comments are addressed in the discussion

of comments and alternatives considered for the consolidated

Arizona-Las Vegas area.

Comments filed by Dairy Farmers of America, Southern Foods

Group, and a western Colorado dairy farmer advocated consolidating

the Western Colorado order area with the consolidated Central area

instead of the Western area. DFA’s comment stated that the

Western Colorado milkshed is more similar to the Central area than

to the Western area. The comments filed by Southern Foods Group

and the dairy farmer expressed concern about an expected reduction

in the blend price paid to producers supplying the Western

Colorado area.

October 1997 data show an increased relationship between

Western Colorado and Eastern Colorado, and reduced milk movements

between Western Colorado and Great Basin. On the basis of the

change in the relationships between Western Colorado and its two

nearest neighbor order areas, the Western Colorado area should

become part of the consolidated Central area instead of the

Western area.

Five Farm Bureau organizations (Michigan, Utah, Iowa, Ohio

and American), a Pennsylvania producer and Dairy Farmers of

America filed eight comments opposing the consolidation of the

Southwestern Idaho-Eastern Oregon order area with the Great Basin

marketing area. One DFA comment suggested combining Utah with the

Arizona-Las Vegas area instead of with Idaho. A primary basis for

opposition to the consolidation is the disparity in the two

regions’ utilization of Class I fluid milk: the Southwestern

Idaho-Eastern Oregon order has a very low percentage of Class I
use, which varies from less than 10 percent to over 20 percent,

while the Great Basin order’s Class I use percentage is higher at

about 35 percent. Commenters fear that the consolidation of these

orders would result in lower returns to producers who currently

are pooled under the Great Basin order. Most of the comments

suggest that the Southwestern Idaho-Eastern Oregon marketing area

should remain under a separate order.

A major source of milk production for both the Southwestern

Idaho-Eastern Oregon and Great Basin orders is a 5-county area

located within the Federal order 135 marketing area, supplying

one-quarter of the milk pooled on the Great Basin order in October

1997. The Southwestern Idaho-Eastern Oregon area should be

consolidated with some other order area because of the small

number of handlers pooled under the order, and this close

relationship with Great Basin makes that consolidation the only

viable possibility.

PACIFIC NORTHWEST.

The Pacific Northwest marketing area is comprised of the

current Pacific Northwest (Order 124) marketing area and one

currently-unregulated county in southwest Oregon. There are 75

counties in this marketing area. This area remains unchanged from

the proposed rule.

Geography.

The Pacific Northwest market is described geographically as

follows: All counties (39) in Washington, 30 counties in Oregon

(29 currently are part of Order 124 and one, Curry County, is

unregulated) and six counties in northwestern Idaho. The market

extends about 490 miles north-to-south from Washington’s northern

border with the Canadian province of British Columbia to Oregon’s

southern border with California and Nevada. East-to-west, the

market ranges from about 450 miles in the northern half of the

market (covering territory from Washington’s western boundary with

the Pacific Ocean to the eastern border of Idaho with Montana) to

about 250 miles in the southern half of the market (covering

approximately two-thirds of Oregon from the state’s western border

with the Pacific Ocean to central Oregon).

The Pacific Northwest marketing area is contiguous with the

consolidated Western Federal order marketing area in eastern

Oregon. The remainder of the marketing area is surrounded by

currently non-Federally regulated areas (California and

northwestern Nevada to the south and Montana, Idaho, and one

northeastern Oregon county to the east), political boundaries

(Canada to the north), and the Pacific Ocean to the west.

Along the Oregon and Washington coasts lies the Coast Range. 

The Cascade Range is located further inland in both states. Both

ranges are north-south in direction, and the Cascade Range
effectively divides both states into two distinct climates: a

year-round mild, humid climate with abundant precipitation

predominates in the western part of the states, and a dry climate

with little precipitation but greater temperature extremes

prevails east of the Cascade Range. The mild climate of the

western portion results in longer growing seasons. The Columbia

River flows south through eastern Washington, turns west, and

becomes the western two-thirds of the border between Oregon and

Washington. The portion of Idaho included in the Pacific

Northwest marketing area is within the Rocky Mountains. This area

has a generally continental climate with the higher elevations

having long and severe winters.

Much of the area is conducive to the production of milk and

many other agricultural commodities. Although dairy products

ranked 2nd among receipts of agricultural commodities in the State

of Washington in 1996, and 4th in Oregon, they accounted for only

13.8 percent and 7.9 percent, respectively, of such receipts. 

Apples (in Washington) and greenhouse/nursery, wheat, and cattle

and calves (in Oregon) ranked ahead of dairy, accounting for 19.8

percent and 33.8 percent, respectively, of agricultural commodity

receipts.

Population.

According to July 1, 1997, population estimates, the total

population in the marketing area is 9 million. Seventy-seven

percent of the marketing area population is located in

Metropolitan Statistical Areas (MSAs). The two largest MSAs are

located on the western side of the Cascade Range. The SeattleTacoma-Bremerton (Seattle) area, with a population of 3.4 million

(37.6% of the marketing area population), is in northwestern

Washington. Over seventy percent of the population of the State

of Washington is located west of the Cascade Mountains, in the

western third of the State. Another 14.5% of the State’s

population is contained in 3 MSA’s east of the Cascades.

The Portland-Salem (Portland) area in northwestern Oregon is

located on the Oregon-Washington border, with Portland just south

of the Columbia River. The population of this MSA is 2.1 million,

or 23.6% of the marketing area population. Ninety percent of the

population of Oregon is concentrated in the western one-third of

the State, or in the western half of the Oregon portion of the

marketing area.

Fluid Per Capita Consumption.

Based on the population figure of 9 million and an estimated

per capita fluid milk consumption rate of 22 pounds of fluid milk

per month, total fluid milk consumption in the Pacific Northwest

marketing area is estimated at 198 million pounds per month. For

October 1997, plants that would be fully regulated distributing

plants under the Pacific Northwest order had route disposition
within the market of 170 million pounds. In addition, the 18

producer-handlers operating during this month had a combined route

disposition of 18 million pounds. Additionally, slightly over 1

million pounds of route disposition (less than one percent of

total route disposition in the marketing area) came from handlers

outside the market. Because the handlers associated with this

market are able to fulfill the market’s Class I or fluid needs,

and because of the somewhat geographic isolation of the market,

maintaining the current Pacific Northwest order as a separate

market is appropriate.
Milk Production.

In October 1997, the 540 million pounds of milk pooled in the

Pacific Northwest market were produced by 1,211 producers located

in 57 counties in California, Idaho, Oregon, and Washington. Five

counties produced 57 percent of the milk pooled. Four of these

counties are in Washington State. They are Whatcom, Skagit, and

Snohomish counties, which are less than 100 miles north of

Seattle; and Yakima County, which is located in central Washington

about 100 miles southeast of Seattle on the eastern side of the

Cascade Range. The fifth county is in Oregon. It is Tillamook

County, which borders the Pacific Ocean, about 60 miles west of

the Portland area on the western side of the Coast Range.

Less than two percent of the milk pooled in the Pacific

Northwest was produced outside of the marketing area, in Idaho and

California. The largest portion is from producers in two northern

California counties who pooled nearly 6 million pounds of milk or

89.8 percent of the pooled milk produced outside the Pacific

Northwest marketing area.

Distributing Plants.

Using distributing plant lists included in the proposed rule,

with the pooling standards adjusted to 25 percent of route

disposition as in-area sales, updated for known plant closures

through December 1998, 35 distributing plants would be expected to

be associated with the Pacific Northwest market, including 19

fully regulated distributing plants (all currently fully

regulated), 2 partially regulated plants, 4 exempt plants (below

150,000 pounds in total route disposition), and 10 producerhandlers. It is known that 3 distributing plants (all producerhandlers) have gone out of business since October 1997.

There are 11 distributing plants within the Portland area,

including 7 pool plants, 2 exempt plants and 2 producer-handlers. 

The Seattle/Tacoma MSAs have 4 pool plants, 1 partially regulated

plant, and 4 producer-handlers. In addition to these two main

population centers, the Spokane, Washington, MSA, located in the

eastern area of the state near the Idaho border with a population

of 405,000, has 2 pool plants.

Two smaller MSA’s in western Oregon contain 2 pool plants, 1

producer-handler, and 1 plant exempt on the basis of size. Of the

5 distributing plants that would be operating in Oregon outside of

MSAs, 3 would be fully regulated, 1 partially regulated, and 1

exempt of the basis of size. All but one, in central Oregon, are

located in western Oregon.

One producer-handler is located in a northwest Washington

MSA, and 1 pool plant, 2 producer-handlers and 1 partially

regulated plant are located in the southeast quadrant of the State

of Washington outside any MSA.

Since October 1997, three producer-handlers are known to have
gone out of business, two in the State of Washington, and one in

Oregon.

Distributing plants fully regulated under the Pacific

Northwest order are located in MSAs where 71 percent of the

market’s population is concentrated.

Utilization.

According to October 1997 pool statistics, the Class I

utilization percentage for the Pacific Northwest market was 36

percent. Because this market is to remain separate, expected

utilization changes due to the reform process result only from

potential changes in plants’ regulatory status; thus very little

change in producer returns under the Pacific Northwest order is

expected as a result of consolidation. For October 1997, Class I

utilization for the Pacific Northwest market was 35.6 percent 

based on 192 million pounds of producer milk used in Class I out

of 540 million total producer milk pounds. The weighted average

use value for the Pacific Northwest market is estimated to be

$13.33 per hundredweight.

Other Plants.

Located within the Pacific Northwest marketing area in May

1997 were 27 supply or manufacturing plants; 12 in Oregon (5 in

the Portland area), 15 in Washington (7 in the Seattle area) and

none in Idaho. Two of the 27 plants (both in Oregon) were Order

124 pool supply plants, one of which manufactured primarily

cheese, and the other nonfat dry milk. Of the 10 nonpool

manufacturing plants located in Oregon, 8 manufactured primarily

Class II products (including ice cream), 1 manufactured butter,

and the other made cheese.

The 15 manufacturing/supply plants located in the State of

Washington were all nonpool plants. Three manufactured primarily

Class II products, 3 manufactured primarily butter, 2 manufactured

primarily powder, and 7 manufactured primarily cheese.

Cooperative Associations.

Five cooperative associations had members in the Pacific

Northwest market in December 1997. Darigold Farms is the largest,

and the only cooperative that had membership affiliated with

another order (Order 135) in December 1997. Other cooperatives in

this market are Farmers Cooperative Creamery, Tillamook County

Creamery Association, Northwest Independent Milk Producers

Association, and Portland Independent Milk Producers Association. 

These five cooperatives pooled 85 percent of the total producer

milk pooled under the Pacific Northwest order in December 1997.

Criteria for Consolidation.

The consolidated Pacific Northwest market adds one currently

unregulated Oregon county to the Pacific Northwest milk order. 

The degree of association of this market with other Federal order

marketing areas is insufficient under any criteria to warrant
consolidation with any other order areas.

Discussion of Comments and Alternatives.

Prior to issuance of the proposed rule, alternatives to the

leaving the Pacific Northwest area as a separate order area that

were considered included the consolidation of the current Pacific

Northwest, Southwestern Idaho-Eastern Oregon and Great Basin order

areas. Because there is virtually no relationship with regard to

either overlapping route dispositions or overlapping milk

procurement between the Pacific Northwest and Southwestern IdahoEastern Oregon milk marketing areas, and none at all with Great

Basin, these alternatives were not pursued.

Only two comments pertained specifically to the

“consolidated” Pacific Northwest marketing area. Darigold Farms,

Inc., commented that the Pacific Northwest marketing area should

remain unchanged except for the addition of the one southwestern

Oregon county proposed to be added. Darigold stated that the

addition of this county would not cause the regulation of any

plant. A comment filed by an individual from Utah stated that

Idaho should be included in the Pacific Northwest area or be a

separate order. As noted before, there is almost no relationship

between the Pacific Northwest and Southwestern Idaho-Eastern

Oregon marketing areas, and no basis for such a consolidation.