`[Federal Register Volume 89, Number 231 (Monday, December 2, 2024)]
[Proposed Rules]
[Pages 95466-95587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27228]



[[Page 95465]]

Vol. 89

Monday,

No. 231

December 2, 2024

Part III





Department of Agriculture





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Agricultural Marketing Service





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7 CFR Parts 1000, 1001, 1005, et al.





Milk in the Northeast and Other Marketing Areas; Final Decision on 
Proposed Amendments to Marketing Agreements and Orders; Proposed Rule

  Federal Register / Vol. 89 , No. 231 / Monday, December 2, 2024 / 
Proposed Rules  

[[Page 95466]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1000, 1001, 1005, 1006, 1007, 1030, 1032, 1033, 1051, 
1124, 1126, 1131, and 1170

[Doc. No. AMS-DA-23-0031]


Milk in the Northeast and Other Marketing Areas; Final Decision 
on Proposed Amendments to Marketing Agreements and Orders

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule; final decision.

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SUMMARY: This proposed rule is the Secretary's final decision in this 
proceeding and recommends amendments to the pricing provisions in the 
11 Federal Milk Marketing Orders (FMMOs). AMS will determine if 
producers approve of the proposed amended orders, as required by 
regulation.

DATES: The representative period for ascertaining producer approval is 
January 2024.

ADDRESSES: To review the hearing record, please see https://www.ams.usda.gov/rules-regulations/moa/dairy/hearings/national-fmmo-pricing-hearing. Webinars with information on the proposed amendments 
and the referendum process are also available on the hearing website.

FOR FURTHER INFORMATION CONTACT: Erin Taylor, USDA/AMS/Dairy Program, 
Order Formulation and Enforcement Branch, STOP 0231-Room 2530, 1400 
Independence Avenue SW, Washington, DC 20250-0231; telephone: (202) 
720-4392; email address: [email protected].

SUPPLEMENTARY INFORMATION: This proposed rule, in accordance with 7 CFR 
900.13a, is the Secretary's final decision in this proceeding and 
proposes the issuance of marketing orders as defined in 7 CFR 900.2(j). 
AMS continues to find that amendments to five milk pricing categories 
would provide more orderly marketing in the 11 FMMOs. The final 
decision reflects changes to the make allowances and, to a very limited 
extent, the Class I differentials included in the recommended decision. 
This final decision recommends amendments to:
    1. Milk Composition Factors. Update the factors to 3.3 percent true 
protein, 6 percent other solids, and 9.3 percent nonfat solids.
    2. Surveyed Commodity Products. Remove 500-pound barrel cheddar 
cheese prices from the Dairy Products Mandatory Reporting Program 
(DPMRP) survey and rely solely on the 40-pound block cheddar cheese 
price to determine the monthly average cheese price used in the 
formulas.
    3. Class III and Class IV Formula Factors. Update the manufacturing 
allowances to: Cheese: $0.2519; Butter: $0.2272; Nonfat Dry Milk 
(NFDM): $0.2393; and Dry Whey: $0.2668. This decision also proposes 
updating the butterfat recovery factor to 91 percent.
    4. Base Class I Skim Milk Price. Update the formula as follows: the 
base Class I skim milk price would be the higher-of the advanced Class 
III or Class IV skim milk prices for the month. In addition, adopt a 
Class I extended shelf life (ESL) adjustment equating to a Class I 
price for all ESL products equal to the average-of mover, plus a 24-
month rolling average adjuster with a 12-month lag.
    5. Class I and Class II differentials. Keep the $1.60 base 
differential and adopt modified location specific Class I differential 
values.
    The Agricultural Marketing Service (AMS) will determine if 
producers approve of each proposed amended order, as required by 
regulation. If at least two-thirds of the producers or two-thirds of 
the milk represented in the vote approve of an amended order, AMS will 
issue a final rule implementing the changes. If an order is not 
approved as amended, AMS will initiate steps to terminate the order.
    In conjunction with this final decision, the AMS conducted a 
Regulatory Economic Impact Analysis to determine the potential impact 
of amending FMMO pricing formulas on producer revenue and marketwide 
pool values. AMS used a static analysis incorporating actual data 
reported from January 2019 to December 2023 to determine the estimated 
price impacts of the package of amendments included in this final 
decision. The full text of the Regulatory Economic Impact Analysis may 
be accessed at https://www.regulations.gov or https://www.ams.usda.gov/rules-regulations/moa/dairy/hearings/national-fmmo-pricing-hearing.

Prior Documents in This Proceeding

    Notice of Hearing: Published July 24, 2023 (88 FR 47396).
    Notice of Reconvened Hearing: Published November 6, 2023 (88 FR 
76143).
    Notice of Reconvened Hearing: Published December 29, 2023 (88 FR 
90134).
    Recommended Decision: Published July 15, 2024 (89 FR 57580).
    This administrative action is governed by sections 556 and 557 of 
title 5 of the United States Code and, therefore, is excluded from the 
requirements of Executive Orders 12866, 13563, and 13175.
    The amendments to the regulations proposed herein have been 
reviewed under Executive Order 12988, Civil Justice Reform. They are 
not intended to have a retroactive effect. If adopted, the proposed 
amendments would not preempt any state or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Agricultural Marketing Agreement Act of 1937 (AMAA), as amended 
(7 U.S.C. 601-674), provides that administrative proceedings must be 
exhausted before parties may file suit in court. Under section 
608c(15)(A) of the AMAA, any handler subject to an order may request 
modification or exemption from such order by filing a petition with the 
USDA stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with the law. A handler is afforded the opportunity for a hearing on 
the petition. After a hearing, USDA would rule on the petition. The 
AMAA provides that the district court of the United States in any 
district in which the handler is an inhabitant, or has its principal 
place of business, has jurisdiction in equity to review USDA's ruling 
on the petition, provided a bill in equity is filed not later than 20 
days after the date of the entry of the ruling.

Civil Rights Impact Analysis

    AMS has reviewed this rulemaking in accordance with USDA 
Departmental Regulation 4300-004, Civil Rights Impact Analysis, to 
identify any major civil rights impacts the rule might have on FMMO 
participants on the basis of race, color, national origin, disability, 
sex, gender identity, political beliefs, age, marital, family/parental 
status, religion, sexual orientation, reprisal, or because of an 
individuals' income is derived from any public assistance program. 
Based on the review and analysis of the rule and all available data, 
issuance of this proposed rule is not likely to negatively impact low 
and moderate-income populations, minority populations, women, Tribes or 
persons with disabilities, by virtue of their age, race, color, 
national origin, sex, disability, or marital or familial status. No 
major civil rights impact is likely to result from this proposed rule.

[[Page 95467]]

Regulatory Flexibility Act and Paperwork Reduction Act

    In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 
601 et seq.), the AMS has considered the economic impact of this action 
on small entities. Accordingly, AMS has prepared this initial 
regulatory flexibility analysis. The purpose of the RFA is to fit 
regulatory actions to the scale of businesses subject to such actions 
so that small businesses will not be unduly or disproportionately 
burdened. Marketing orders and amendments thereto are unique in that 
they are normally brought about through group action of essentially 
small entities for their own benefit. A small dairy farm as defined by 
the Small Business Administration (SBA) (13 CFR 121.201) (NAICS Code 
112120) is one that has an annual gross revenue of $3.75 million or 
less, and a small dairy products manufacturer is one that has no more 
than the number of employees listed in the chart below:

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                                                                                            Size standards in
                   NAICS code                           NAICS U.S. industry title          number of employees
----------------------------------------------------------------------------------------------------------------
311511.........................................  Fluid Milk Manufacturing..............                    1,150
311512.........................................  Creamery Butter Manufacturing.........                      750
311513.........................................  Cheese Manufacturing..................                    1,250
311514.........................................  Dry, Condensed, and Evaporated Dairy                      1,000
                                                  Product Manufacturing.
----------------------------------------------------------------------------------------------------------------

    To determine which dairy farms are ``small businesses,'' the $3.75 
million per year income limit was used to establish an annual milk 
marketing threshold of 18.3 million pounds. Although this threshold 
does not factor in additional monies that may be received by dairy 
producers, it should be an accurate standard for most ``small'' dairy 
farmers. Based on the U.S. 2023 average yield per cow and 2023 NASS 
average All-Milk price, a dairy farm with approximately 780 cows or 
fewer would meet the definition of a small business. In 2022, the most 
recent year with statistics available, there were 24,470 dairy farms 
with milk sales, of which approximately 19,576 had milk regulated on an 
FMMO for at least one month of the year. Based on the 2022 Census of 
Agriculture, Milk Cow Herd Size by Inventory and Sales, an estimated 89 
percent of operations with milk sales are likely to be small 
businesses.
    To determine a handler's size, if the plant is part of a larger 
company operating multiple plants that collectively exceed the 750-
employee limit for creamery butter manufacturing; the 1,000-employee 
limit for dry, condensed, and evaporated dairy product manufacturing; 
the 1,150-employee limit for fluid milk manufacturing; or the 1,250-
employee limit for cheese manufacturing; the plant was considered a 
large business even if the local plant does not exceed the 750, 1,000, 
1,150, or 1,250-employee limit, respectively.
    In 2022, the following number of plants were regulated for at least 
one month of the year in each FMMO: 66 plants on the Northeast, 19 
plants on the Appalachian, 9 plants on the Florida, 20 plants on the 
Southeast, 58 plants on the Upper Midwest, 32 plants on the Central, 43 
plants on the Mideast, 24 plants on California, 17 plants on the 
Pacific Northwest, 26 plants on the Southwest, and 8 plants on Arizona. 
According to the 2022 Census of Agriculture, approximately 86 percent 
of fluid milk manufacturing plants, approximately 96 percent of cheese 
plants, approximately 82 percent of dry products plants, and 
approximately 78 percent of butter plants met the SBA definition of 
small businesses.

How FMMO Pricing Provisions Currently Operate

    The proposed amendments in this decision cover five milk pricing 
subject areas: Milk Composition Factors, Surveyed Commodity Products, 
Class III and Class IV Formula Factors, base Class I skim milk price 
(Class I mover), and Class I and II Differentials. This decision 
proposes to amend provisions in all five pricing subject areas. The 
amendments are intended to update formulas and factors in response to 
industry changes over time, many of which have not been updated since 
the provisions were adopted on January 1, 2000, to ensure USDA is 
carrying out the purposes of the AMAA.
    Milk Composition Factors. FMMO milk prices are based on three 
primary components--protein, other solids, and nonfat solids. Skim milk 
composition factors in the current price formulas codified in the FMMO 
regulations were adopted in 2000: 3.1 percent protein, 5.9 percent 
other solids, and 9 percent nonfat solids. The proposed amendments 
would increase milk composition factors to 3.3 percent protein, 6.0 
percent other solids, and 9.3 percent nonfat solids. Actual component 
tests of skim milk have increased since 2000, with more significant 
increases beginning in 2016. The amendments are intended to more 
accurately represent component levels in milk produced.
    Surveyed Commodity Products. Milk prices under FMMOs are related to 
wholesale prices for butter, cheese, nonfat dry milk, and dry whey. The 
formulas use USDA-surveyed average wholesale prices to calculate milk 
component prices (butterfat, protein, nonfat solids, and other solids) 
that are converted to Class III and IV milk prices. The protein value 
in cheese is a component of the Class III price. Currently, the prices 
of commodity cheddar cheese packaged in 40-lb blocks (``blocks'') and 
500-lb barrels (``barrels'') are collected weekly by AMS through the 
DPMRP survey. A monthly average of those prices is used to represent 
commodity cheese in the Class III price formula. The butterfat value in 
commodity salted butter is the driver of the butterfat price used in 
all classified prices. The proposed amendments would eliminate 500-lb 
barrels from the DPMRP survey and rely solely on the monthly average 
survey price for 40-lb cheddar blocks. The amendment is intended to 
provide for more orderly marketing through a survey of only one 
product.
    Class III and IV Formulas Factors. Make allowances are a factor in 
the FMMO pricing formulas representing the cost of converting raw milk 
into the four manufactured dairy products surveyed by USDA (butter, 
cheese, nonfat dry milk, and dry whey). Make allowances were last 
updated in 2008 following a rulemaking proceeding in 2007. The proposed 
amendments would update the make allowances in the FMMO Class III and 
IV formulas to the following: $0.2519 for cheese; $0.2272 for butter; 
$0.2393 for NFDM; and $0.2668 for dry whey. The proposed amendments 
would also update the butterfat recovery factor in the Class III 
formula to 91 percent. The amendments are intended to update the 
formula factors to be more representative of current costs and 
butterfat recovery observed in dairy product manufacturing.

[[Page 95468]]

    Class I mover. The Class I mover is the base price for the skim 
milk portion of raw milk used in the production of Class I products. 
Agriculture Improvement Act of 2018 (2018 Farm Bill) amended the Class 
I skim milk price mover from the ``higher of'' Class III or Class IV 
skim prices to a simple average of the two classes plus $0.74, referred 
to as the ``average of'' mover. The proposed amendments would return 
the base Class I skim milk price calculation to the higher-of Class III 
or Class IV skim prices. The proposed amendments would also adopt a 
rolling monthly Class I ESL adjustment equating to a Class I price for 
all ESL products equal to the average-of the Class III and Class IV 
advance prices, plus a 24-month rolling average adjuster, with a 12-
month lag. The monthly Class I ESL adjustment would be calculated as 
the average of the differences between the higher-of and the average-of 
calculations for the prior 13 to 36 months. The amendments are intended 
to provide for more orderly marketing by returning to the higher-of 
mover; while the Class I ESL adjustment would provide better price 
equity for ESL products whose marketing characteristics are distinct 
from other Class I products.
    Class I and II Differentials. FMMO Class I prices are calculated as 
the average of the advanced Class III and Class IV prices, plus $0.74, 
plus a location-specific differential referred to as a Class I 
differential. As the value of milk varies by location, Class I 
differentials have been determined for every county in the continental 
U.S. Current Class I differential levels were implemented January 1, 
2000, with updates to the differentials in the three southeastern 
orders taking effect May 1, 2008. The proposed amendments would retain 
the $1.60 base differential and adopt modified location-specific Class 
I differential values. The amendments are intended to recognize the 
evolution of the dairy industry since 2000 and the increased cost of 
servicing the Class I market given current transportation costs and 
plant and producer locations.
    This decision continues to find these amendments are necessary. The 
evidentiary record reflected testimony from a broad range of 
stakeholder views that updates are necessary in all five pricing 
subject areas to reflect current market conditions.

Impact on Small Businesses

    An economic analysis has been performed on impacts the proposed 
amendments will have on industry participants, including producers and 
handlers. It can be found on the AMS website at https://www.ams.usda.gov/rules-regulations/moa/dairy/hearings/national-fmmo-pricing-hearing. The proposed amendments would be applied identically 
to all proprietary and cooperative handlers regulated by FMMOs, 
regardless of their size. The proposed amendments would implement 
prices that more accurately reflect current market conditions, 
providing for more orderly marketing for both small and large producers 
and handlers.
    AMS considered alternatives to each of the proposed amendments. 
Over 49 days of hearing, dozens of witnesses from 9 industry 
stakeholder groups presented testimony and evidence on 21 proposals in 
the 5 pricing subject areas. AMS considered all evidence and testimony, 
including alternative proposals presented, in making its 
recommendations.
    A review of reporting requirements was completed under the 
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35). It was 
determined that these proposed amendments would have no impact on 
reporting, recordkeeping, or other compliance requirements because they 
would remain identical to the current requirements. No new forms are 
proposed, and no additional reporting requirements would be necessary.
    This proposed rule does not require additional information 
collection that requires clearance by the Office of Management and 
Budget (OMB) beyond currently approved information collection. The 
primary sources of data used to complete the forms are routinely used 
in most business transactions. Forms require only a minimal amount of 
information which can be supplied without data processing equipment or 
a trained statistical staff. Thus, since the information is already 
provided, no new information collection requirements are needed, and 
the current information collection and reporting burden is relatively 
small. Requiring the same reports for all handlers does not 
significantly disadvantage any handler that is smaller than the 
industry average.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    No other burdens are expected to fall on the dairy industry as a 
result of this rulemaking. This rulemaking does not duplicate, overlap, 
or conflict with any existing Federal rules.

Preliminary Statement

    A public hearing was held upon proposed amendments to the marketing 
agreements and orders regulating the handling of milk in all 11 Federal 
milk marketing areas. The hearing was held pursuant to the provisions 
of the AMAA, as amended (7 U.S.C. 601-674), and the applicable rules of 
practice and procedure governing the formulation of marketing 
agreements and marketing orders (7 CFR part 900).
    The proposed amendments set forth below are based on the record of 
a public hearing held in Carmel, IN, from August 23-October 11, 2023, 
November 27-December 8, 2023, January 16-19, 2024, and January 29-31, 
2024, pursuant to a notice of hearing published July 24, 2023 (88 FR 
47396), a notice of reconvened hearing published November 6, 2023 (88 
FR 76143), and a second notice of reconvened hearing, published 
December 29, 2023 (88 FR 90134).
    The hearing was held to receive evidence on 21 proposals submitted 
by dairy farmers, handlers, and other interested parties. A total of 
165 witnesses testified over the course of the 49-day hearing. 
Witnesses provided an overview of the complexity of the U.S. dairy 
industry and submitted 511 exhibits containing supporting data, 
analyses, and historical information.
    The material issues, related to FMMO pricing formulas, presented on 
the record of hearing are as follows:

1. Milk Composition Factors
2. Surveyed Commodity Products
3. Class III and Class IV Formula Factors
4. Base Class I Skim Milk Price
5. Class I and Class II differentials

Summary of Testimony

Milk Composition

    Two proposals seeking to amend the milk composition standards are 
being considered in this rulemaking. Proposal 1, submitted by the 
National Milk Producers Federation (NMPF) seeks to increase the skim 
component factors, with a 12-month implementation lag. The proposed 
standards are as follows: increase the nonfat solids assumption from 
9.0 to 9.41 per hundredweight (cwt) of Class IV skim milk; increase the 
protein assumption from 3.1 to 3.39 per cwt of Class III skim milk; and 
increase the other solids assumption from 5.9 to 6.02 per cwt of Class 
III skim milk. Proposal 1 also contains an updating methodology that 
would automatically update the standards no more than once every three 
years once the nonfat solids component for the prior three years 
changes by at least .07 percentage points.

[[Page 95469]]

    Proposal 2, submitted on behalf of National All-Jersey (NAJ), is 
identical to Proposal 1, except for the automatic update methodology. 
The proposal would update the standards annually using the previous 
year's weighted averages, with a 12-month implementation lag.
    A witness from NMPF, a trade association representing dairy farmer-
owned cooperative marketing associations throughout the United States, 
testified in support of updating the skim milk price milk component 
factors, as contained in Proposal 1. The witness explained how the U.S. 
dairy industry has undergone dynamic structural change since 2000, 
while FMMO product price formulas have generally remained static. The 
witness stated dairy farmers have responded to component pricing by 
significantly increasing the butterfat, protein, and other solid levels 
in their milking herds. According to the USDA's National Agricultural 
Statistics Service (NASS), said the witness, average butterfat tests 
have increased 10.9 percent from 2000 to 2022, and USDA's Economic 
Research Service (ERS) reported average skim milk solids content of 
U.S. milk production increased 0.31 percent during the same period. The 
witness said average protein, other solids, and nonfat solids (NFS) in 
milk pooled on FMMOs in 2022 were 3.39 percent, 6.02 percent, and 9.41 
percent, respectively.
    The NMPF witness asserted the static component levels contained in 
the formulas result in underpayments to producers in all FMMOs for the 
value of their Class I skim milk. Therefore, NMPF proposes to increase 
the milk composition factors in skim milk to 2022 levels. The NMPF 
witness analyzed 2013-2022 FMMO product prices and concluded adoption 
of Proposal 1 would have increased the Class III skim price by $0.80 
per cwt and the Class IV skim milk price by $0.41 per cwt. An increase 
from the 2022-based skim milk component factors by the proposed 0.07 
percentage point threshold level, the witness added, would have 
increased the Class III and Class IV prices by $0.14 and $0.07 per cwt, 
respectively.
    Another NMPF witness testified the announced FMMO Class III and 
Class IV skim milk values do not reflect the current component levels 
of producer milk, resulting in announced prices being lower than actual 
market values. The witness said this leads to a misalignment of fluid 
and manufacturing milk, possibly leading to disorderly marketing 
conditions. This occurs because the Class I Mover skim milk price is 
calculated based on skim milk component levels based on 2000 levels, 
narrowing the difference between Class I prices and manufacturing milk 
prices (Classes III and IV) and resulting in more instances of price 
inversions and depooling.
    Several NMPF dairy farmer witnesses testified in support of 
Proposal 1. The witnesses stated improved genetics and feed quality 
have caused component levels in the milk they market to increase. The 
witnesses stated component levels in the pricing formulas should be 
updated to reflect the additional protein produced.
    An NMPF witness testified regarding their work as a business 
consultant with dairy farmers. The witness said dairy farming costs 
have been consistently increasing due to higher feed prices, overall 
inflation, interest rate increases, and rising costs associated with 
labor and environmental regulations. The witness estimated the average 
margin per cwt of milk produced over the past decade was less than $1, 
or approximately 4 to 7 percent of the average milk price. The witness 
opined that financially sustainable margins are necessary to avoid 
further consolidation in the industry.
    An NMPF dairy farmer witness testified that monthly pay price 
volatility has increased since 2000. According to the witness, in 2000 
their pay price varied $0.52, from a high of $12.95 to a low of $12.43. 
In the 12 months prior to August 2023, the witness said the variance 
was $7.46, ranging from $22.50 to $15.04, while costs continued to 
rise, including the price of corn and soybean meal more than doubling. 
The witness said that during the same 12-month period their milk output 
rose over 10,000 pounds. The witness attributed improvements in cow 
comfort, genetics, and feed quality to the increases in milk output and 
component levels but opined low component standards were depressing 
producer price differentials (PPDs) and discouraging milk from 
supplying the Class I market.
    NMPF, in their post-hearing brief, offered additional support for 
Proposal 1. The brief credited significant advances related to animal 
genetics, farm management, and cow nutrition as contributing to rising 
skim milk component levels. NMPF reiterated hearing testimony regarding 
the static component levels in the formulas leading to a narrowing of 
the difference between Class I and manufacturing milk prices resulting 
in more price inversions, larger volumes of depooled milk, and 
resulting in disorderly marketing. NMPF stated higher skim milk 
component levels have value in the competitive manufacturing dairy 
market, which is the basis for determining Class I values. NMPF stated 
that increasing the skim milk components in the formulas to reflect 
current levels would recognize the current average value of producer 
milk used for manufacturing dairy products and result in a Class I 
price that properly reflects base milk values. Additionally, NMPF 
argued delayed implementation of updated component level factors is 
necessary because of dairy farmers' use of risk management programs. 
Such a delay would allow for the completion of most transactions placed 
prior to announcement of the change.
    A Dairy Farmers of America, Inc. (DFA) witness, appearing on behalf 
of NMPF, testified the failure to delay an update in skim component 
standards would cause financial harm to dairy farmers, milk plants, end 
users, and others who entered into risk-management transactions. DFA is 
a dairy farmer cooperative and owns and operates 14 manufacturing 
plants which produce liquid whey, Italian cheese, skim milk powder, 
whole milk powder, American-style cheese, condensed milk, cream, nonfat 
dry milk, milk protein concentrate (MPC), sweetened condensed milk, and 
dry whey. The witness testified that failure to delay implementation 
would affect the basis, or the profit margin for milk being hedged. The 
witness testified that 35 to 45 percent of the U.S. milk supply was 
hedged by dairy farmers and there is a growing demand for risk 
management services among larger-sized dairies.
    A witness representing the American Farm Bureau Federation (AFBF), 
a farmer advocacy organization with approximately 6 million members 
throughout the U.S., testified in support of Proposal 1. The witness 
estimated that raising the skim component standards would increase the 
Class I price by an average of $0.70 per cwt, based on 2022 data. 
Consequently, raising the skim component standards would help bring the 
Class I, III, and IV prices in alignment, reduce the frequency of 
negative PPDs, and reduce the incentives for depooling, which the 
witness said undermines orderly marketing. The witness stated that 
raising the value of the skim milk in the manufacturing classes for the 
skim and butterfat markets would reduce the incentive of manufacturing 
plants in the multiple component pricing (MCP) orders to pool milk, 
which would lower the producer's price and discourage milk from 
entering a milk deficit region. The witness testified that updating 
component standards would address

[[Page 95470]]

some price misalignment issues and is preferred to prevent handlers 
from depooling.
    AFBF offered support in their post-hearing brief stating Proposal 1 
would more accurately define the market value of skim milk pooled on 
FMMOs. The brief asserted the resulting increase in Class I prices 
would reduce the incidences of price misalignment with Class III and IV 
prices, reduce the size and frequency of negative PPDs, and reduce 
depooling incentives. AFBF supported periodic adjustments to component 
levels, as contained in Proposal 1, to account for the continuing 
increases in the component levels but specified these levels should 
only be changed in the positive direction. In AFBF's opinion, more 
frequent updates, as contained in Proposal 2, would be disruptive.
    A witness representing NAJ, an organization representing the 
interests of Jersey cattle breeders, testified in support of Proposal 
2, which proposes the same milk composition levels as Proposal 1, with 
automatic annual updates. The witness said many factors have 
contributed to increased component levels, including improved genomics, 
increased use of gender-selected semen, and volume-based programs such 
as base/excess programs. The witness testified an annual update would 
provide improved accuracy because of the recently accelerated pace of 
component increases and would have better alignment with pricing 
between butterfat/skim and multiple component pricing FMMOs. 
Additionally, the witness stated a 1-year lag on implementing these 
updates would allow for greater risk management which is becoming 
increasingly more important to producers and processors.
    NAJ's post-hearing brief reiterated their support for Proposal 2, 
arguing record evidence shows protein and other solids levels in 
producer milk have progressively and significantly increased since FMMO 
reform in the late 1990s. NAJ stated the trend of higher solids 
components in skim milk was expected to continue due to economic 
signals to producers from component values and improved production 
techniques. NAJ argued amendments of standard skim milk composition 
factors is necessary to help avoid periods of price inversions, 
depooling, undervaluing Class I milk, milk supply inefficiency, and 
disincentives to supply milk for Class I use. NAJ stated a change to 
the skim milk component levels should be announced at least 11 months 
in advance of implementation due to risk management practices used by 
producers and processors. NAJ argued annual updates better serve risk 
management practices because it would lead to smaller incremental 
changes and less adverse impact on risk management contracts with more 
than 12-months open interest at the time component changes are 
announced.
    A witness representing Edge Dairy Farmer Cooperative (Edge), a 
Wisconsin-based dairy milk test verification cooperative, testified in 
support of Proposals 1 and 2. The witness supported increasing the 
implementation lag to 15.5 months to support longer contract hedging. 
The witness was of the opinion the standard butterfat test also should 
be updated from 3.5 percent to 4.06 percent, the 2022 average butterfat 
for all markets combined as published by the USDA's AMS. According to 
the witness, this would more accurately reflect current butterfat 
levels and better align the butterfat to protein ratio used in the 
formula, ensuring more effective risk management tools, as farmers' 
ability to manage their gross pay price risk would improve.
    Edge, in their post-hearing brief, reiterated hearing testimony 
that failure to adjust the butterfat level when updating skim component 
levels would cause disorderly milk marketing, as it undermines 
effective risk-management tools for dairy farmers. Edge argued that 
without the corresponding change, producers hedging milk revenue using 
risk management products based on Class III milk or Class IV milk 
prices, will tend to be under protected against the decline in 
butterfat prices. Edge added that changing the butterfat level would 
not affect handler obligations to the producer settlement fund, PPDs, 
or uniform producer prices.
    A witness representing the International Dairy Foods Association 
(IDFA) testified in opposition to Proposals 1 and 2, stating that 
updating the component standards would increase the Class I skim price 
by $0.60 per cwt, a value that cannot be recovered in the marketplace. 
IDFA is a trade organization representing manufacturers of milk, 
cheese, ice cream, yogurt, cultured products, and dairy ingredients. 
The IDFA witness testified consumers choose finished Class I products 
based on desired fat level, freshness, and price, not higher nonfat 
solids levels. The witness estimated that updating component levels in 
the formulas would result in manufacturing handlers in butterfat/skim 
FMMOs paying an additional $0.40 to $0.80 per cwt, even though the 
component levels of milk delivered to those plants was less than those 
proposed. The witness cited National Dairy Herd Information Association 
(DHI) data showing 2020 to 2022 average skim protein levels in 
butterfat/skim FMMOs below the levels contained in Proposals 1 and 2. 
The witness attributed the lower observed component levels to the fact 
that producer payments in these orders are made on the basis of the fat 
and skim content of their milk, leaving no financial incentive to 
produce higher component milk.
    A witness from Saputo Cheese USA (Saputo), appearing on behalf of 
IDFA, also testified in opposition of Proposals 1 and 2. Saputo is a 
dairy processor and manufacturer operating 29 plants throughout the 
U.S. The witness said Saputo operates three plants located in the skim/
fat orders, and in 2022 the average NFS level of milk received at those 
plants was 9.1070 percent, which is less than what is proposed in 
Proposals 1 and 2. The witness explained Saputo purchases skim solids 
to add to its skim milk in order to ensure the Class II products it 
manufactures contain the skim solids necessary to meet standard of 
identity requirements for those products. Updating the component levels 
in the formula would only result in Saputo paying for skim solids not 
received, but it would not lower the amount of skim solids Saputo must 
purchase, explained the witness.
    A post-hearing brief submitted by IDFA reiterated its opposition to 
Proposals 1 and 2, arguing that increased component levels have no 
financial benefit or economic value to Class I handlers who would be 
the primary entities impacted by adoption of these proposals. IDFA 
stated the current FMMO system of pricing Class I milk on a skim/fat 
basis versus Classes II, III, and IV milk on a component basis does not 
create disorderly marketing.
    The Milk Innovation Group (MIG) is a group of fluid milk processors 
and producers that market value added dairy based products. MIG's 
members include Anderson Erickson Dairy (AE), Aurora Organic Dairy 
(Aurora), Crystal Creamery, Danone North America (Danone), fairlife, HP 
Hood LLC (HP Hood), Organic Valley/CROPP Cooperative (Organic Valley), 
Shamrock Foods Company (Shamrock), Shehadey Family Foods LLC 
(Shehadey), and Turner Dairy Farms (Turner Dairy). Crystal Creamery is 
a California fluid milk processor producing Class I, II, and IV 
conventional and organic milk products. Danone is a food and beverage 
company operating seven plants in the U.S. Fairlife is a fluid milk 
processor of ultra-filtered lactose free milk, and other

[[Page 95471]]

high protein products. Organic Valley is a dairy farmer-owned organic 
cooperative producing more than 30 percent of the organic milk sold in 
the U.S.
    Seven witnesses representing MIG, including witnesses from HP Hood, 
Shehadey, Saputo, Shamrock, AE, Turner Dairy, and Aurora, testified in 
opposition to Proposals 1 and 2. HP Hood is a fluid milk processor 
operating five ESL plants and four high-temperature, short-time (HTST) 
plants in the Northeast and California. Shehadey operates four 
manufacturing plants in California, Nevada, and Oregon, producing Class 
I and Class II products. Shamrock is a fluid milk processor of HTST and 
ESL products with processing facilities in Arizona and Virginia, and a 
20,000-head dairy farm located in Arizona. AE is an Iowa fluid milk 
processor producing both Class I and II products. Aurora is a 
vertically integrated organic milk supplier with four organic dairy 
farms located in Colorado and Texas. Turner Dairy is a small fluid milk 
processor with full or partial ownership of two fluid milk plants, as 
well as a standalone Class II plant, all located in western 
Pennsylvania.
    Six witnesses testified their plants regularly receive milk with 
components below the proposed levels. One witness offered that 
component levels received ranged from 3.09 to 3.63 percent protein, 
5.83 to 6.10 percent other solids, and 8.92 to 9.65 percent NFS. MIG 
members testified that increasing the component levels in the formulas 
would increase their raw milk costs, requiring them to pay for milk 
components not received. One witness stated that adoption of Proposals 
1 and 2 would increase costs between $0.60 and $0.75 per cwt. All MIG 
witnesses claimed that fluid milk processors, even if they did receive 
higher component milk, are unable to convert those higher components 
into additional market revenue as Class I products are sold on a 
volume, not component basis.
    Another MIG witness testified on a survey conducted of MIG members 
plus two additional large grocery retailers who own their own fluid 
milk processing plants. According to the witness, using component data 
from 32 out of the 36 plants surveyed, these plants frequently received 
milk with components below the proposed levels. As data was 
confidential, no specific data was provided. The witness also noted the 
data showed component levels changed due to seasonality and 
geographics, demonstrating inconsistent levels received by plants. The 
witness testified the adoption of Proposals 1 or 2 would raise Class I 
prices and make it more challenging for these plants to recover costs. 
Should USDA decide to change the standard component levels in the 
pricing formulas, the witness testified component minimums should be 
used instead of averages because FMMOs are meant to provide minimum 
prices.
    A post-hearing brief filed on behalf of MIG argued it would be 
disorderly for Class I fluid milk processors, the only mandatory 
participant of FMMOs, to be forced to pay for component levels 
regardless of what is actually received. MIG opined consumers do not 
value additional skim component levels in fluid milk products, 
therefore Class I processors are unable to recoup additional revenue 
out of the market. MIG was of the opinion no record evidence was 
provided at the hearing that the current skim component formula factors 
are causing disorderly marketing and added that although they oppose 
Proposals 1 and 2, if any part of these proposals are adopted there 
should be a 12-month implementation delay.
    A witness representing the CME Group (CME) testified to explain 
various dairy risk management tools offered through the exchange, 
including futures and options contracts. The witness explained the CME 
is a derivatives marketplace offering a range of futures exchanges to 
meet private risk management needs. The witness explained a futures 
contract is a legally binding agreement to buy or sell a standardized 
asset on a specific date or during a specific month. An option on a 
futures contract is the right, but not the obligation, to buy or sell 
the underlying futures contract at a predetermined price on or before a 
given date in the future. The witness stated 97.43 percent of contracts 
in the futures and options market are for 12-month periods, and in a 
previous change to futures contracts there was an 18-month lag on 
implementation to be beyond open interest. The witness testified that 
Dairy Revenue Protection (DRP) is one of many programs that rely on CME 
markets and advocated USDA to consider futures and options markets when 
establishing implementation plans.
    In its post-hearing brief, CME reiterated its neutrality on all 
proposals under consideration. They stated any change modifying the 
current Class III and Class IV formulas would be considered a material 
change affecting current contracts. CME stressed the importance of 
sufficient and transparent notice of any changes.
    A post-hearing brief was submitted on behalf of Select Milk 
Producers (Select), a dairy-farmer owned cooperative which owns and 
operates eight processing plants in Texas, New Mexico, and Michigan, 
manufacturing ESL fluid milk products and a variety of cheese, butter, 
and NFDM products. Select offered support for Proposal 1 and took 
exception to the assertion there is no value in higher protein levels 
in Class I products, as it is belied by the success of specialty fluid 
milk products such as fairlife, and the higher milk solids required for 
California fluid milk. Although Select supported adoption of Proposal 
1, they do not support a delay in implementation, nor the annual update 
as contained in Proposal 2.
    Lamers Dairy Inc. (Lamers), a Wisconsin based HTST fluid milk 
processor, submitted a post-hearing brief in opposition to Proposals 1 
and 2. Lamers stated component levels can vary both regionally and from 
farm to farm. Lamers opined that USDA is statutorily required to 
conduct a study of component levels before any change could be made and 
argued adoption of Proposals 1 and 2 should not be considered.
    New Dairy OPCO LLC (New Dairy), a fluid milk processor operating 
four fully regulated distributing plants (three of which are located in 
the southeastern U.S.), submitted a post-hearing brief in opposition to 
Proposals 1 and 2. New Dairy offered support for arguments made by IDFA 
and MIG that fluid milk processors would be unable to recoup the 
additional cost of components should Proposals 1 or 2 be adopted. They 
purport that charging fluid milk processors for components not actually 
received would be disorderly. New Dairy said raising component levels 
in the formulas would harm its southeastern plants as they pay on a 
skim/fat basis which provides no incentive to producer to increase 
components to match the national average.
    In its post-hearing brief, NMPF opposed the annual updating feature 
contained in Proposal 2. NMPF stated that by limiting changes to the 
standard component levels to a periodic basis and relying on 3-year 
weighted average, Proposal 1 is more likely to produce accurate 
component values and avoid disruption from more frequent changes.

Surveyed Commodity Products

    This rulemaking proceeding considers four proposals, and a modified 
proposal submitted during the hearing, that would add or remove a 
variety of products in the DPMRP survey, which are then reported in the 
National Dairy

[[Page 95472]]

Product Sales Report (NDPSR) and used to establish FMMO classified 
prices. The proposals are as follows:
    Proposal 3, submitted by NMPF, seeks to eliminate the Cheddar 
cheese barrel price from the cheese price formula.
    Proposal 4, submitted by AFBF, seeks to add Cheddar cheese 640-
pound block price series to the cheese price formula.
    Proposal 5, submitted by AFBF, seeks to add unsalted butter to the 
butterfat and cheese price formulas.
    Proposal 6, submitted by the California Dairy Campaign (CDC), seeks 
to add a price series for mozzarella to the cheese price formula.
    Edge offered a proposal modification during the hearing to adopt 
different weighting methodology which would reweigh 40-pound blocks and 
500-pound barrels in the DPMRP survey by all U.S. cheddar block and 
barrel production volumes.
    NMPF witnesses from Foremost Farms USA (Foremost), Ellsworth 
Cooperative Creamery (Ellsworth), Land O'Lakes (LOL), and DFA testified 
in support of Proposal 3. Foremost is a cooperative with 850 members 
located in Wisconsin, Michigan, Iowa, Minnesota, Indiana, Ohio, and 
Illinois, and operating eight manufacturing plants producing cheese and 
butter.
    Ellsworth is a Wisconsin-based cheese manufacturer producing a 
significant volume of barrel cheese and a variety of specialized 
cheeses and cheese curds from 250 dairy-farmer members. LOL is a dairy 
farmer-owned cooperative with more than 1,000 dairy farmer members, 
primarily producing butter and cheese.
    The witnesses explained the current cheese price formula includes 
both block and barrel cheese in the computation. They asserted the 
cheese price formula provides for orderly marketing if the difference, 
known as the ``spread,'' in the respective market prices of blocks and 
barrels remains close to the assumed $0.03 per pound cost difference, 
which occurred from 2000 to 2016. However, since 2017 the spread 
between the block and barrel prices has been volatile. One witness 
stated the weighted average spread published in the weekly NDPSR during 
January 2017 through July 2023 was $0.120 per pound, with a much wider 
and more volatile range per pound. The LOL witness opined that the 
DPMRP survey could continue to include and publish prices of 500-pound 
barrel cheese without necessitating its inclusion in the Class III 
protein price calculation.
    An NMPF witness testified the CME block cheddar price is used as a 
pricing index for most cheese produced in the U.S., including cheddar, 
40-pound block, 640-pound block, mozzarella, other American-type 
cheese, and other cheese including cream cheese, and Hispanic cheese. 
They estimated 90 percent of natural cheese produced in the U.S. is 
sold using the CME 40-pound block cheddar price as a pricing index. The 
witness estimated the CME barrel cheese price is used to price only 
about 9 percent of total domestically produced natural cheeses, 
including barrels themselves. They said DPMRP survey volumes of barrel 
cheese between 2013 and 2022 ranged from 44 to 52 percent, resulting in 
an overrepresentation of 500-pound barrels compared to the actual 
volume of cheese that is priced off of barrels. The witness testified 
that since 2017, the significantly wider and increasingly volatile 
block-barrel spread has caused instability in the cheese market. 
Consequently, the witness said, dairy farmer revenue has been reduced 
as the over representation of 500-pound barrels lowered the Class III 
price. The Foremost witness estimated the undervaluation represented $2 
billion since 2017, claiming the value would have been greater if not 
for the large volume of Class III milk not pooled in 2020 and 2021.
    The NMPF witness testified eliminating 500-pound barrel prices from 
the Class III price would create more orderly marketing in FMMOs by 
reducing the financial uncertainty for dairy producers and 
manufacturers and ensuring the cheese price in the protein component 
formula represents the single commodity cheddar cheese product. The 
witness described how barrel cheese manufacturers are harmed when they 
must account to the pool at an FMMO cheese price higher than the 
revenue generated from barrel cheese product. The witness said 
eliminating the 500-pound barrels would have increased the Class III 
price by $0.41 per cwt, using average product prices for 2017 to 2022.
    An NMPF witness testified that removing 500-pound barrels had been 
addressed in prior rulemakings but denied by USDA in the rulemaking. 
However, current market conditions have significantly changed, 
necessitating a re-evaluation. The witness attributed the increased 
volatility in the block-barrel price spread since 2017 to a variety of 
factors, including increased 500-pound barrel production capacity that 
may be due to increasing values of its white whey by-product.
    NMPF witnesses testified eliminating 500-pound barrel cheese from 
the protein component price (PCP) formula would still provide adequate 
volume of cheddar cheese for price discovery purposes as 40-pound block 
cheese surveyed represents approximately 16 percent of total U.S. 
natural cheddar cheese production. The witness also said this 
methodology change would bring the cheese price into conformity with 
the price for butter, NFDM, and dry whey, which utilize only one 
surveyed product for price discovery purposes.
    The witness testifying on behalf of Ellsworth stated 40-pound 
blocks and 500-pound barrels are not interchangeable products. The 
witness said while 40-pound block cheddar has many markets and uses, 
500-pound barrel cheddar is used for processed cheese, a market driven 
by few processors and purchasers. As a result, the witness said, 
surveying barrel cheese prices skews the FMMO cheese price towards a 
smaller market that is not representative of the rest of the cheese 
market. The witness estimated the volatility in the block-barrel spread 
since 2017 cost Ellsworth producers $0.84 per cwt. The witness said 
barrel cheese manufacturers would adjust to the elimination of barrel 
prices from the survey and eventually transition to prices based on the 
40-pound block cheese price.
    Witnesses representing IDFA, Leprino Foods Company (Leprino), and 
Associated Milk Producers, Inc. (AMPI) testified in opposition to 
Proposal 3. Leprino operates nine plants in the U.S., manufacturing 
mozzarella cheese, whey products, and NFDM. AMPI owns and operates 
eight manufacturing plants processing cheese, butter and powdered dairy 
products from member farms in Wisconsin, Minnesota, Iowa, Nebraska, 
South Dakota, and North Dakota.
    The witnesses said sales of both block and barrel cheddar cheese 
are robust and each play a significant role in setting the market value 
of cheddar cheese. They argued eliminating 500-pound barrels would 
reduce by more than half the cheese market price contained in the 
survey and would result in a distorted picture of the total commodity 
cheddar market. The witness said opposition to removing barrels was not 
related to the presumed effect on the Class III price as the NDPSR 
weighted average cheese price (reflecting block and barrel cheese) was 
higher than the 40-pound block price in 9 of 14 years from 2009 to 
2022. One witness opined additional cheddar block plant capacity is 
coming on-line in the next couple of years, increasing 40-pound block 
volumes, and would reduce the block-barrel spread to historical levels 
under normal supply-demand behavior.

[[Page 95473]]

    The IDFA witness speculated cheddar barrel manufacturers may opt 
not to pool milk if the barrel price is no longer surveyed because they 
would be unable to garner sufficient market revenue in order to account 
to the pool and the Class III price.
    Two Leprino witnesses testified eliminating 500-pound barrels from 
the Class III price formula removes the product most closely capturing 
the supply and demand balance. They opined that removing 500-pound 
barrels would both shrink the survey volume and likely result in 
greater cheddar block production to clear the market. The witnesses 
testified this would add volatility to the block market, cause 
unnecessary stress to the U.S. marketplace, and make U.S. cheese less 
attractive to global buyers.
    The Leprino witnesses said dropping 500-pound barrels from the 
survey would create a presumption within the Class III formula that all 
cheese, including barrels, would then be priced off blocks. The 
witnesses asserted barrels and blocks have different supply and demand 
functions and eliminating barrels from the Class III formula would 
force barrels to be priced off blocks, adding dysfunction to the barrel 
market. The witnesses argued barrels are the market-clearing cheese, 
and instead 40-pound blocks should be eliminated from the price formula 
to be more consistent with the minimum pricing provisions.
    In its post-hearing brief, NMPF reiterated testimony regarding 
price differences between 40-pound blocks and 500-pound barrels 
becoming more volatile since 2017. Historically, NMPF wrote, using both 
block and barrel prices in the Class III pricing formula increased the 
volume of cheddar cheese reported in the NDPSR. However, the increased 
price spread has caused instability in the cheese market, reducing 
revenue for dairy farmers as the barrel price is a disproportionately 
large share of the cheese price compared to its volume sold. NMPF 
estimated 90 percent of the natural cheese produced in the U.S. is 
priced using the CME 40-pound block price, while the remaining is 
priced off the CME barrel cheese price. As a result, NMPF wrote, the 
Class III milk price has been undervalued and lowered producer revenue.
    Leprino submitted a post-hearing brief reiterating the important 
balancing function barrels provide and opined removing them would push 
40-pound blocks into the balancing role and would increase price 
volatility for cheddar blocks.
    Select submitted a post-hearing brief in support of Proposal 3, 
arguing 500-pound barrels no longer represent the commodity cheddar 
market and 40-pound blocks are an appropriate commodity to establish 
the protein price. According to Select's brief, current formulas 
dramatically overweight the barrel price relative to the market's 
actual barrel use.
    The AFBF submitted a post-hearing brief in support of Proposal 3 
reiterating hearing testimony that barrels represent roughly 50 percent 
of the NDPSR volume but are used to set prices for only 10 percent of 
U.S. cheese. The AFBF stressed use of barrels in the cheddar cheese 
price formula creates a price not representative of the value of 90 
percent of cheddar cheese produced.
    In their post-hearing brief, IDFA opposed Proposal 3, arguing its 
adoption would make 500-pound barrel production uneconomical. This, 
they explained, would result in barrel-makers going out of business or 
switching to block production, which would destabilize the block 
market. IDFA wrote that 40-pound blocks and 500-pound barrels serve 
materially different functions in the market and the failure to include 
both in the survey would distort the commodity cheddar cheese market.
    NAJ submitted a post-hearing brief in opposition to Proposal 3. NAJ 
cited hearing evidence showing the market price of block and barrel 
cheese has diverged significantly since 2017, with barrel cheese priced 
about $0.11 per pound less than block cheese from 2017-2022. NAJ stated 
blocks and barrels have different uses, different buyer markets, and 
limited substitutability. With an expected increase in block production 
in the coming years, NAJ wrote, there may be many months in which 
barrels are more per pound and should remain part of the cheese price 
formula.
    A witness representing the AFBF testified in support of adding 640-
pound cheddar blocks to the Class III formula, as contained in Proposal 
4. The witness said adding 640-pound blocks would expand the volume of 
cheese surveyed and better reflect U.S. block and barrel production 
volumes. The witness was of the opinion there has been a pronounced 
production shift from 40-pound blocks to 640-pound blocks and adding 
640-pound blocks would provide more survey volume to avoid future 
rulemaking to address the dwindling 40-pound block survey volume. The 
witness testified that 40-pound and 640-pound blocks are largely 
interchangeable in price, use, and storage, and therefore it is 
appropriate those prices be reflected in the Class III price.
    A witness representing IDFA testified in opposition to Proposal 4. 
The witness said the DPMRP cheese survey encompassed more than 1.34 
billion pounds of sales in 2022, divided almost evenly between 40-pound 
blocks and 500-pound barrels. The witness testified the data set is 
sufficient to determine prices in the market and, since 640-pound 
blocks typically trade off the 40-pound block price, its addition would 
provide little additional price discovery information. The witness 
opined that only a small percentage of the 640-pound block market would 
meet survey specifications because of the nature of how the product is 
manufactured and sold.
    The two Leprino witnesses argued it would be inappropriate to add 
640-pound blocks as the market is largely make-to-order and the lack of 
equipment to handle 640-pound blocks limits sales to a narrow group of 
buyers. The witnesses noted the 640-pound block market is balanced 
through the cutting down of 640-pound blocks into 40-pound blocks, so 
the 40-pound block cheddar market is already reflected in its pricing.
    A witness representing Glanbia PLC (Glanbia), testified in 
opposition to Proposal 4. Glanbia owns four dairy plants in Idaho and 
partially owns two joint venture plants in New Mexico and Michigan, 
processing 34 million pounds of milk daily into barrel cheese, block 
cheese, whey protein concentrates, proprietary protein blends, and 
lactose. The witness testified Glanbia plants manufacture 40-pound and 
640-pound-blocks, both priced off the CME 40-pound block price and 
opined that adding 640-pound blocks would not add new information to 
the survey.
    A witness representing the Wisconsin Cheese Makers Association 
(WCMA), whose 81 members include cheese manufacturers making 40-pound 
blocks, 640-pound blocks, and 500-pound barrels, testified in 
opposition to Proposal 4. The witness testified the industry uses the 
40-pound block price to price 640-pound blocks, and since 40-pounds 
blocks are already used in the protein formula, adding 640-pound blocks 
would add no new price information.
    A DFA witness representing NMPF, testifying in opposition to 
Proposal 4, said the 40-pound block volume provides an adequate data 
set and the sole inclusion of 40-pound blocks is sufficient for cheese 
price discovery, making adoption of Proposal 4 unnecessary. The witness 
stated the daily CME cash block cheese market is widely recognized by 
market participants as heavily influencing the

[[Page 95474]]

price of cheese. The witness concluded that because annual CME block 
cheese traded volumes are not as large as NDPSR block survey volumes, 
the volume of 40-pound blocks reported in the NDPSR is more than 
adequate to determine the FMMO cheese price. The witness testified that 
incorporating 640-pound blocks into the NDPSR data set could promote 
the same disorderly market conditions currently observed with the 
inclusion of 500-pound barrels.
    The AFBF reiterated their support of Proposal 4 in their post-
hearing brief. The AFBF indicated 640-pound blocks are priced 
identically, or nearly identically, to 40-pound blocks, and are a 
standardized commodity cheddar cheese product. Including the 640-pound 
blocks in the NDPSR survey, they argued, would help make the survey 
more robust.
    Select, in their post-hearing brief, expressed support for Proposal 
4 agreeing with proponents that its inclusion would increase DPMRP 
survey volume. Select mentioned that, with new cheese processing 
capacity starting in upcoming years in Minnesota, New Mexico, Michigan, 
and Texas, 640-pound blocks would become a larger proportion of the 
commodity cheddar market, and it would be prudent to incorporate their 
prices and volume in the survey.
    IDFA reiterated opposition to Proposal 4 in its post-hearing brief. 
IDFA highlighted evidence describing how 640-pound blocks are typically 
made to customer order as there is only a small number of cheese buyers 
who are able to purchase and process them. Since manufacturers of 640-
pound blocks often balance the 640-pound block market by cutting them 
down to 40-pound blocks, IDFA said no new price information would be 
gained from including 640-pound blocks in the survey.
    WCMA also expressed opposition to Proposal 4 in their post-hearing 
brief and wrote that because 640-pound blocks do not have a unique 
price discovery mechanism, they would add no new price information to 
the formulas.
    A witness representing the AFBF testified in support of Proposal 5, 
seeking to add unsalted butter to the DPMRP butter survey. The witness 
said because of the growing volume of unsalted butter production and 
use in the U.S., the DPMRP salted-only butter price collection 
increasingly underrepresents the value of U.S. butter. According to the 
witness, the amount of butter captured by the NDPSR as a percentage of 
total butter production has been declining, from 16 percent in 1999 to 
9.4 percent in 2022. The witness expected this trend to continue 
without the addition of unsalted butter.
    Citing USDA voluntarily graded salted and unsalted butter volumes, 
the AFBF witness said one reason for declining butter survey volumes is 
the increase in U.S. unsalted butter production. The AFBF witness 
testified the exclusion of unsalted butter is unnecessarily restrictive 
for the purposes of the DPMRP survey. The witness cited U.S. butter 
export data showing 2,000 metric tons exported in 2000, to over 65,000 
metric tons in 2022, estimating almost all the exports were unsalted. 
The witness said incorporating unsalted butter prices into the FMMO 
butterfat formula would make the survey more representative of the 
evolving butter market, allow for better market transparency, and 
provide for more orderly marketing of butter and milk. The witness 
claimed salted and unsalted butter are production substitutes, as the 
same production line can be used for both without substantial 
interruption. The witness clarified Proposal 5 is not intended to 
change the current 80 percent butterfat reporting standard for butter, 
and therefore exported unsalted butter at 82 percent butterfat would 
continue to be excluded.
    A witness representing CDC expressed support for Proposal 5, 
without additional testimony. The CDC represents dairy farmers 
throughout California and is a state chapter of the National Farmers 
Union.
    A witness representing IDFA testified in opposition to Proposal 5. 
The witness testified there is no uniform specification for unsalted 
butter, so it is impossible to derive a uniform price for purposes of 
an FMMO pricing formula. The witness explained unsalted butter does not 
store as well compared to salted butter, rendering unsalted butter less 
capable of providing useful uniform price information. The witness also 
testified unsalted butter tends to be priced off the CME Grade AA 
salted butter price, and therefore does not bring any new pricing 
information. As substantial quantities of unsalted butter are exported 
through premium-assisted sales, which would not be included in the 
DPMRP survey, emphasizing unsalted butter should not be relied on for 
determining the market price of butter. Moreover, the witness 
considered the current volume of salted butter reported in the DPMRP to 
be a robust quantity of butter sales.
    A witness representing the Dairy Institute of California (DIC) 
testified in opposition to Proposal 5. The DIC is a trade association, 
representing fluid milk and dairy product processing plants in 
California. The witness asserted most unsalted butter is 82 percent 
butterfat and exported and should be considered substantively different 
from domestically consumed butter which contains 80 percent butterfat. 
The witness referenced a lack of clarity on how subsidies on exported 
butter would be handled in the product price reporting as another 
reason for their opposition.
    A California Dairies, Inc. (CDI) witness, representing NMPF, 
testified in opposition to Proposal 5. CDI is a California dairy 
farmer-owned cooperative with 258 members producing and marketing 41 
percent of California's total milk production and operating six butter 
and milk powder manufacturing facilities in the state. The witness 
disagreed with the assertion that salted butter at 80 percent butterfat 
no longer represents an adequate survey volume. The witness testified 
CDI manufactures both types of butter, and unlike salted butter, 
unsalted butter is manufactured exclusively for customer order. The 
witness argued sales of the two types of butter are not 
interchangeable. The witness stressed the addition of salt allows 
salted butter to be stored for long periods, making it a market 
clearing product, whereas the nature of unsalted butter requires it to 
be sold and consumed in a significantly shorter period of time. The 
witness was of the opinion introducing unsalted butter into the survey 
may result in volatility in the relationship between salted and 
unsalted butter similar to the current volatile relationship between 
40-pound block and 500-pound cheddar barrels. The witness said it was 
preferable to have one product generate the singular commodity 
reference price for purposes of calculating the minimum FMMO prices.
    In post-hearing briefs, the AFBF offered additional support for 
Proposal 5, stating the growing volume of unsalted butter production 
and use in the U.S. markets results in a salted-only butter price 
collection in the NDPSR survey which increasingly underrepresents the 
value of U.S. butter. The AFBF argued the declining trend in butter 
survey volume as a percent of actual production would continue, as 
butter survey volume has fallen from 16 percent of total production in 
the 1999 to 9.4 percent in 2022.
    Select expressed opposition to Proposal 5 in its post-hearing 
brief. Select argued that despite the growth of unsalted butter 
products, it should not be included in the survey because it lacks a 
uniform specification, is typically produced for special orders,

[[Page 95475]]

has no active commodity market, is often made with 82 percent butterfat 
versus 80 percent, and is viewed as a higher-value product.
    IDFA's post-hearing brief reiterated their opposition to Proposal 5 
stating the Grade AA salted butter survey volume is robust and the 
product is traded on the CME. IDFA wrote that a majority of unsalted 
butter is exported through government or private assisted sales, such 
as Dairy Export Incentive Program or Cooperatives Working Together, 
which would disqualify such sales from being reported. IDFA also stated 
unsalted butter does not store as well as salted butter, making it more 
likely to be made to order to a particular buyer's specifications.
    A witness representing the CDC testified in support of adding 
mozzarella prices to the FMMO cheese price, as contained in Proposal 6. 
The witness was of the opinion that adding mozzarella would make the 
FMMO Class III price more reflective of all U.S. cheese production. The 
witness asserted that because the volume of mozzarella production 
significantly exceeds cheddar production it should be reflected in the 
FMMO cheese price to improve price transparency and increase dairy 
farmer revenue. The CDC witness also stated mozzarella production is 
the largest category of cheese produced today and deserves a standard 
specification determined by the volume of mozzarella produced today.
    The CDC witness proposed adding mozzarella to the FMMO protein 
price based on the Van Slyke cheese yield formula, a formula for 
predicting cheddar cheese yields from milk on the basis of its fat and 
casein content. The witness submitted numerous USDA Specifications of 
Mozzarella Cheese for the Department to consider when determining an 
acceptable moisture and fat content of mozzarella cheese to be 
surveyed. The specification detailed requirements for six variations of 
mozzarella types in four forms (loaf, sliced, shredded, or diced). The 
witness testified that 5 to 6-pound loaves of mozzarella would be 
representative of a wholesale commodity mozzarella product and 
reasonable for inclusion in the survey.
    A California dairy farmer testified in support of Proposal 6. The 
witness said including mozzarella in the survey would create a Class 
III price that more accurately reflects the value of the current cheese 
market. The witness attributed the ongoing decline in the number of 
California dairy farms to negative margins and price volatility and 
stressed the urgency in capturing the additional value of mozzarella. A 
Wisconsin dairy farmer also supported inclusion of mozzarella for 
similar reasons.
    A witness representing IDFA testified in opposition to Proposal 6. 
The witness described the difficulty in selecting appropriate 
mozzarella product specifications, yield assumptions, and manufacturing 
costs to include in the formulas whose factors currently reflect only 
cheddar production. The witness also testified the commercial 
mozzarella cheese market contains wide product variability, including 
varying fat and moisture parameters demanded by mozzarella customers. 
The witness testified that unlike bulk cheddar products, mozzarella is 
not a market-clearing product, is often sold to meet the customer 
specifications, is not traded on the CME, and is not storable for 
extended periods.
    Witnesses from Leprino and Glanbia testified in opposition to 
Proposal 6, asserting the proposal lacked critical details making it 
difficult to interpret and evaluate. The witnesses explained the 
equipment, production, and yield difference between mozzarella and 
commodity cheddar. The witnesses said Proposal 6 does not define the 
type of mozzarella to be surveyed or how USDA should address the 
diversity of mozzarella cheese types and packages. The witnesses stated 
significant volumes of mozzarella are manufactured into value-added 
forms, whether as shred, string, or smaller retail or foodservice 
loaves by the primary manufacturer. The witnesses also noted most 
mozzarella is not market-clearing and is stored in refrigerated form 
with limited shelf life reducing its role as a market clearing product. 
The witnesses added that the volume of mozzarella production sold by 
the primary manufacturer in bulk format is comparatively small, in 
contrast to cheddar, in which most shredding, processing into consumer 
packaging, and conversion to other forms is performed by different 
companies rather than the original manufacturer. The witnesses opined 
cheddar remains the most appropriate Class III cheese product.
    Leprino reiterated their opposition to Proposal 6 in their post-
hearing brief. Leprino argued mozzarella cheese is a grouping or 
collection of similar products with diverse specifications, and that 
the assumption mozzarella production volume represents a single defined 
bulk product is incorrect. Leprino further stated mozzarella has 
different manufacturing processes, costs, and product yields. 
Therefore, if mozzarella was added to the Class III pricing formula, 
the formula would become substantially more complicated with little 
incremental benefit.
    A Foremost witness, testifying on behalf of NMPF, testified in 
opposition to Proposal 6, urging USDA to only utilize one commodity 
price series to represent each of the four dairy prices: cheese, 
butter, NFDM, and dry whey, to ensure orderly marketing. The witness 
noted the many mozzarella composition types, and purported deriving a 
40-pound block cheddar equivalent price would be difficult. The witness 
added mozzarella manufacturing costs are different and no data exists 
to determine how those costs should be reflected in the cheese make 
allowance. The witness said including mozzarella pricing into the 
protein price calculation would not enhance price discovery as 
mozzarella prices already move with the 40-pound cheddar market. Other 
NMPF witnesses testified to the appropriateness of limiting the cheese 
price to one survey product, cheddar. Witnesses representing the AFBF 
and WCMA opposed the inclusion of mozzarella due to the lack of 
standard format that could be surveyed.
    Select's post-hearing brief opposed Proposal 6 because no workable 
framework for incorporating mozzarella into the price formula was 
provided on the record.
    IDFA's post-hearing brief reiterated their opposition of Proposal 6 
as mozzarella lacks uniformity in compositional specifications and 
yields and is not traded on the CME. IDFA wrote the U.S. Food and Drug 
Administration (FDA) Standards of Identity provide four different 
variants of mozzarella cheese, with a wide variety of fat and moisture 
levels. IDFA also stated that while proponents advocated use of the Van 
Slyke formula to determine yields, the record lacked evidence as to how 
the formula should be revised to incorporate mozzarella cheese.
    WCMA opposed Proposal 6 in their post-hearing brief. WCMA members 
argued that there is no FDA Standard of Identity for mozzarella and are 
concerned over the vast variety of forms and functionality of each 
mozzarella manufacturer.
    A witness testifying on behalf of the CME offered information 
regarding its dairy futures and options markets which utilize FMMO 
prices. The witness did not appear in support or in opposition to any 
proposal under consideration. The witness testified that the CME dairy 
product portfolio, which began in 1996, includes Class III and Class IV 
milk futures and options, cash-settled cheese, 40-pound block cheese, 
cash-settled

[[Page 95476]]

butter, NFDM, and dry whey. The witness said the relationship between 
Class III and Class IV milk futures can serve as a mechanism to manage 
both input and output costs and provide the dairy trading community 
with an opportunity to provide liquidity to the market while managing 
risk. The witness testified any changes to FMMO formulas, or underlying 
DPMRP survey methodology could result in a material change to the 
valuation of the contracts. A post-hearing brief filed by CME 
reiterated its hearing testimony and stressed that the Department 
consider the impact to futures and options markets when determining the 
implementation timeframe for any FMMO price formula changes.
    A witness representing Edge offered the modified proposal that 
would reweight 40-pound blocks and 500-pound barrels by U.S. production 
volumes, not DPMRP survey volumes. The witness said this alternative 
weighting methodology would reduce the weight of barrel cheese as most 
cheddar cheese is manufactured into blocks. The witness explained that 
since a significant volume of block cheddar cheese does not qualify for 
inclusion in the NDPSR, barrels have a weight disproportionate to their 
true market share of the cheddar market. The witness was of the opinion 
the protein price should primarily reflect the block cheddar cheese 
market as it is estimated 70 to 75 percent of all cheddar cheese is 
produced into 40-pound or 640-pound blocks.
    The Edge witness predicted that the block-barrel spread could 
invert in 2025 due to the growth of block cheese production. The 
witness expects cheese manufacturers who can make either blocks or 
barrels will react to profitable opportunities, thus reducing the 
spread between block and barrel prices by altering their production 
schedules. The witness argued that, given the anticipated trends over 
the next 3 to 5 years, it would be more prudent to reduce the weight of 
barrels today and revisit the topic of removing barrels in 5 years.
    Edge reiterated their support for the weighting methodology in its 
post-hearing brief, as an alternative to eliminating barrel cheese or 
adding 640-pound blocks to the survey. Edge explained that, in 
practice, the Department would survey all barrel cheese production 
volume on an annual basis, including forward contracted cheese volumes, 
to determine the percentage of barrel cheese produced in relation to 
the NASS total U.S. cheddar cheese production estimates. Edge proposed 
the percentage be rounded to the nearest 5 percent, and the inverse 
would be assumed to represent block production. This calculated weight 
would be announced by September 15 and be applicable for the following 
calendar year. Survey prices would then be weighted by these 
percentages to determine weighted average cheese prices.
    IDFA, in their post-hearing brief, opposed Edge's modified 
proposal, arguing that it ignores market clearing, minimum pricing 
principles. IDFA opposed the idea of Class III prices being 
predominantly determined through a 40-pound block cheddar price.
    A post-hearing brief submitted by NMPF opposed Proposals 4, 5, 6, 
and Edge's modified proposal on the grounds the proposals perpetuate 
the problem Proposal 3 seeks to fix, which is to have only one product 
surveyed to determine a wholesale commodity price.

Class III and Class IV Formula Factors

a. Make Allowances
    Proponents submitted three proposals to amend the make allowances 
in the Class III and IV formulas. Proposal 7, submitted by NMPF, seeks 
to update make allowances to the following: cheese, $0.2400; dry whey, 
$0.2300; NFDM, $0.2100; butter, $0.0210. WCMA and IDFA submitted 
Proposal 8 and identical Proposal 9, respectively, to update make 
allowances as described in the below table. The proposals contain a 
four-year implementation schedule with 50 percent of the increase 
implemented in year 1 and the remaining 50 percent implemented evenly 
across the following 3 years.

                                       IDFA/WCMA Proposed Make Allowances
----------------------------------------------------------------------------------------------------------------
                     Product                          Year 1          Year 2          Year 3          Year 4
----------------------------------------------------------------------------------------------------------------
Cheese..........................................         $0.2422         $0.2561         $0.2701         $0.2840
Dry Whey........................................          0.2582          0.2778          0.2976          0.3172
NFDM............................................          0.2198          0.2370          0.2544          0.2716
Butter..........................................          0.2251          0.2428          0.2607          0.2785
----------------------------------------------------------------------------------------------------------------

    A former University of Wisconsin economics professor testified 
regarding separate manufacturing cost surveys they conducted on behalf 
of USDA and IDFA in 2021 and 2023, respectively. Each survey collected 
data submitted voluntarily from plants producing commodity cheddar 
cheese, dry whey, butter, and NFDM. The witness previously conducted 
similar surveys used by the Department in determining make allowance 
levels. The witness did not testify in support or opposition to any 
manufacturing allowance proposals under consideration.
    The witness explained that only plants manufacturing commodity 
products meeting DPMRP product specifications were eligible to 
participate. As plant participation was voluntary, the sample of plants 
and respective volumes varied by product and between surveys, with 
increasing cost variation between plants over time. The witness noted 
more observed cost variation across plants can occur due to newer 
automation technology employed in some plants, varying utility costs 
over time, and economies of scale achieved by some plants who negotiate 
input costs. The witness explained that dairy-based raw product costs, 
such as raw milk or purchased cream, are excluded, while costs of non-
dairy ingredients needed to transform the raw milk into a manufactured 
product, such as salt and enzymes, are collected and included in the 
survey results. According to the witness, costs, such as labor and 
utility, through the product-packaging stage are incorporated, but 
post-packaging costs, such as long-term storage or distribution and 
sales costs, are not. The witness explained an economic depreciation 
factor, not consistent with taxable depreciation, is incorporated to 
cover consumed capital, and the asset's return on investment is 
included to capture opportunity costs.
    The witness explained two different methodologies used for 
allocating costs in multi-product plants that could not be associated 
with a specific product (unallocated costs). The witness said the 2021 
survey utilized a degree-of-transformation factor to allocate costs 
based on degree of transformation raw milk must undergo to be 
manufactured into the wholesale product. Transformation factors were 
assigned

[[Page 95477]]

subjectively, based on knowledge of manufacturing processes. As a 
result, the witness said, unallocated costs were weighted towards 
heavily transformed products, such as NFDM, while products undergoing 
less transformation, for example, butter, were assigned a lower portion 
of the unallocated costs. Due to questions from the industry regarding 
this methodology, the witness said the 2023 survey reverted to 
allocating costs on a solids basis, a methodology more familiar to 
industry stakeholders. The witness said the 2021 survey showed more 
variation of costs when compared to current make allowance levels, 
ranging from an 18 percent decrease in butter costs to a 75 percent 
increase in NFDM costs. The 2023 survey results revealed a more 
consistent cost change when compared to current FMMO levels, ranging 
from a 65 percent increase in NFDM costs to a 72 percent increase in 
butter costs.
    The witness attributed much of the survey result differences to the 
plant samples. For NFDM, the 2021 survey had 27 participating plants, 
whereas the 2023 survey had 15, with larger average volume per plant, 
according to the witness. For cheese, the 2023 survey included 18 
plants compared to 10 in the 2021 survey. Further, the witness 
elaborated that the cheese plants surveyed were much larger on average 
and represented a significant proportion of the NDPSR volume when 
compared to the 2021 survey.
    The witness testified the data on butter highlighted the importance 
of sample composition. Both surveys sampled a similar numbers of butter 
plants, 13 in 2023 and 12 in 2021, and represented roughly the same 
total volume. However, the witness stated the 2023 survey had more 
variation in production volumes whereas in the 2021 survey, butter 
plants were more similarly sized. Finally, the witness testified the 
dry whey surveys had similar numbers of participating plants, 9 in 2023 
and 8 in 2021, but the surveyed volume in the 2023 survey was nearly 50 
percent more than that contained in the 2021 survey.
    NMPF offered Proposal 7 as one option for amending FMMO make 
allowance levels. Eleven NMPF witnesses representing the manufacturing 
interests of cooperatives testified in support of Proposal 7. The 
witnesses testified the current FMMO make allowances do not resemble 
manufacturing costs currently experienced in their plants. The 
witnesses provided detailed testimony on the impact of inadequate make 
allowances, which consisted of similar themes. First, they opined 
inadequate make allowances cause the FMMOs to overvalue raw milk. 
Consequently, the witnesses said many cooperatives have reblended 
cooperative revenues to members as a way of recouping manufacturing 
costs not covered by current FMMO make allowances. Second, the 
witnesses said insufficient make allowances disincentivize plant 
investment, whether it be in current or potential new plants.
    The NMPF witnesses testified the industry lacks consensus on 
reliable data to determine make allowances due to inconsistencies in 
cost allocation and reporting across operations. The witnesses were of 
the opinion the available manufacturing cost surveys are not 
comprehensive or reliable enough to justify large make allowance 
increases. The witnesses all stressed increasing make allowances to 
levels above actual costs could cause untenable financial harm to 
producers, putting many out of business and jeopardizing the milk 
supply. One NMPF witness described how an informal manufacturing cost 
survey of some NMPF members was used in the development of Proposal 7.
    A CDI witness testified regarding the impact insufficient make 
allowances have had on their member farms and six butter and milk 
powder manufacturing facilities. According to the CDI witness, the NFDM 
and butter make allowances in Proposal 7 are transformations of the 
2021 survey results, using the combined costs and yields of the two 
products. An LOL witness testified inadequate make allowances have led 
to disorderly market conditions, including lack of investment in 
manufacturing plants to process and balance milk supplies and 
inequitable producer pay prices between producers of different 
cooperatives and between cooperative and nonmember producers.
    A witness from Agri-Mark, a dairy farmer-owned cooperative with 
over 550 members, 3 cheese manufacturing plants and 1 butter-powder 
plant in the Northeast, said current make allowances overvalue producer 
milk and make it difficult for cooperatives with manufacturing 
facilities to remain profitable and pay the FMMO blend price. 
Consequently, the witness said, cooperatives must re-blend proceeds to 
recoup manufacturing costs, resulting in producer pay prices often less 
than FMMO blend prices.
    A Foremost witness attributed higher operating costs seen in their 
plants to inflation since 2008, adding that in the last 2 years, they 
have experienced particularly acute price increases in all categories. 
A witness representing FarmFirst Dairy Cooperative (FarmFirst), a 
cooperative operating in the Upper Midwest with 2,600 dairy farmer 
members, testified negotiated over-order premiums have diminished by 24 
percent since 2020 due to their processor's compressed margins, partly 
a result of inadequate make allowance levels. In addition to reducing 
premiums, the FarmFirst witness attested the current make allowances 
overvalue producer milk and have contributed to an oversupply of milk 
in the Upper Midwest, resulting in milk dumping, negative PPDs, 
depooling, and milk selling at below Class III prices.
    A Northwest Dairy Association (NDA) witness testified in support of 
Proposal 7. NDA is a dairy farmer-owned cooperative located in the 
Pacific Northwest with approximately 295 members, whose subsidiary 
(Darigold) operates 5 fluid milk bottling plants and 7 manufacturing 
plants making butter, cheese, dry whey, and dry milk products. The 
witness testified Darigold's manufacturing costs increased 80 percent 
between 2008 and 2022. The witness said inadequate or delayed 
investment in manufacturing plant capacity increases transportation 
costs, which are borne by producers, since milk must be shipped farther 
distances to find an available manufacturing market. A witness 
representing Maryland and Virginia Milk Producers Cooperative, Inc. 
(MDVA), a dairy farmer-owned cooperative located in the Mid-Atlantic 
that operates three pool distributing plants and two pool supply plants 
manufacturing bulk butter and NFDM, testified costs had increased 
compared to 2008 levels, with NFDM conversion costs increasing 64 
percent over the period. According to the MDVA witness, Proposal 7 
would reduce, but not eliminate, the manufacturing losses incurred in 
balancing their milk supply. A witness representing Lone Star Milk 
Producers (Lone Star), a dairy-farmer owned cooperative marketing milk 
on the Appalachian, Southeast, Central, and Southwest FMMOs, testified 
that manufacturing costs at their butter and NFDM plant have risen 
since commencing operation in 2017. A witness representing Ellsworth 
testified to the increasing costs of production at their cheese and dry 
whey operation. Lastly, a DFA witness testified in support of Proposal 
7 and provided dairy farm cost of production data, arguing this data 
should be considered when determining make allowances.
    A dairy economist from the University of Missouri, appearing on 
behalf of NMPF, testified on the estimated economic impact of Proposal 
7. Using an econometric model, the

[[Page 95478]]

witness estimated the proposed make allowances would lead to a $0.30 
decline in the All-Milk Price and a 200-million-pound milk production 
decline in the first year of implementation, with a further milk 
production decline of 400 million pounds in the second year. In the 
long run, the witness forecasted the decline in the All-Milk Price 
would moderate to $0.04 as markets adjusted to lowered milk production.
    A dairy farm accountant, testifying on behalf of NMPF, presented 
various statistics related to their dairy farmer clientele. The witness 
testified average total income from their clients' operations was $5.50 
per cwt in 2022, with a break-even milk price of $19.78 per cwt. 
According to the witness, the average net income from 2006 to 2023 was 
$1.23 per cwt, on an average milk production of 995,115 cwt, yielding 
an average net income of approximately $1.2 million. The witness later 
stated that a 3,300-milking cow herd would require an investment of 
approximately $40 million.
    An economist from Cornell University, on behalf of NMPF, testified 
on the topics of dairy farm profitability, cost of production measures, 
and farm data from the Cornell Dairy Farm Business Summary, Michigan 
State University, and the University of Wisconsin. The witness warned 
that setting make allowances ``too high'' would lead to unwarranted 
investments in processing facilities while setting make allowances 
``too low'' would lead to insufficient plant investments and 
cooperative deductions on member milk checks.
    Numerous dairy farmers testified in support of Proposal 7, 
recognizing the need for increased make allowances despite what they 
acknowledge would be a decrease in FMMO producer prices. These 
witnesses testified to recent decreased farm margins due to a declining 
All-Milk Price, falling net pay prices, higher feed costs, and 
increasing production costs, leading to near negative operating 
incomes. While make allowance increases would hasten this trend, the 
witnesses said, Proposal 7 accounts for these factors, balancing 
producer and processor needs. Multiple witnesses expressed doubt in the 
available manufacturing cost survey data due to its voluntary and 
unaudited nature, as well as observations of cheese manufacturing 
profitability and continued investment.
    Dairy farmer witnesses testified that inadequate make allowances 
have disadvantaged dairy farmer-members of cooperatives who own 
manufacturing plants compared to dairy farmer-members of cooperatives 
who own no plants. Several dairy farmer witnesses said that the 
prevalence of market adjustment deductions from their member milk check 
signifies negative returns on the cooperatives manufacturing assets due 
to inadequate make allowances. Another dairy farmer testified 
processing costs for Agri-Mark's four manufacturing plants producing 
cheese, butter, NFDM, and whey have increased by an average of 20 
percent since 2008, and insufficient make allowances have resulted in 
deductions to member milk checks to cover processing costs. According 
to the Agri-Mark witness, this has led to disorderly market conditions, 
which impair plant investment and disadvantage cooperative members. A 
CDI dairy farmer witness testified to the financial difficulties of 
operating CDI's balancing plants given current make allowance levels.
    A witness from the Milk Producers Council (MPC), an organization 
representing California dairy farms, testified Proposal 7's proposed 
make allowances balance producer and processor needs. The witness said 
the cost survey information entered into evidence is of limited value 
due to its voluntary, unaudited nature and the lack of transparency in 
cost allocation for multi-product plants. The witness argued 
differences between the All-Milk Price and the Mailbox Price indicate a 
need for increased make allowances and a guideline to the resulting 
impact on producer pay prices, currently estimated at $0.75 per cwt.
    In its post-hearing brief, NMPF reiterated its arguments for 
adopting the make allowance levels contained in Proposal 7, writing it 
is the only option accounting for an increased cost in manufacturing 
while protecting producer pay prices. NMPF stated there has never been 
a make allowance adjustment greater than $0.35 per cwt, and the changes 
contained in Proposal 7 would decrease farmer milk prices by 
approximately $0.50 per cwt.
    NMPF presented in its brief the aggregated costs cooperatives with 
manufacturing capacity shared on the record, emphasizing the increases 
across cost categories since make allowances were last updated. While 
the need to update make allowances to reflect higher costs is 
necessary, NMPF stated, the data on the record is not sufficiently 
comprehensive, verifiable, or unambiguous to determine make allowances 
above those offered in Proposal 7. In its post-hearing brief, Agri-Mark 
reiterated support for Proposal 7 as the most balanced approach to 
updating make allowances, despite acknowledging the proposed levels are 
not sufficient to cover all manufacturing costs.
    Opponents to Proposal 7, primarily representatives for IDFA or 
WCMA, echoed similar concerns from cooperative manufacturers regarding 
inadequate make allowances, claiming the inability to recover 
manufacturing costs on wholesale commodity products has led to a lack 
of investment in manufacturing capacity. These witnesses testified on 
the importance of make allowances fully covering manufacturing costs, 
rather than a portion of costs as proposed in Proposal 7. Witnesses 
testified that continued capital investment in plant yield and 
efficiency gains have not fully countered the effects of insufficient 
make allowances as costs have continued to increase. Without make 
allowances accurately reflecting costs, the witness said, manufacturers 
receive inaccurate financial signals, which impact investments, capital 
distribution, and FMMO pooling decisions. Additionally, they argued the 
competitive advantage gained by manufacturing plants not regulated by 
an FMMO leads to more investments into operations unaffiliated with the 
FMMO system. Only make allowance increases that reasonably cover 
commodity product manufacturing costs, according to these witnesses, 
can counteract these effects.
    In its post-hearing brief, IDFA reiterated opposition for Proposal 
7, writing that the proposed make allowance levels are inadequate and 
not grounded in observed data. IDFA stressed that make allowances are 
defined as covering the entire cost of converting raw milk to a given 
dairy product, not a portion. In its brief, IDFA pointed to NMPF's 
recognition that Proposal 7's make allowances do not fully cover actual 
costs but instead represent a balance dairy farmers can withstand. IDFA 
objected to the consideration of farm production costs when determining 
make allowance levels. IDFA reiterated FMMOs are not a price support or 
income support program, and the prices must reflect the market price of 
end-dairy products. IDFA explained manufacturers cannot raise the 
prices of commodity dairy products to offset higher manufacturing costs 
because the wholesale prices are captured in the NDPSR and would raise 
the reference price by the same amount. In its post-hearing brief, AMPI 
reiterated opposition for Proposal 7 as failing to reflect 2022 
manufacturing costs. AMPI argued that USDA should not delay increasing 
make allowances on the possibility that legislation will give

[[Page 95479]]

USDA the authority to conduct a mandatory audited survey.
    A witness from DIC testified in support of Proposals 8 and 9. The 
witness testified that setting minimum prices too high incentivizes 
excess milk production, while a low minimum price through higher make 
allowances allows for over-order premiums to set a competitive market 
price. The witness argued Class III and IV prices should allow 
manufacturing plants to clear the market and operate profitably.
    The DIC witness entered data concerning its 2022 California dairy 
manufacturing cost forecast (2022 CA Forecast). The witness testified 
the 2022 CA Forecast used a combination of 2003-2016 California 
Department of Food and Agriculture (CDFA) data, state and national 
indices, and market developments to measure how changes in labor, 
utility, and other costs historically moved the actual CDFA cost data. 
The model then used that information to forecast California-specific 
2017-2022 manufacturing costs, according to the witness. According to 
the witness, while the model forecasts costs, the range of actual costs 
around those forecasts could be relatively wide given the relatively 
few observations (14 years) used to estimate the model. For example, 
the expert witness elaborated, CDFA only collected dry whey costs until 
2006, when they surveyed fewer than three dry whey plants, which is why 
the CA analysis did not forecast dry whey costs. The DIC witness opined 
the best approach to determine manufacturing allowance levels is using 
observed cost data but offered the 2022 CA Forecast as another 
methodology for use with the other cost surveys and testimony 
presented.
    An IDFA witness testified in support of Proposals 8 and 9, stating 
make allowances should be updated to reflect increased costs in 
manufacturing dairy products. While end-product-prices change monthly 
to reflect the current market, the witness said, make allowances are 
fixed at 2006 cost levels, forcing dairy manufacturers to lose money or 
stop production. The witness stressed the need for relief from the 
current inadequate make allowances that do not reflect rising industry 
costs, adding losses are not sustainable for plants or dairy farmers 
who depend on these manufacturing outlets for their milk. The witness 
explained IDFA's proposed make allowances are simple averages of the 
2023 survey and 2022 CA Forecast plus a $0.0015 marketing cost.
    The IDFA and WCMA witnesses asserted accurate make allowances need 
to be adopted quickly as current make allowances are based on 2005/2006 
cost data. The IDFA witness clarified their staggered implementation 
proposal, which would implement proposed year 1 levels shortly after 
the final decision is published. According to both IDFA and WCMA 
witnesses, the staggered implementation is designed to recognize the 
impact significant make allowance increases would have on producer 
prices. However, if there is any delay in implementing changes, both 
witnesses stressed the staggered implementation approach should be 
abandoned and the proposed year 4 levels should be implemented.
    The WCMA witness stated the use of audited California manufacturing 
cost data in the 2022 CA Forecast should alleviate any data validity 
concerns; further, the 2023 survey methodology follows precedent used 
to determine the current make allowance levels. The witness noted the 
risk of using a simple average of the 2022 CA Forecast and the 2023 
survey to determine proposed make allowances is the potential of the 
result being skewed towards California costs, since California plants 
are represented in both surveys.
    A dairy farmer witness, who is a member of AMPI, testified on 
behalf of IDFA and expressed support of Proposals 8 and 9. The witness 
testified that AMPI, who participated in the 2023 survey, experienced 
cheese manufacturing costs close to the study average despite plant 
sizes that were smaller than the survey average plant size. According 
to the witness, their manufacturing costs of bulk cheese products are 
47 percent higher and general plant expenses are up 62 percent in 2022, 
compared to 2008.
    Several dairy manufacturer witnesses representing Hilmar Cheese 
Company (Hilmar), Glanbia, Saputo, and Leprino testified in support of 
Proposals 8 and 9. Hilmar is a cheese and whey manufacturer with 
processing locations in California and Texas. According to these 
witnesses, dairy processing costs have increased, particularly of late 
because of inflation, noting Hilmar's natural gas costs were 45.1 
percent above the 20-year average. The Saputo witness echoed testimony 
on increasing costs, citing the St. Louis Federal Reserve data series 
for labor, energy, packaging, and maintenance costs. The witness said 
these costs, comprising 20 percent of the total cost to manufacture a 
finished cheese product, rose 60 percent, on average since 2006. 
According to the Saputo witness, its manufacturing costs align with the 
2021 and 2023 survey results. The Hilmar witness testified their 
manufacturing cost increases correlate with the results of the 2022 CA 
Forecast. The Leprino witness stated the 2021 survey and 2023 survey 
had robust participation, and the 2022 CA Forecast, which used CDFA 
audited mandatory data, leveraged a widely accepted statistical 
modeling approach. All four witnesses stressed the urgency of updating 
make allowances. The manufacturer witnesses generally agreed that 
inaccurate make allowances distort pricing signals for farmers, 
processors, and ultimately consumers.
    Witnesses representing Nasonville Dairy and Cedar Grove Cheese, two 
proprietary specialty and commodity cheese manufacturer members of 
WCMA, testified to rising manufacturing costs by outlining costs in a 
similar manner to the 2021 and 2023 surveys. According to the 
witnesses, their costs have risen $0.3226 and $0.77 per pound, 
respectively, far beyond the fully implemented Proposal 8 levels. The 
witnesses testified that insufficient make allowances negatively impact 
cheese processing investments and increase the production of higher-
cost specialty products unable to play the same balancing or 
foodservice roles as commodity products. They added current make 
allowance levels impair the ability of proprietary manufacturers to 
participate in the FMMO pool and deprives producers the benefits of 
having their milk pooled.
    In their post-hearing briefs, WCMA and IDFA reiterated their 
support for Proposals 8 and 9. IDFA wrote that USDA has consistently 
set make allowances to reflect the most recent and reliable actual cost 
data, using multiple surveys, as in Proposals 8 and 9. Further, IDFA 
stressed in its brief, the 2023 survey is the most robust of all of the 
author's previous surveys used to set make allowances. IDFA refuted the 
notion the 2022 CA Forecast is inappropriate to use for determining 
make allowances, explaining the underlying data is robust audited 
California manufacturing data and the econometric techniques are widely 
accepted. IDFA contended that the 2022 CA Forecast and 2023 survey 
averages are lower than the cooperative manufacturing costs shared on 
the record. Even if inflation has subsided since 2022, IDFA added in 
its brief, there would have to be deflation to arrive below pre-2022 
levels.
    IDFA clarified in its brief the proposed schedule for phasing in 
make allowance changes, which is designed to accommodate farmers. When 
addressing implementation timing, IDFA refuted the CME's points about 
incorporating risk management in the timing of implementation, arguing 
that CME's

[[Page 95480]]

interests do not necessarily align with those of the broader dairy 
industry because of the fee revenue they generate.
    In its brief, IDFA emphasized the destabilizing effect of current 
make allowances on processors and farmers. IDFA shared charts from the 
hearing, showing how the Mailbox Price is in close proximity to FMMO 
blend price, which it says indicates FMMO prices are too high. IDFA 
refuted NMPF's argument that Proposals 8 and 9 will result in a $1.42 
per cwt decrease in the All-Milk Price because FMMO prices are minimum 
prices and don't reflect premiums received. Further, IDFA wrote in its 
brief that dairy farmers whose cooperatives own processing facilities 
are receiving depressed prices when make allowances are too low.
    IDFA said the best method to update make allowances is through a 
mandatory and audited USDA survey; however, USDA does not currently 
have the authority and IDFA estimates it would take approximately five 
years before new make allowances could be adopted once the authority 
was granted. IDFA reiterated arguments that make allowances under-
representing actual costs harm both dairy farmers and manufacturers.
    In its post-hearing brief, AMPI reiterated support for the make 
allowance levels in Proposals 8 and 9, contending they accurately 
reflect the changes in costs. AMPI added it supports immediate 
implementation, rather than the phased 4-year approach. AMPI wrote the 
2023 survey had the largest product volumes of any previous surveys and 
highlighted other manufacturing cooperative testimony describing 
increased manufacturing costs. AMPI opined continued high manufacturing 
costs and farm bill delays have made make allowance updates more 
urgent.
    Leprino's post-hearing brief reiterated its support of Proposals 8 
and 9, emphasizing the importance of implementing make allowance 
changes immediately. Leprino stressed 2023 cost levels have continued 
to climb and offered its own updated cost increases, compared to 2022: 
11 percent for labor, 17 percent for property insurance, and 9 percent 
for liability insurance.
    A witness representing the AFBF testified in opposition to 
Proposals 8 and 9, opining the 2021 and 2023 survey data may be biased 
due to its unaudited nature and the known potential to be used for 
rulemaking, stating the incentive to overestimate reported costs for 
commodity goods disqualifies this voluntary data. The witness testified 
only the 2016 CDFA survey results can be verified as accurate enough to 
be used for determining make allowances. According to the witness, the 
relatively complicated 2022 CA Forecast model using a small number of 
observations (14 years) to forecast 2022 costs (6 years out from the 
actual data) could be overfitted to the 2000-2016 data and unreliable 
to predict future costs.
    Numerous dairy farmer witnesses testified in opposition to 
Proposals 8 and 9, focusing on the negative effect significant make 
allowance increases would have on producer pay prices. A DFA farmer 
witness from New Mexico testified the make allowance increases 
contained in Proposals 8 and 9 would result in negative operating 
income over the next 10 years, making continued operation of their farm 
unsustainable. The witness said any make allowance increases would 
severely and disproportionally impact producers in the southwest due to 
the share of milk going into manufacturing products. A LOL dairy farmer 
testified significant increases in make allowances would be difficult 
for farms in California to absorb, where water scarcity has led to high 
forage costs. According to the witness, large make allowance increases 
would put adequate milk supply at risk, all the while guaranteeing 
profit for commodity manufacturers and leading to over production of 
manufactured dairy products.
    Two dairy farmer witnesses, a member of the CDC and a small 
Maryland dairy farmer, testified against increases in make allowances 
due to the impact on producer pay prices and lack of accounting for 
dairy farm production costs. According to the witnesses, while 
processors can pass on costs to customers up the supply chain, producer 
margins are too thin to sustain substantial price decreases from 
increased make allowances. The witnesses testified that further 
declines to producer margins will cause more producer exits and 
disruption to the milk supply. According to a dairy farmer witness 
representing Edge, any change in make allowances should require a 15.5-
month delay, be restrained by the impact on producer pay prices, and 
cover only the most efficient plants.
    In its post-hearing brief, NMPF reiterated its arguments in 
opposition to Proposals 8 and 9. NMPF argued that these proposed 
changes would decrease dairy farmer milk prices by approximately $1.45 
per cwt, further narrowing producer margins and causing disorderly 
marketing.
    NMPF cited ongoing plant investment as an indication current make 
allowances are not too low as portrayed by proprietary manufacturers. 
NMPF emphasized proprietary manufacturers are not required to be 
regulated and, thus, can choose not to participate in the FMMO and 
avoid paying minimum prices they contend are too high because of 
inadequate make allowance levels. NMPF opined about the lack of 
evidence to merit raising make allowances to levels contained in 
Proposals 8 and 9.
    In its brief, NMPF refuted the studies used as a basis for 
Proposals 8 and 9. NMPF cited hearing testimony regarding the 
insufficiency of some plant sample sizes in the 2023 survey. Further, 
NMPF argued the 2023 survey does not capture how manufacturing costs 
are skewed by plants that serve a balancing role. NMPF stated if make 
allowances are set too high, balancing plants would be incentivized to 
run at maximum capacity, rather than running at less than full capacity 
to provide critical balancing services to the market. NMPF voiced 
concerns with the 2022 CA Forecast, noting the proposed make allowances 
in Proposals 8 and 9 are duplicative since the 2023 survey included 
California data. Further, NMPF opined that the 2022 CA Forecast is of 
little utility as it did not account for basic changes to the 
California dairy manufacturing sector since 2016, such as plant 
openings and closings and productivity improvements.
    In its post-hearing brief, Select also opposed Proposals 8 and 9, 
on the basis of the 2022 CA Forecast being inappropriate to use in 
determining make allowances. Select echoed NMPF's argument that use of 
the forecast would be duplicative of California data. Further, Select 
argued indexing does not account for improvements to plant efficiencies 
and the Department has not previously used indexing to determine make 
allowances.
    In its brief, the AFBF opposed any increase to make allowances, 
instead advocating they only be increased once a mandatory, audited 
cost survey was administered by the Department. The AFBF opined that 
both the 2021 and 2023 surveys were biased because there was a clear 
intention the surveys would be used in a rulemaking proceeding. The 
AFBF opposed the use of indexing to set make allowances, as was done in 
the 2022 CA Forecast, because it fails to recognize productivity 
improvements over time. The AFBF echoed other brief arguments that 
continued processor investment is evidence that make allowances are not 
too low.
    The Midwest Dairy Coalition (MDC), an alliance of six dairy farmer-
owned cooperatives operating in the Midwest,

[[Page 95481]]

filed a post-hearing brief stating make allowance updates are long 
overdue, but took the position the Department should be granted 
legislative authority to conduct a mandatory and audited cost survey. 
MDC did not offer support or opposition to any make allowance related 
proposals. In its post-hearing brief, Edge also did not support or 
oppose any make allowance related proposals but cautioned against 
setting make allowances too high. Until there is a mandatory and 
audited USDA-administered survey, Edge stated, the Department should 
err on the side of caution to not subsidize commodity manufacturing.
    In its post-hearing brief, Select offered an alternative 
methodology for determining the make allowance levels using what Select 
argued was the most reliable record data. Select suggested taking the 
average of the 2021 survey and 2023 survey, subtracting the current 
make allowance level, and taking half that difference to add to current 
make allowance levels. As a result, Select proposed the following: 
cheddar cheese, $0.2281; butter, $0.2004; NFDM, $0.2260; and dry whey, 
$0.2498.
    In its post-hearing brief, CME noted any make allowance changes 
would be considered material changes, and USDA should consider an 
implementation timeframe that mitigates risks to those involved in 
futures and options trading.
b. Yield Factors
    Submitted by Select, Proposal 10 seeks to amend the cheese price 
formula by increasing the butterfat recovery rate in the cheese yield, 
from 90 to 93 percent. A Select witness testified in support of 
Proposal 10 and clarified a butterfat recovery rate of 93 percent would 
also necessitate an increase in the butterfat yield factor in the 
protein price formula from 1.572 to 1.624. According to the witness, 
these changes would result in a modest increase in the Class III price, 
estimated at $0.04 per cwt. The witness stressed USDA should not be 
guided by price impacts but rather by achieving formulas to better 
reflect manufacturing realities and the actual value of raw milk. 
Select reiterated support for this proposal in its post-hearing brief.
    An independent expert witness, retained by Select, testified 
advancements in vat technology, coagulants, and curd handling have 
enabled manufacturers to achieve recovery rates higher than the 
currently assumed 90 percent. The witness described how modern, 
horizontal vats attain butterfat recoveries far exceeding both open and 
enclosed horizontal vats, and how most commodity cheddar manufacturers 
use advancements in coagulants and curd handling to attain greater than 
93 percent butterfat recovery. Additionally, the witness said, whey 
cream can be reintroduced into the cheesemaking vat to increase cheese 
yield and revenue, ultimately increasing butterfat recovery.
    In its post-hearing brief, the AFBF wrote in support of Proposal 10 
to increase the butterfat recovery factor. The AFBF pointed to evidence 
on the record of increasing plant efficiencies, justifying updating the 
butterfat recovery factor to the level in Proposal 10.
    Six witnesses, representing Glanbia, Leprino, IDFA, CDI, DIC, and 
MPC, testified in opposition to Proposal 10. The Glanbia witness 
described a broad range of industry fat recovery based on plant age and 
processing techniques, and acknowledged many modern plants, including 
Glanbia plants, can achieve 93 percent cheddar fat recovery. The 
witness testified Proposal 10 is being offered to enhance prices while 
ignoring other parts of the formula that overvalue milk. The witness 
contended lost solids within the manufacturing plant and the discounted 
price of whey cream, should they be considered, outweigh the effects of 
Proposal 10 on milk prices. The Leprino witness testified any changes 
to the yield factor should only occur after a comprehensive review of 
all yield assumptions. The witness agreed 93 percent butterfat 
retention is achievable in some plants but does not believe it is 
possible across the entire industry.
    The IDFA witness contended Proposal 10 takes a piecemeal approach 
to changes in the yield formula and selectively focuses on dairy farmer 
revenue enhancements only. The witness opined whey cream is overvalued 
in the current formula, as butterfat not going into cheese is currently 
valued as Grade AA butter despite regulation that whey cream cannot be 
used in Grade AA butter. According to the witness, whey cream is 
discounted 20 percent or more compared to fresh cream. In addition, the 
witness claimed, in-plant milkfat losses are not recognized in the 
current formula, something that should be considered when evaluating 
yield factor changes. The witness testified any decreases in the Class 
III prices that result from accurately accounting for both processing 
losses and whey cream values would more than offset the increases in 
Class III prices proposed by Select.
    A witness from the Center for Dairy Research (CDR), appearing on 
behalf of IDFA, testified to observing improvements in butterfat 
retentions over the past 40 years, mostly due to improved vat design 
and technology. The CDR, with a dairy plant on the University of 
Wisconsin-Madison campus, supports the U.S. dairy industry with 
expertise in cheese, dairy ingredients, cultured products, dairy 
beverages, quality/safety, and dairy processing. The witness noted a 
range of butterfat losses at the cutting stage including 9 to 10 
percent fat loss in open vats, 7 percent fat loss in Double O vats, 6 
percent fat loss in horizontal vats, and 5 percent fat loss in modern 
vats. While large modern plants are installing newer, more efficient 
vats, the witness claimed, old, less efficient vats are not leaving 
production, and are being repurposed and installed in medium and small 
plants throughout the country. The witness noted there is still a large 
variety of vats being using in the industry and stressed the latest vat 
design does not ensure optimal butterfat retention, as the experience 
of the cheesemaker and product handling practices could also lower 
butterfat recovery.
    Based on current observations and work within the industry, the CDR 
witness provided best estimates for fat recoveries in cheddar 
cheesemaking as 91 to 93 percent retention in well-run factories with 
modern vats, 90 to 92 percent retention in well-run factories with 
vertical Double O vats, and 88 to 91 percent retention in factories 
with open vats. The witness said, based on their experience, 91 percent 
could be considered the industry average butterfat recovery for cheddar 
cheese plants.
    A CDI witness, appearing on behalf of NMPF, testified to the lack 
of yield data available to support the proposed recovery rate contained 
in Proposal 10. The witness supported a tempered update to the cheese 
make allowance that does not include an update to the yield factor. A 
witness representing DIC testified the current 90 percent butterfat 
recovery rate is reasonable because, despite some newer, more efficient 
plants achieving higher fat recovery, older plants may not be able to 
achieve the higher rates. The DIC witness stated fat recovery data is 
lacking across the industry and further asserted the current 90 percent 
butterfat recovery should be retained. The witness representing MPC 
testified the current formula should remain in place until the industry 
tackles the mechanics of the Class III formula, and the big issue is 
how butterfat not being retained in the cheesemaking process is valued.
    A witness representing AMPI provided testimony supporting the 
improvement seen in butterfat recovery

[[Page 95482]]

due to new vat technology. According to the witness, AMPI installed 
cheesemaking equipment that facilitates the recovery of fat; however, 
they did not provide specific data.
    Submitted by Select, Proposal 11 seeks to eliminate farm-to-plant 
shrinkage from the yield factors in the FMMO Class III and IV price 
formulas. A witness appearing on behalf of Select testified USDA's 
decision to include shrinkage in the formula was premised on the 
concept that such losses were not in the handler's control and are 
unavoidable and common. The Select witness opined that producers, 
cooperatives, and handlers do have the ability to address and stem 
losses in the transportation of milk from the farm to the plant. The 
witness said, historically, as the number of farms on a milk route 
increased, the probability for discrepancies between farm weights and 
plant weights also increased, as each stop offered potential for 
spillage, loss within piping, and errors in measurement. The witness 
shared statistics on the increasing size of U.S. dairy farms, stating 
that in 2016, three-quarters of all U.S. milk production came from 
farms that could fill a full tanker, whereas in 2000, less than half of 
U.S. production came from farms filling a full tanker. The witness 
estimated 80 percent of the current milk volume in the U.S. comes from 
farms able to fill full tankers on every-other-day pickup schedules. 
Consequently, the witness said, the occurrence of shrinkage is 
decreasing. As an example, the witness explained, Select's members are 
large enough to ship full tanker loads of milk, meaning Select does not 
experience the same risks of milk loss which occur on multi-stop 
routes.
    Other than milk losses occurring with hoses, the Select witness was 
unaware of any inherent, unavoidable, farm-to-plant losses that could 
occur within the pick-up process. The witness said even farms without 
the ability to fill a tanker can adopt farm scales, flow measurement, 
and other technologies to minimize imprecision and inaccuracy. The 
witness testified the cost of implementing these improvements would be 
offset by the anticipated price impacts of adopting Proposal 11, which 
the witness estimated to be $0.07 per cwt.
    A second Select witness presented an analysis of Select plant data 
from August 2022 to July 2023, representing 171,240 milk shipments and 
a total of 9.8 billion pounds. The witness stated approximately half of 
their customers do not report plant weights back to Select. For those 
plants who do report, the witness said reported plant weights exceeded 
farm weights about half of the time. The witness stated non-shrink 
factors, such as scale calibration or weather, typically cause the 
large discrepancy between farm and plant weights. The witness concluded 
that for the subset of loads where differences occurred between farm 
and plant weights, the net variance across all loads was less than 0.1 
percent.
    A witness testifying on behalf of Continental Dairy Facilities 
(CDF) and Continental Dairy Facilities Southwest (CDF SW), two wholly 
owned subsidiary plants of Select in Michigan and Texas, manufacturing 
NFDM, butter, and buttermilk powder, presented farm-to-plant loss data 
to support Proposal 11. The witness analyzed farm-to-plant losses in 
milk deliveries to the two CDF facilities from August 2022 through July 
2023, comprised of both single and multi-farm pickups. The witness 
stated that in total, plant weights averaged 0.15 percent lower than 
farm weights for CDF and 0.10 percent lower for CDF SW. The 
discrepancies ranged from a negative 0.32 percent (plant weights were 
0.32 percent lower than farm weights) to 0.67 percent (plants weights 
were 0.67 percent lower than farm weights). Since many of the non-
Select shipments to CDF are multi-farm pickups, the witness said 
management for farm-to-plant shrink is not unique to Select or larger 
farms, generally. The witness described improperly calibrated scales, 
input or transposition errors by milk haulers, changes in equipment or 
personnel when weighing loads, or snow settled on scales or tanks when 
weighing, as reasons for weight discrepancies. The witness testified 
these variances are not inherent and can be addressed. Select 
reiterated its arguments supporting Proposal 11 in its post-hearing 
brief.
    The AFBF expressed support for Proposal 11 in its post-hearing 
brief. The AFBF contended that data on farm-to-plant shrinkage 
contained in evidence is similar to what was used to determine the 
original farm-to-plant shrinkage factor. The AFBF argued that this 
issue does not merit a formal data collection, but a one-time 
adjustment to reflect that farm-to-plant shrinkage is much less 
significant than it used to be.
    Five witnesses representing IDFA, Leprino, CDI, DIC, and MPC 
testified in opposition to Proposal 11. The witnesses asserted Select's 
minimal farm-to-plant shrinkage is not the reality for much of the 
dairy industry, noting the lack of industry-wide data on farm-to-plant 
shrinkage and the differing nature of measuring components at the farm, 
rather than at the plant, are reasons Proposal 11 should not be 
adopted. The witnesses further testified FMMO yield factors should not 
be based on one company's experience, especially one, they argued, that 
was an industry leader in this area.
    The Leprino witness testified that while Select has been able to 
limit their own farm-to-plant loss through increasing herd sizes and 
improvements in milk weighing and sampling, this is not a 
representation of the nationwide dairy industry. Additionally, the 
witness argued that the scientific characteristic of milk fat clinging 
to the walls of stainless steel has not changed; as such, volume and 
fat loss still occur, even at the most innovative plants. The IDFA 
witness claimed less than 10 percent of all farms produce enough milk 
to fill entire tanker loads, so it is reasonable to conclude the losses 
experienced when the formulas were adopted are still happening today. 
According to the witness, failure to account for the diversity of farm 
size may further incentivize manufacturers to prefer larger farms over 
smaller farms.
    Submitted by Select, Proposal 12 recommends amending the nonfat 
solids price formula by increasing the NFDM yield factor from 0.99 to 
1.03. A Select witness, testifying in support of Proposal 12, said it 
would correct the NFS yield factor by including the value of milk 
solids utilized in buttermilk powder, as they said producers are not 
currently paid accurately from a price calculated on NFDM prices alone. 
According to the witness, a proper yield factor for NFDM should account 
for all milk solids, including the milk solids remaining in cream after 
separation and used in butter or buttermilk. The witness stressed the 
initial NFS formula, correctly adopted in 2000, included buttermilk 
powder.
    A witness for CDF and CDF SW testified on price alignment and 
processing differences between NFDM and buttermilk powder. The witness 
stated sales and regional prices observed at the two plants for 
buttermilk powder and low-heat NFDM are closely aligned, as well as 
consistent with prices reported by AMS' Dairy Market News (DMN) from 
January 2023 through June 2023. Further, according to the witness, the 
process of drying buttermilk utilizes the same equipment as that of 
drying skim milk but requires a thorough cleaning of equipment when 
changing product lines, higher temperature, and additional drying time 
due to buttermilk's higher butterfat content. The witness said this 
leads to increased utility costs of approximately $0.02. The witness 
testified the NFS yield factor should consider all powder products, 
including buttermilk powder whose

[[Page 95483]]

yield is lower than NFDM. Select reiterated its arguments in support of 
Proposal 12 in its post-hearing brief.
    In its post-hearing brief, the AFBF expressed support for Proposal 
12 as it believes it reflects the long-term market shift toward valuing 
buttermilk near the NFDM price. The AFBF stated that a formal extensive 
data collection is not necessary for this proposal to be adopted 
because there is a clear record of buttermilk values.
    Two witnesses, representing Leprino and IDFA, testified in 
opposition to Proposal 12. The witnesses testified Proposal 12 is based 
upon a theoretical yield approach which assumes a perfect system with 
no in-plant component losses in the conversion of NFS to NFDM. The 
witness said in-plant losses exist even in the most modern and 
efficient manufacturing facilities and should be recognized in the 
price formulas. The witnesses gave an example of the portion of NFS 
remaining in cream after separation, which cannot be processed into 
NFDM. The Leprino witness argued the FMMO system is predicated on the 
notion processors should pay for milk based on the revenue they can 
derive from selling products manufactured from that milk. The witness 
said milk routinely lost in processing does not end up in finished 
products, which should continue to be accounted for in the formulas. 
The IDFA witness testified product yields should incorporate 
manufacturing losses, and overestimating the quantity of NFDM 
manufactured from NFS by accounting for buttermilk powder would 
overvalue the market-clearing of NFDM and contribute to disorderly 
marketing.
    A witness from CDI testified on behalf of NMPF in opposition to 
Proposal 12. The witness testified CDI supports evaluating all factors 
in the Class III and IV formulas, and yield factors should only be 
updated once industry-wide data on product yields are available. The 
witness stated the NFS price formula is based on NFDM and the yield 
factor correctly reflects the yield of NFDM only, without an adjustment 
for buttermilk powder. The witness said Proposal 12 would adjust the 
NFDM yield factor to represent a composite yield for multiple products 
which differ in terms of component composition, uses, cost of 
manufacture, and market prices. While acknowledging buttermilk powder's 
processing costs are likely higher than NFDM's, the CDI witness 
testified there was not enough data to quantify the difference in 
processing costs; further, data presented from DMN and by Select 
witnesses are not sufficient to determine the alignment of prices 
between buttermilk powder and NFDM. The witness clarified that buyers 
of butterfat and NFS must account for all solids utilized at the 
minimum component prices, regardless of whether the solids are used in 
the surveyed products of butter and NFDM or in other Class IV products 
such as buttermilk powder.
    A witness from the DIC testified in opposition to Proposal 12. 
According to the witness, while NFDM yields are likely higher than the 
current yield factor of 0.99, not all NFS in producer milk end up in 
NFDM, with some NFS from cream remaining in buttermilk. The DIC witness 
claimed the lower yield factor is to compensate for generally lower 
buttermilk powder prices compared to NFDM but acknowledged DMN data 
suggested a buttermilk powder price discount relative to NFDM narrowing 
in recent years. A witness from MPC testified in opposition to Proposal 
12, stating they were opposed largely due to a lack of adequate data.
    In their post-hearing briefs, IDFA and NMPF opposed Proposals 10, 
11, and 12. IDFA argued the three proposals are not representative of 
industry-wide experience, but rather on what is possible given modern 
technology and equipment. NMPF echoed IDFA's opposition in its brief, 
citing insufficient data to justify the proposed changes. IDFA 
specifically objected to Proposal 11, stating it would place an unfair 
burden on small farms that cannot fill a tanker and, thus, continue to 
experience shrinkage. Proposal 11 was also opposed by WCMA in its post-
hearing brief. Lastly, IDFA contended Proposal 12 should be rejected 
because it overvalues buttermilk powder.

Base Class I Skim Milk Price

    Six proposals to amend the base Class I skim milk price were 
considered in this proceeding. Proposal 13, submitted by NMPF, seeks to 
return the base Class I skim milk price to the higher-of the Class III 
or Class IV advanced skim milk price, referred to as the ``higher-of'' 
mover. Proposal 14, submitted by IDFA, would use an average of the 
advanced Class III and Class IV skim milk prices, plus an adjuster that 
resets every January. The adjuster would be the higher of either: (1) 
$0.74; or (2) the 24-month average difference between the higher-of and 
the average-of the advanced Class III and Class IV skim milk pricing 
factors. The 24-month calculation would run from August of the three 
years prior to July of the previous year. Proposal 15, submitted by 
MIG, would amend the current average-of mover from a $0.74 adjuster to 
a monthly rolling average adjuster calculated as the difference between 
the higher-of and the average-of, for 24 months, with a 12-month lag.
    Proposal 16, referred to as ``Class III plus,'' submitted by Edge, 
would start with the announced Class III price and incorporate a 36-
month rolling adjuster averaging the monthly differences between the 
higher-of the advanced Class III or advanced Class IV skim milk prices, 
and the Class III skim milk price. The proposal would eliminate 
advanced prices. Proposal 17, also submitted by Edge, would return to 
the higher-of mover but would use announced rather than advanced 
prices. Proposal 18, submitted by the AFBF, would return to the higher-
of mover and would eliminate the advanced pricing of Class I skim milk, 
Class I butterfat and Class II skim milk.
    An NMPF witness testified in support of Proposal 13. The witness 
reviewed the 2000 Federal Order Reform (Order Reform) rulemaking and 
summarized the higher-of methodology as accurately reflecting the value 
of the different milk use categories and ensuring shifts in demand for 
any one manufactured product does not lower Class I prices. The witness 
said the Department determined during Order Reform that the higher-of 
mover addresses disorderly marketing by reducing volatility in milk 
prices, reducing class price inversions and depooling, and assisting 
Class I handlers in competing for a milk supply.
    The NMPF witness testified the 2019 change to the average-of was 
designed to facilitate price risk management strategies for fluid milk 
processors, which, the witness stated, is not an objective of FMMOs. 
The witness said the intent of the change was to be roughly revenue 
neutral, while allowing handlers to better manage volatility in monthly 
Class I skim milk prices using Class III and Class IV milk futures and 
options contracts. The witness claimed the 2019 change has not 
functioned as intended or anticipated by NMPF, has exacerbated 
disorderly marketing conditions, has not been revenue neutral, and will 
continue to have deleterious effects on the dairy industry. The witness 
described the asymmetrical risk to producers which was not anticipated 
when the mover change occurred. The witness explained the higher-of 
exceeds the average-of calculation whenever the Class III and IV 
advanced skim milk pricing factors differ by more than $1.48 per cwt, 
regardless of which factor is higher. The witness noted the reverse is 
true when the advanced skim pricing factors differ by less than $1.48 
per cwt.

[[Page 95484]]

    A witness from Southeast Milk, Inc. (SMI), an NMPF cooperative 
member with 114 dairy farmer members, testified that when the two 
advanced skim milk pricing factors are equal, the maximum amount by 
which the average-of can exceed the higher-of Class I mover is $0.74 
per cwt, but there is no limit by which the average-of can fall below 
the higher-of Class I mover. The NMPF witness testified that in 2020 
and 2022, there were instances when the average-of mover fell below 
what the higher-of mover would have been, in which the difference was 
at times significant. The witnesses testified the maximum divergence 
recorded between the current average-of mover and the higher-of mover 
was a $5.19 lower average-of mover in December 2020, when Classes II, 
III, and IV skim prices differed by approximately $11 per cwt. In 
comparison, the witness said, the maximum gain during that time was 
capped at $0.74. The SMI witness said because the upside is capped, but 
the downside is not, it is difficult to ever return to revenue 
neutrality under the average-of mover.
    The SMI witness testified the average-of mover has lowered dairy 
farmer revenue compared to what they would have received under the 
higher-of mover, with estimated cumulative market losses totaling 
$998.3 million from May 2019 through August 2023. The witness said that 
for the same period, the average-of mover decreased revenue to the 
southeastern FMMO producers by more than $192 million. The NMPF witness 
reviewed data during periods of relative price stability, revealing the 
average-of mover generated modest gains over the higher-of mover. 
However, in periods of price volatility, there were substantial revenue 
losses in months when the average-of mover was less than the calculated 
higher-of mover, which resulted in significant cumulative losses to 
producers over time.
    The NMPF witness claimed the change to the average-of mover 
increased disorderly marketing by reducing Class I prices relative to 
the other classes and creating greater incentives for handlers to 
depool milk. The witness said that in 2020, the enhanced demand for 
cheese relative to the demand for butter and NFDM widened the spread 
between Classes III and IV well beyond $1.48, substantially lowering 
Class I prices compared to what they would have been under the higher-
of mover. The SMI witness testified that between May 2019 and June 
2023, the Class III skim value exceeded the Class IV skim value by over 
$1.48 per cwt in 16 months, and the Class IV skim value exceed Class 
III skim value by $1.48 or more per cwt in 11 months. In 2023, 
according to the SMI witness, the average-of continued to be lower than 
the higher-of in some months, which had a more significant impact to 
dairy farmers because it occurred during a time of extremely low dairy 
farm margins. The witness said they expect to see more volatility and 
larger spreads between Class III and Class IV prices in the future 
because of anticipated higher butterfat prices which will lower the 
Class III skim value.
    The NMPF witness testified that adoption of the average-of mover 
created class price inversions and resulted in significant volumes of 
depooled Class III milk during the second half of 2020. Class price 
inversions occurred again in 2022 and 2023, said the witness, resulting 
in price volatility and substantial depooling of Class IV milk. The 
witness opined a wide variety of market conditions have proven capable 
of generating market volatility, driving a wedge between Class III and 
IV skim milk prices, and resulting in an average-of mover of more than 
$1 per cwt below what the higher-of mover calculation would have been.
    The NMPF witness said the average-of mover has not resulted in 
increased risk management activity at a value to handlers anywhere near 
the losses experienced by dairy farmers. Numerous witnesses testified 
their fluid milk customers have shown very little interest in hedging 
milk since the average-of mover was implemented.
    NMPF witnesses testified other Class I mover proposals under 
consideration in this proceeding use the higher-of mover calculation as 
the benchmark for determining adequate Class I skim milk price revenue. 
They testified those proposals provide producers revenue in an after-
the-fact-manner that fails to maintain the maximum monthly separation 
between advanced Class I prices and the manufacturing class prices, a 
goal expressed by the Department when it recommended the higher-of 
mover during Order Reform.
    The SMI witness testified that because of the change to the 
average-of mover, the southeastern FMMOs experienced disproportionately 
large reductions in blend prices due to the higher Class I utilization 
in the region, making it harder to attract supplemental milk the region 
requires to meet fluid demand. The witness noted that using an average-
of mover to establish a Class I skim price makes it more difficult for 
Class I handlers to procure milk from plants with higher-value 
manufactured products because the price difference is not large enough 
to draw milk away from manufacturing. The witness opined a Class I skim 
mover should provide for orderly marketing by ensuring an adequate 
supply of raw milk for fluid plants, producer price equity including 
prompt and uniform payments to farmers and cooperatives, and stability 
for dairy farms. The witness argued the current average-of mover makes 
it more difficult for FMMOs to achieve those purposes.
    An NMPF consultant witness testified the higher-of mover is 
necessary to transmit market signals in real time. The witness said a 
higher Class I milk price relative to other class prices sends market 
signals to move milk from surplus to deficit regions to ensure adequate 
fluid milk supplies. Additionally, the witness continued, disorderly 
marketing caused by prolonged depooling occurs when the Class I price 
is lower than Class II, III, or IV prices. The witness asserted 
prolonged periods of depooling create market disorder. Since the change 
in 2019, claimed the witness, the Class I mover has facilitated 
persistent long-term periods of depooling because there is no guarantee 
Class I prices will exceed the other class prices over time. In 
contrast, the witness asserted that under the higher-of mover, if Class 
III and IV advance skim prices increased, the Class I price would 
remain higher and depooling would moderate.
    The NMPF witness presented data to demonstrate the objective of 
adopting the average-of mover, to allow for greater risk management, 
has not been accomplished, and prolonged periods of depooling have made 
it difficult for producers to hedge their farm margins. The witness 
stated that when milk is not pooled, producer hedging losses cannot be 
offset by gains on milk checks because revenue from the higher valued 
manufacturing milk is not shared with the marketwide pool. The witness 
asserted risk-management performance is relatively similar under the 
higher-of and average-of movers, entering data they believed showed how 
Class III futures contracts would similarly mitigate risk. The witness 
contended other proposals do not adequately replicate the higher-of 
price in future periods; nor do they share equally among dairy 
producers and others, necessitating periodic recalibration. Rather than 
recognize the average-of limitations, the witness said, other proposals 
seek to align the average-of and higher-of performance. The witness 
testified an average-of mover with an adjuster causes past market 
conditions to influence current prices, sending pricing misinformation 
to the market

[[Page 95485]]

and causing disorderly marketing. The witness concluded that without 
immediate market signals from the advanced Class III and IV milk 
prices, any of the average-of or Class III plus movers would struggle 
to replicate the higher-of mover performance.
    An NMPF witness representing Prairie Farms testified producer 
revenue has been significantly reduced, without recovery, since the 
change to the average-of mover. Prairie Farms is an Illinois based 
farmer-owned milk cooperative with over 600 dairy farmer members 
operating fluid milk processing and manufacturing facilities that 
produce a variety of fluid and manufactured dairy products. Increased 
depooling in the last few years because of the average-of mover has 
resulted in increased price volatility, the witness said. The witness 
testified that with the average-of mover either Class III or Class IV 
milk is not pooled, depending on which class is higher, because the 
manufacturer is able to keep the additional market revenue instead of 
sharing it among pooled producers.
    The Prairie Farms witness testified dairy producers want a pricing 
system that gives real-time market signals, which is accomplished with 
the higher-of mover. The witness testified Prairie Farms supported the 
change to the average-of mover believing it would facilitate their 
customers' ability to hedge Class I milk. However, Class I processors 
have generally not increased their use of hedging, said the witness, 
while dairy producers have taken on additional risk by giving up a 
higher Class I price. The witness stated one reason they believe their 
customers do not utilize hedging is because of fear of incurring a 
price disadvantage compared to their competitor. The witness added that 
of the Prairie Farms dairy farmer members engaged in risk management, 
there has been a decrease in the use of forward contracting since the 
implementation of the average-of mover because of negative PPDs, as 
they create a negative basis dairy producers are unable to account for 
in their risk management decisions. The witness presented data showing 
negative PPDs have become larger and more frequent under the average-of 
mover, which has increased the volume of depooled milk and 
significantly reduced revenue to farmers.
    Another NMPF witness representing Upstate Niagara Cooperative 
(Upstate Niagara) testified the average-of mover has not operated as 
intended, has negatively impacted producer revenue, and has exacerbated 
disorderly conditions. Upstate Niagara is a dairy farmer-owned 
cooperative marketing the milk of approximately 250 members and 
operating eight fluid processing and manufacturing plants in New York 
and Pennsylvania. According to the witness, under the average-of mover, 
producers pooled on FMMOs with higher Class I utilization were most 
severely impacted due to the depressed Class I milk prices and no 
ability to benefit from the higher priced manufacturing milk. Similar 
to other witnesses, the Upstate Niagara witness described the 
asymmetric price risk of the average-of mover.
    From interactions with fluid milk customers, the Upstate Niagara 
witness said there is widespread acceptance of prices based on FMMO 
monthly price announcements by their conventional customers. The 
witness said conventional customers have been less interested in 
pursuing a fixed price if there was any chance it could result in a 
competitive disadvantage in any given month. The witness recognized 
there may be some processors or end users in specialized Class I 
product channels that may utilize hedging but contended it is a 
relatively small portion of total Class I sales.
    A University of Missouri professor testifying on behalf of NMPF 
presented results of an analysis conducted to evaluate the impact of 
adopting Proposal 13. The witness testified, under the higher-of mover, 
Class I prices would increase every year between $0.32 and $0.50 per 
cwt; the Class II price would be between $0.08 and $0.12 per cwt less 
annually; the Class III price would be between $0.06 and $0.13 per cwt 
less annually; the Class IV price would be between $0.08 and $0.12 per 
cwt less annually; and the all-milk price would be between $0.01 or 
$0.02 per cwt higher annually, except for a more significant increase 
of $0.06 per cwt in the first year. The witness said the model 
forecasted the effect on the all-milk price to moderate over time as 
production expands.
    Twenty dairy farmers testified in support of Proposal 13. Many 
dairy farmers testified blend prices have been lower and their milk 
prices have been reduced since the average-of mover was implemented. 
They said only when Class III and Class IV prices are within a narrow 
range of each other is the average-of mover equal to or outperforming 
the higher-of mover. The witnesses said their experience supports 
NMPF's assertion that farmers' milk prices have been reduced by $950 
million, and the reduction is not just a COVID-era anomaly. Dairy 
farmer witnesses said the losses demonstrate the goal of revenue 
neutrality with the change to the average-of has not been achieved. One 
witness asserted that in 29 of the 52 months since the average-of was 
adopted, Class I prices averaged $1.30 per cwt less than what the price 
would have been under the higher-of mover. In comparison, said the 
witness, in the remaining 23 of the 52 months the average-of returned a 
price only $0.42 higher per cwt. The witnesses testified to near-
universal support by dairy farmers for a return to either the higher-of 
or, under the average-of, a mechanism to be equal to the higher-of over 
a period of time, such as 24 months.
    Several dairy farmers urged a return to the higher-of mover, 
claiming a need for financial relief as dramatic shifts in milk markets 
since implementation of the average-of mover have caused significant 
financial losses to dairy farmers. Dairy farmers reiterated the 
average-of mover change affects 100 percent of pooled producer milk 
while it is unlikely fluid milk processors are covering 100 percent of 
their products with risk management tools. A dairy farmer testified 
they were assured the change to the average-of would be net neutral or 
net positive, but it has not been. Many dairy farmer witnesses 
described losses to dairy farmers under the average-of compared to what 
the Class I mover would have been under the higher-of and testified to 
receiving lower blend prices. The dairy farmers were concerned about 
receiving a delayed value of milk from a Class I mover with a rolling 
average methodology because they believe they cannot afford to wait 
months or years for the added revenue. They testified restoring the 
higher-of mover through adoption of Proposal 13 would help to reduce 
the volatility in monthly milk prices, bringing more stability and 
predictability to farmer income.
    Dairy farmers of all sizes testified to relying on risk-management 
tools, such as Dairy Margin Coverage (DMC), Dairy Revenue Protection 
(DRP), and CME futures and options markets because it is difficult to 
manage their farms through periods of significant price volatility. 
Dairy farmers' testimonies described a range of contract periods, 
anywhere from 3-18 months, depending on the individual farmers' risk-
management strategy and risk tolerance. In its post-hearing brief, NMPF 
reiterated hearing testimony arguing the average-of mover does not meet 
the standards set forth in Order Reform, and the change has not been 
revenue neutral as originally assumed. NMPF restated that under the 
average-of mover, price inversions, volatility, and depooling have 
increased, and Class I prices have been less effective at incenting 
milk to fluid processors relative to

[[Page 95486]]

manufacturing. NMPF reiterated the asymmetrical risk borne by dairy 
farmers with the average-of mover and the frequency of which the 
difference between Class III and IV prices exceeded $1.48 per cwt, 
effectuating that risk.
    NMPF reiterated the average-of mover failed to send appropriate 
market signals to participants because the fixed adjuster could not 
maintain the maximum monthly separation between the advanced Class I 
and the manufacturing class prices. NMPF wrote this increased the 
likelihood manufacturing classes would have a higher value than milk 
used in Class I and resulted in increased volumes of depooled milk. 
Under the higher-of mover on the other hand, NMPF argued, when a 
particular manufacturing class price is rising, the Class I price also 
rises and tends to maintain Class I as the highest priced class. To 
dampen the effect volatility in the manufacturing classes has on Class 
I, the highest priced manufacturing class should provide the foundation 
for ensuring the Class I price remains above the manufacturing classes 
almost every month, reducing the incentive to depool, which is 
disorderly.
    The demand for Class I hedging is not clear, NMPF asserted in its 
brief, and no evidence was presented to suggest more than a small 
minority of the overall fluid market utilizes hedging, especially 
beyond ESL handlers. NMPF argued in its brief that while facilitating 
risk management for fluid processors may have merit, it is not an 
objective of FMMOs. In regulating processors, the AMAA only considers 
price uniformity to processors, NMPF asserted. Finally, NMPF restated 
in its brief the widespread support of producers for a return to the 
higher-of mover.
    The Dairy Cooperative Marketing Association, Inc. (DCMA), a Capper-
Volstead Marketing Agency in Common with nine cooperative members in 
the southeastern U.S., submitted a post-hearing brief in support of 
Proposal 13. In its brief, DCMA argued the change to the average-of 
mover has not been revenue neutral to dairy farmers, nor provided 
benefits to the industry as originally intended. According to DCMA, the 
hearing record demonstrates that little Class I hedging occurs, 
especially on HTST milk, and includes no evidence that the use of 
hedging is more prevalent now than prior to the change. DCMA stated 
most testimony demonstrated HTST milk is sold based on FMMO announced 
prices each month plus a fixed margin. Because revenue on packaged milk 
sales flows back to the processor in step with the monthly changes in 
the FMMO announced prices, there is no price risk to the Class I 
processor under this system, according to DCMA. In its brief, DCMA 
described the pronounced losses in the southeastern region as a result 
of the change to the average-of mover.
    The MDC submitted a post-hearing brief in support of Proposal 13, 
expressing the importance of making the changes as part of the FMMO 
reform process underway. MDC conveyed in its brief the importance of 
ensuring all reforms are considered in concert since all changes have 
ripple effects throughout the entire system and across all classes of 
milk.
    In its post-hearing brief in support of Proposal 13, Select 
reiterated the proposal would support the priorities expressed by the 
Department in Order Reform, the rationales of which remain true today. 
Select cited billions of dollars lost to producers, an increase in 
depooling, and a lack of Class I handlers hedging their milk costs as 
reasons the average-of has failed.
    In both witness testimony and briefs, IDFA and MIG strongly opposed 
a return to a higher-of mover. A majority of their opposition was 
contained in supporting testimony and evidence for Proposals 14 and 15, 
as detailed below.
    A witness representing IDFA testified in support of Proposal 14. 
The witness said the goal of Proposal 14 is to keep producer Class I 
revenue consistent with what would be experienced under the previous 
higher-of mover, while allowing for effective and affordable Class I 
risk- management strategies.
    The IDFA witness claimed that in the long-run, the proposed Class I 
mover would never fall below what the Class I skim milk price would 
have been under the higher-of mover. According to the witness, Proposal 
14 would have paid more than the higher-of mover in 13 of the past 21 
years. The witness asserted dairy farmers are ``made whole'' as 
compared to the higher-of mover over time through the annual adjuster 
calculation. The witness presented data from 2003 through 2019 showing 
Proposal 14 would have yielded a Class I price $0.08 greater than the 
higher-of mover. For 2004 through 2023, the witness said Proposal 14 
would have yielded a Class I price $0.05 higher, due to the $0.74 
floor.
    The IDFA witness entered data and analysis to show the volume of 
milk not pooled would be slightly less under Proposal 14 than Proposal 
13, and the Class I price would be lower than Class III or Class IV 
prices in nearly the same number of months under both proposals. The 
IDFA witness presented an analysis showing Proposal 14 would have 
reduced price volatility with the only exception of very high cheese 
prices in 2020. According to the witness, volatility equates to greater 
price risk, which increases hedging costs, and ultimately higher 
consumer prices.
    The IDFA witness countered claims the higher-of mover sends 
important price signals to dairy farmers through the Class I price, 
instead claiming the blend price sends more important price signals 
because it is the price farmers receive. The witness alleged there is 
little difference between signals sent by the blend price under 
Proposals 13 and 14, arguing that from 2012 to 2022, Proposal 13 would 
average 31.9 percent of the Class I value in the blend price while 
Proposal 14 would average 31.8 percent. As the impact on the blend 
prices is very similar, over time there is little difference in price 
signals between the proposals, the witness said.
    Regarding the delay incorporated by the rolling adjuster and 
farmers possibly not receiving the make-up payments, the IDFA witness 
noted farmers go out of business for many reasons, and some may go into 
the business or expand and benefit from higher payments. The witness 
said this issue is no different than handlers going out of business 
before the make allowances are raised.
    The IDFA witness testified hedging is a critical tool for the 
subset of innovation and value-added milk manufacturers to remain 
competitive with alternative beverages. In the few growing segments of 
the milk market, especially ESL and higher value-added products, 
retailers are demanding processors provide long-term fixed price 
contracts, rather than contracts with fluctuating monthly prices, the 
witness said. Since processors cannot enter into a fixed purchase price 
for raw milk with their milk suppliers, hedging allows processors to 
take on the risk of entering into a fixed sales price for its finished 
products and cover the risk of raw milk prices rising during the 
contract period, the witness testified.
    The IDFA witness noted several ESL processors formed and quickly 
implemented risk management plans in anticipation of the change to the 
average-of mover. The witness noted ESL processors are interested in 
hedging because of the longer product shelf-life. According to the 
witness, a risk management plan allows a processor to level out what 
could otherwise be very different costs of milk products that could 
have been produced at significantly different times but are being sold 
to the customer at the same point in time. The witness noted more 
hedging of HTST products is done by

[[Page 95487]]

end users, such as foodservice customers, not processors. The witness 
testified that while risk management is not a stated objective of the 
AMAA, a stable price, promotion, and growth of the sale of milk are, 
and the ability to use risk management tools results in stable prices 
and increased sales.
    The witness testified IDFA would support a rolling average longer 
or shorter than 24 months, but the 12-month implementation lag is 
essential to allow for hedging. The witness testified Proposal 14 
calculates the adjuster from August through July because long term 
Class I sales contracts between processors and retailers are often 
negotiated and entered into during the final months of the calendar 
year. To allow for effective hedging for those contracts, Class I 
processors would need to know at the time of the contract negotiations 
what the adjuster would be for the next calendar year. The witness 
supported Proposal 15 as an acceptable alternative to Proposal 14.
    A dairy processor witness representing Schreiber Foods (Schreiber) 
testified in support of Proposal 14 or 15. Schreiber is a fluid milk 
processor primarily manufacturing Class II and Class III products, with 
approximately 5 percent of their products sold as ESL Class I products. 
The witness testified that over the past 20 years risk management has 
become a necessary tool for companies with exposure to dairy market 
volatility. The witness said that only since the change to the average-
of mover in 2019 have milk processors had a viable way to manage risk. 
The witness testified that, in response to requests from foodservice 
and retail customers to manage Class I costs, Schreiber has offered 
Class I forward contracts since 2019. Prior to 2019, the witness said 
creating an effective hedge for Class I milk was challenging as it was 
unknown whether Class III or Class IV would be the mover. The witness 
stressed the change to the average-of allows purchasers to use a 
combination of Class III and Class IV hedge positions, which gives 
everyone in the supply chain the ability to control their market risk 
in a way that was not previously possible under the higher-of.
    According to the witness, Schreiber hedges price risk for its ESL 
production through a combination of Class III and IV futures and swaps, 
and Class I swaps, which typically go out 12 to 18 months. Under 
Proposal 14, the witness explained, market participants will know the 
fixed adjuster in advance of the calendar year in order to conduct 
their hedging analyses for the coming year. If the Class I mover were 
to revert to the higher-of, the witness testified they would have to 
either find a different way to hedge or cease offering forward 
contracts on their ESL products.
    A witness representing Nestl[eacute] USA (Nestl[eacute]) testified 
in support of Proposal 14. Nestl[eacute] is a fluid milk processor 
operating one plant regulated by the FMMO system. The witness testified 
that Nestl[eacute] procures milk from cooperatives using contract 
agreements and offers its customers an annual fixed price contract for 
their primary Class I product, an ESL product. The witness stressed the 
importance of hedging to manage risk and compete in the market against 
nondairy beverages. The witness stated Nestl[eacute] did not use 
hedging for Class I under the higher-of mover because not knowing which 
class price would be higher caused uncertainty. The witness testified 
Nestl[eacute] currently hedges all its Class I milk purchases using 
Classes III and IV futures contracts, and while they have an 18-month 
outlook they typically hedge Class I milk 6 months out. If USDA returns 
to the higher-of mover, the witness testified, Nestl[eacute] would not 
be able to continue hedging its Class I milk. The witness testified 
price volatility has specific impacts on ESL products, as it is 
challenging for retailers to set different prices due to monthly milk 
price fluctuations for two identical products sold at the same time but 
produced in different months.
    A witness representing Lamers testified in support of Proposals 14 
and 15 stating those proposals would help smooth out the volatility in 
the pricing of Class III and Class IV.
    In its post-hearing brief, IDFA reiterated the importance of 
hedging to processors for managing price risk and volatility and 
claimed effective hedging could only be achieved with an average-of 
mover. IDFA noted that when price uncertainty does not allow fluid milk 
processors to manage risk 6 to 12 months out, they risk losing shelf 
space to plant-based and other alternative beverage products that can 
offer fixed prices. IDFA argued that the choice for a fluid milk 
processor, especially with respect to ESL products, higher value-added 
products, and foodservice, is increasingly between offering stable 
pricing and long-term contracts demanded by customers or losing shelf 
space to competing beverages. Pricing stability and long-term 
contracting are facilitated by hedging, according to IDFA. IDFA 
stressed the growing need for Class I hedging because of increased 
volatility between the manufacturing classes.
    In response to criticism of Proposal 14, IDFA wrote the average-of 
mover does not create price inversions or lead to milk not being 
pooled, arguing depooling occurs because of the price relationships 
between classes, and is caused by negative PPDs and pooling 
requirements. IDFA also wrote that the average-of mover does not 
increase price volatility, unlike a higher-of mover which routinely and 
unpredictably switches between Class III and Class IV. Finally, IDFA 
asserted the value of Class I products is not necessarily related to 
the value of Class III or IV products, thus, the higher-of does not 
better reflect the value of milk than the average-of mover.
    NAJ submitted a post-hearing brief in support of Proposal 14, 
arguing it better protects long-term producer milk revenue, provides 
less Class I price volatility, and preserves equitable risk-management 
opportunities for Class I handlers who are required to participate in 
the FMMO system. NAJ noted the perception a return to the higher-of 
mover would produce higher producer Class I revenues is based on highly 
divergent Class III and IV price movers and an expectation this will 
continue in the future. However, NAJ argued in its brief this price 
divergence analysis does not account for composition factor amendments 
nor potential Class I differential amendments. With revised composition 
factors, NAJ asserted, a restored manufacturing to Class I price spread 
would mitigate price inversion and depooling.
    A MIG witness testified in support of Proposal 15 seeking to amend 
the average-of mover from a $0.74 adjuster to a rolling 24-month 
adjuster with a 12-month lag. The witness claimed the movers contained 
in Proposals 14 and 15 provide similar base Class I skim milk prices 
and have similar effects on producer prices. The witness explained in 
certain years Proposal 15 would return more money to farmers than the 
higher-of, and even if farmers do not experience the benefits of a high 
manufacturing price immediately, they will over time through the lagged 
adjuster. The witness presented data comparing the monthly average base 
Class I skim milk price calculated under the current mover, the higher-
of mover, and Proposal 15 from 2003 to 2022 to show Proposal 15 would 
be revenue neutral in the long run.
    The MIG witness testified Proposal 15 preserves risk-management 
opportunities for both producers and Class I processors, which is part 
of orderly marketing. The ability to hedge Class I milk became 
effective in 2019, followed by the pandemic and regulatory uncertainty 
as to whether the average-of would remain, and time, resources, and 
lack of knowledge

[[Page 95488]]

slowed the adoption of Class I risk-management strategies, the witness 
testified.
    Five MIG member witnesses representing fairlife, HP Hood, Turner 
Dairy, Shehadey, and Crystal Creamery testified on the importance of 
hedging Class I milk. The fairlife and HP Hood witnesses said they 
primarily process ESL products, which they hedge using CME Class III 
and IV component and commodity futures. The HP Hood witness stated they 
do not hedge HTST milk because it is primarily sold through direct 
store delivery where the standard business practice is monthly pricing. 
However, ESL products are distributed primarily through grocery 
warehouses and buyers expect 60 to 90 days' notice for any price 
changes, the witness said. The HP Hood witness stated the ability to 
hedge has not changed their ESL pricing strategy but has allowed for 
fewer price increases. In earlier testimony a witness representing 
Shamrock, also a MIG member, said they manufacture both HTST and ESL 
products and hedge milk used in their ESL products.
    A processor witness representing Shehadey testified contracts with 
retailers such as grocery stores use a fixed formula that changes 
monthly, quarterly, or semi-annually, and are based on FMMO prices. The 
witness testified Shehadey has only HTST Class I milk products and they 
do not use any form of risk-management tools to hedge their risk. The 
Turner Dairy and Crystal Creamery witnesses said their companies 
primarily process HTST Class I milk products which they currently do 
not hedge. Both witnesses expressed value in hedging HTST milk sold to 
foodservice, as foodservice customers prefer to know prices months to 
years in advance. The fairlife and HP Hood witnesses testified hedging 
under the higher-of mover was difficult due to price volatility and 
uncertainty, but the average-of mover allows them to offset the risk. 
The witnesses also testified it takes time to develop a robust hedging 
program. The HP Hood witness stated Class I hedging is primarily used 
by more sophisticated operators, but as Class I hedging becomes more 
accepted, the market should become more liquid, and more processors 
will likely use this risk-management tool. The fairlife witness said 
fairlife typically hedges its ESL Class I products, mainly 0 to 6 
months out, but contracts could extend up to 12 months.
    A MIG witness explained that the adoption of Proposal 15 would 
allow for less price volatility throughout the market and support 
industry growth by stabilizing the cost of milk for retailers and 
consumers. Hedging, the witness said, is important to offering 
customers and consumers a more stable price, which could stem the 
declines in fluid milk as fluid milk competes with many beverages in 
the market. The fairlife witness testified that price certainty 
translates to price stability for both the retailer and the consumer. 
The HP Hood witness testified the goal of hedging is not to make a 
higher return, but instead to act as price risk insurance by removing 
some input price volatility and increasing margin certainty for end-
product sales. The Turner Dairy witness testified the average-of mover 
results in more price stability which is beneficial to the Class I 
market. The witness said under the higher-of formula, the Class I price 
went up with every spike in butter, cheese, or powder markets, even 
though short-term changes in those product prices have no direct effect 
on the actual Class I market. The witness argued the price spikes 
necessitated raising prices to cover cost, without a market-based 
explanation to provide to customers.
    The MIG and fairlife witnesses testified in support of the 12-month 
lagged adjuster contained in Proposal 15, stating it is critical to 
allow Class I processors to mitigate risk and hedge successfully. 
Knowing the adjuster 12 months in advance allows companies who hedge to 
reduce or eliminate basis risk, the witness said, while the 24-month 
rolling adjuster updates and provides dynamic market signals. The 
witnesses said Proposal 15 would stabilize prices by moving gradually 
and make fluid milk products a more reliable and steady purchase for 
customers. Proposal 15 has no floor or ceiling, as the witness 
testified MIG members believe floors and ceilings can create price 
distortions. The witnesses testified a lookback of less than 24 months 
would create more volatility, while a longer lookback does not transfer 
market signals well over time. The fairlife witness testified the 12-
month lag is necessary to be able to buy futures 12 months out. The 24-
month rolling average adjuster allows the system to recognize the 
difference between Class III and Class IV prices and what the higher-of 
mover would have been, the witness said, allowing the industry to know 
definitively what the premium structure is going to look like 
associated with the adjuster 12 months into the future.
    In its post-hearing brief in support of Proposal 15, MIG argued 
USDA should first assess whether the current average-of formula has 
resulted in disorderly marketing. MIG wrote the current average-of 
mover ensures the market has sufficient milk for both fluid and 
manufacturing uses and there is not disorderly competition for fluid 
market access. MIG argued a return to the higher-of under Proposal 13 
would not provide higher returns to farmers, estimating a minimal 
impact of a $0.01 to $0.02 per cwt increase in the long term. However, 
MIG argued in its brief, the return to the higher-of mover would have 
significant negative impacts on the Class I market and the entire dairy 
industry. There is no asymmetrical risk inherent in Proposal 15, MIG 
argued in its brief, unlike the present average-of mover formula.
    According to MIG, the use of risk management developed primarily 
after the average-of formula was adopted and is likely to grow in the 
future. MIG stated Class I processors do currently use risk-management 
tools to hedge ESL products, as this sector has historically utilized 
more fixed pricing, meaning hedging can be more easily adopted. MIG 
stated many HTST customers, such as grocery stores, have become 
accustomed to the monthly fluctuations of pass-through pricing, but 
HTST customers, such as school lunch programs or USDA feeding programs, 
would benefit from the increased price certainty that comes with an 
average-of calculated mover. The industry has not yet had time to 
widely adopt risk management, MIG reiterated in its brief, and 
regulatory uncertainty due to this proceeding has caused processors to 
hesitate further use of risk-management tools.
    MIG noted in its brief that even though the AMAA does not 
specifically provide for hedging, a Class I formula that supports 
hedging helps serve the enumerated purpose of the AMAA of avoiding 
unreasonable price fluctuations and reducing milk price volatility. 
When Class I processors can better manage risk, they can offer more 
stable prices to customers and consumers, MIG argued in its brief.
    In its brief, MIG reiterated hearing testimony that use of an 
average-of mover best ensures an orderly market, and sufficient supply 
of milk for fluid use, including the most accurate pricing signals for 
dairy farmers in a longer, and more appropriate, time. MIG took 
exception to arguments that the Class I price be used to address price 
inversions and depooling. Using a California pool example, MIG argued 
that record evidence shows the Department would have to increase the 
Class I price an impractical amount to incentivize both manufacturing 
classes to remain pooled. MIG reiterated many factors cause depooling 
and negative PPDs, and neither the Class I price nor

[[Page 95489]]

use of an average-of mover drive those results. Rather, according to 
MIG, the main drivers of depooling in the months reviewed in testimony 
were the Class III/IV spread and advanced pricing.
    In its brief, MIG argued a return to the higher-of mover will not 
help Class I handlers in competing for milk supply as a higher pool 
obligation detracts from the incentive to service Class I plants. MIG 
reiterated hearing testimony that the current marketplace is 
sufficiently served using an average-of formula.
    Lamers submitted a post-hearing brief in support of retaining an 
average-of mover. Lamers argued that because of the small percentage of 
Class IV use in the market, Class IV prices should not be a main driver 
for setting the Class I price, as an average-of mover is more 
representative of the entire manufacturing market. Lamers preferred the 
lower of the Class III and IV prices should be used when setting the 
mover as they believe the higher-of artificially raises Class I prices 
to consumers.
    NMPF presented numerous witnesses who testified in opposition to 
the continuation of the average-of mover, embedded in the summary of 
their testimony and post-hearing brief presented above. An SMI witness 
opposed a modified average-of mover, testifying it would result in 
revenue losses to dairy farmers because the Class I price is paid back 
to dairy farmers over time and would not compensate dairy farmers that 
have exited the business.
    Select expressed opposition to Proposals 14, 15, and 16 in its 
post-hearing brief. Select wrote that the higher-of more accurately 
reflects the value of milk in manufacturing classes, better manages 
shifts in demand for any one manufactured product, helps reduce milk 
price volatility, better addresses class price inversions and 
depooling, and makes it more difficult to draw milk away from Class I 
uses for manufacturing. Select noted most Class I handlers have not 
engaged in milk hedging under the average-of mover, and the average-of 
mover creates and exacerbates opportunistic depooling when Class III 
and IV prices diverge significantly. Select opined the average-of mover 
results in market disorder which they believe would continue until the 
higher-of mover is restored.
    In its post-hearing brief, the AFBF opposed Proposals 14 and 15, 
arguing they do not address the key issue of class price misalignment. 
The AFBF believes handlers of all sizes can find alternative methods of 
managing risk under a higher-of mover.
    A witness representing Edge testified in support of Proposals 16 
and 17. The witness advocated for the adoption of Proposal 16, referred 
to as a Class III plus proposal, because the Class III price is 
typically higher than the Class IV milk price. In times of rapidly 
declining dairy prices brought on by a decrease in demand, the witness 
said, government recovery efforts typically prioritize more perishable 
products, usually Class III. The witness said this would result in 
higher Class III prices in relation to Class IV, and consequently a 
base Class I skim price under Proposal 16 approximately equal to the 
higher-of mover. According to the witness, in situations where the 
Class IV skim milk price is higher than the Class III skim milk price, 
any lost revenue would be redistributed to producers over the next 
three years through the adjuster and would better support dairy farmers 
during years of lower profitability. The witness testified risk 
management under Proposal 16 is easy to implement and less expensive 
due to high liquidity of Class III milk futures, creating more 
predictable prices and making fluid milk products competitive with 
plant-based beverages. The witness testified Edge would support a 
monthly rolling adjuster in place of an annual adjuster.
    The Edge witness testified that as Class I utilization rates 
continue to fall, advanced pricing would continue to cause disorderly 
marketing conditions such as opportunistic depooling. The witness said 
advanced prices are antiquated and anti-competitive and their 
elimination would encourage fluid plants to use risk management. The 
Edge witness entered data showing the contribution of various factors 
to negative PPDs. The witness testified that while the change to the 
average-of mover tended to make PPDs more negative, advanced prices and 
the spread between Class III and IV influenced pooling decisions, not 
the adoption of the average-of mover. The witness testified that if the 
Class I price was announced at the same time as the Class III and Class 
IV prices, it would prevent a for-profit Class I trading relationship 
between Class III and Class IV, and the CME group would be more likely 
to create a Class I futures contract. The witness expressed a strong 
preference for Proposal 16, which they argue balances producer, 
processor, and consumer needs and supports risk management which they 
said was critical for the success of the nation's dairy farmers, 
particularly fluid sector innovators.
    The Edge witness also testified in support of Proposal 17, 
returning to the higher-of mover without advanced pricing. The witness 
said the proposal would allow the Class I futures price to be equal to 
the greater of the Class III futures price and the Class IV futures 
price. Risk management players would have minimal risk in providing 
liquidity to Class I hedgers by spreading their position between Class 
I and the higher-of Class III or IV futures. The witness testified 
dairy producers may prefer the higher-of mover without advanced 
pricing, such as Proposal 17, as it provides real-time maximum income 
for Class I milk, whereas Proposal 16 is more of a compromise.
    The Edge witness stated that since 2010, total fluid milk sales 
have been steadily declining, adding more instability and difficulties 
hedging under the higher-of mover. The witness entered data showing how 
much more risk and costs were involved to hedge under the higher-of 
mover than the average-of mover. The witness concluded a person hedging 
with futures contracts under the higher-of mover would have significant 
difficulties, but hedging under the average-of mover meets 
effectiveness standards required for hedge accounting.
    Nine dairy farmer witnesses, located in Wisconsin, Minnesota, Iowa, 
and South Dakota, testified in support of Proposals 16 and 17. The 
dairy farmers opined Proposals 16 and 17 would decrease the frequency 
of negative PPDs and depooling and enhance their ability to manage 
price risk through hedging and other risk-management programs. One 
witness said using only the Class III skim price to set the Class I 
skim price is the best option because Class III milk futures carry more 
liquidity than Class IV and better represent Class I prices. The 
witnesses testified Proposal 16 would help keep prices steady, 
benefitting both plants and customers.
    In its post-hearing brief, Edge objected to what it believes are 
goals of some proponents to maximize FMMO Class I handler obligations 
in order for the additional revenue to be used to offset the negative 
producer impact of increasing make allowances. Edge argued the 
Department should consider the following factors in its decision: there 
have not been any significant shortages in the supply of beverage milk 
to retail stores; Congress' reason for changing to the average-of mover 
to facilitate risk management by fluid milk processors which fluid milk 
processors testified is still relevant; advanced pricing is outdated 
and no longer necessary to facilitate supply chain coordination but 
instead facilitates opportunistic depooling; a mover resulting in the 
highest fluid milk price when the Class IV price substantially exceeds 
Class III is not in the best interest of consumers; and a mover

[[Page 95490]]

resulting in the highest fluid milk price when the Class IV price 
substantially exceeds Class III is not in the best interest of all 
dairy farmers. Edge argued dairy farmers located where Class I 
utilization is low may be worse off under a higher-of mover than an 
average-of or Class III-based pricing as proposed by Edge.
    Edge reiterated Proposal 16 would facilitate risk management by 
fluid milk manufacturers and large commercial buyers, eliminate 
outdated advanced pricing and reduce the incidence and magnitude of 
opportunistic depooling, and best serve both producer and consumer 
interests.
    A witness representing the AFBF testified in support of Proposal 
18. The witness said the AFBF believes orderly pooling is the key to 
orderly marketing, and this is best accomplished by the proper 
alignment of the four class prices. The witness claimed advanced Class 
I pricing leads to increased Class III component values, a common 
factor contributing to negative PPDs. The witness said advanced prices 
reflect market conditions that are 25 to 40 days older than final 
prices, which are announced after the close of the month. When a market 
rally occurs between the announcement of advanced and final prices, the 
witness said it leads to low or negative PPDs and creates incentives 
for handlers to depool milk. The witness stated depooling results in 
elevated component prices not being shared with the pool, further 
depressing the PPD and undermining the FMMO principle of uniform 
producer prices. The witness testified advanced pricing may also cause 
price inversions when manufacturing prices are rising rapidly, making 
it difficult for Class I handlers to attract adequate milk supplies. 
The witness entered data showing the effects of advanced pricing on 
class price alignment from May 2019 to May 2023 under the current 
average-of, and under Proposals 13, 17, and 18. The witness said this 
data showed many months under the current average-of mover and Proposal 
13 in which the manufacturing class prices exceeded the Class I price, 
testifying this created disorderly marketing conditions. On the other 
hand, according to the witness, the data showed elimination of advanced 
pricing under Proposals 17 and 18 resulted in more consistent alignment 
of class prices.
    The AFBF witness testified the frequency of published commodity 
data allows handlers to estimate price changes regardless of when 
prices are announced, and as more products are available on the CME or 
other exchanges, processors and manufacturers will have information 
needed to hedge and manage risk. The witness opined that the 
elimination of advanced pricing would allow for the introduction of 
Class III and IV spread options, providing an additional way to hedge 
Class I milk when both are used in combination. Three dairy farmers 
testified in support of Proposal 18, stating the proposal would reduce 
the incentive to depool brought on by low and negative PPDs.
    The AFBF witness also testified that while they support the 
elimination of advanced pricing, they oppose Proposal 16 because it 
would delink Class I prices from Class IV prices, which they anticipate 
being higher than Class III in the future due to better export markets. 
The witness said tying the Class I price to only the Class III price 
could operate more like a ``lower-of'' formula. The witness stated the 
AFBF supports Proposal 17 because it is identical to Proposal 18 if 
combined with Proposal 13.
    In its post-hearing brief, the AFBF reiterated its support for a 
return to the higher-of mover, which it argued would support class 
price alignment and substantially decrease negative PPDs and depooling.
    The AFBF reiterated its hearing testimony that volatility has and 
continues to increase, contributing to price inversions and rapidly 
changing markets, resulting in competitive inequalities among dairy 
farmers. The AFBF said the CME has indicated a willingness to provide 
contracts catering to industry demand, and the fact that the industry 
is used to advanced pricing should not be a driving reason for its 
retention. The AFBF argued disorderly marketing conditions are present 
when producers do not receive uniform prices because of frequent 
depooling, and its proposals lead to the realignment of class prices, 
which encourage consistent pooling and uniform pricing.
    An SMI witness, appearing on behalf of NMPF, testified in 
opposition to elimination of advanced pricing as contained in Proposals 
16, 17, and 18. The witness said 90 percent of packaged fluid milk is 
highly perishable HTST milk which is processed, packaged, distributed, 
and sold in a relatively short period. The witness said these marketing 
characteristics require the price of the product to be known at the 
time of purchase, which advanced pricing of Class I milk provides. 
According to the witness, most HTST packaged fluid milk is priced 
monthly by fluid processors to their customers based on monthly FMMO 
Class I prices. This is materially different from cheese and butter 
products, the witness said, the prices of which are typically based on 
CME daily cash prices. According to the witness, advanced pricing 
enables retailers to set store milk prices at the beginning of a month, 
allowing the fluid processor to know the price the plant would receive 
for the packaged fluid milk prior to the raw milk being processed, 
packaged, and sold.
    The SMI witness also testified that if advanced pricing was 
eliminated, retailers would not know their fluid milk costs until the 
end of the month when FMMO Class I prices are announced. This would 
mean most fluid milk purchased by retailers would be sold during the 
month without knowing its minimum regulated price which, the witness 
said, from a retailer's perspective is not orderly marketing. The 
witness claimed that if there were significant month-to-month increases 
in the Class I price, retailers could seek price relief from the 
processor, and ultimately, cooperative suppliers, opening the potential 
for fluid milk processors in the same marketing area to have 
inequitable raw milk costs and non-uniform payments to producers. In 
its post-hearing brief, NMPF reiterated its opposition to the 
elimination of advanced pricing.
    A witness representing IDFA opposed Proposals 16, 17 and 18. The 
witness objected to the elimination of advanced pricing as it would 
result in Class I handlers pricing milk products to their customer 
before knowing the minimum regulated milk price and impact a handler's 
ability to hedge. In its post-hearing brief, IDFA supported the feature 
of Proposal 16 that would create a predictable Class I price that could 
be hedged based off a hedged Class III price plus a known adjuster. 
However, IDFA maintained its opposition to the elimination of advanced 
pricing, arguing it is essential for non-hedging Class I handlers to 
know their milk cost before the start of the month. It is also an 
important part of planning for fluid milk retail customers to market 
milk, IDFA stated. IDFA noted in its brief that traditional fluid milk 
retail customers are not yet using hedging sufficiently to permit a 
regulatory change eliminating advanced pricing. IDFA reiterated their 
total opposition to Proposals 17 and 18 in that they would return to a 
higher-of mover and, according to the brief, eliminate any practical 
ability to hedge.
    A MIG witness testified in opposition to eliminating advanced 
pricing. The witness said the industry is not yet using hedging 
sufficiently to permit this regulatory change, as advanced pricing 
remains critical for the dominant share of the fluid market as 
retailers expect to know the price in advance. The witness

[[Page 95491]]

also opposed Proposal 16, which would price Class I milk solely off the 
Class III price. The witness said the proposal would delink the fluid 
milk supply and demand from Class IV which MIG believes is critical for 
balancing. The witness opposed Proposals 17 and 18 as they limit risk-
management opportunities for Class I processors. In its post-hearing 
brief, MIG reiterated its opposition to any proposal (Proposals 16, 17, 
and 18) seeking to eliminate advanced pricing, which MIG claimed is 
critical to Class I processors. MIG further argued that eliminating 
advanced pricing would negatively impact those market segments. With 
respect to Proposal 16, MIG expressed concern with pricing Class I milk 
solely off Class III prices as it would be a significant departure from 
the current practice and completely divorce fluid milk supply and 
demand from the Class IV market. According to MIG, the record contains 
testimony from cooperatives that Class IV remains the ultimate 
balancing utilization.
    In testimony and in its post-hearing brief, MIG opposed a return to 
the higher-of mover under Proposals 13, 17, and 18 as it would severely 
limit risk-management opportunities. MIG argued in its brief that a 
return to the higher-of is unnecessary and not supported by the facts 
as the industry has acknowledged the higher-of does not work. Dairy 
farmers' concerns are not about the average-of, MIG asserted, but 
rather the fixed $0.74 addition. USDA should support moving the 
industry forward, not revert to an outdated policy because it is 
familiar, MIG stated.
    MIG argued NMPF introduced no evidence the average-of mover hinders 
a sufficient supply of milk for fluid uses. Rather, MIG wrote, a return 
to the higher-of mover would result in disorderly marketing as larger 
spreads between Classes III and IV would lead to higher prices under 
the higher-of mover and raise the uniform price, incentivizing the 
lower-priced manufacturing milk to remain pooled. In that situation, 
MIG argued, FMMOs should not be raising the uniform price paid out to 
the lower-priced manufacturing class, thus, encouraging it to remain 
pooled. This compensation, argued MIG, overvalues the lower-priced 
manufacturing milk in the marketplace and incentivizes milk to move to 
the lower manufacturing class instead of to a higher performing class. 
According to MIG, the average-of mover would better move milk between 
the manufacturing classes as the market needs. MIG argued the FMMOs are 
designed to ensure processors have sufficient milk supplies for fluid 
use, but FMMOs should not be drawing milk away from Class III or IV 
when a manufacturing use would be the highest and best value for the 
milk. According to MIG, Class I does not need more milk, and FMMOs 
should not be disrupting the market to pull milk for fluid utilization. 
MIG argued in its brief that revenue neutrality is not a valid policy 
consideration without evidence to establish revenue neutrality is 
necessary to ensure a sufficient supply of fluid milk.
    A witness representing Lamers testified in opposition to the 
elimination of advanced pricing in Proposals 16, 17, and 18. The 
witness stated Class I handlers need to know prices in advance so they 
can set wholesale pricing with their retail customers.
    In its post-hearing brief, Select opposed the elimination of 
advanced pricing set forth in Proposals 17 and 18, arguing that 
testimony at the hearing made clear that the majority of producers 
prefer using the higher-of, and the majority of handlers prefer to 
maintain advanced pricing which Select believes is in the best interest 
of stability in the Class I market.

Class I and Class II Differentials

    Numerous witnesses appeared on behalf of NMPF testifying in support 
of increasing the Class I differentials as provided for in Proposal 19. 
Witness testimony centered around the themes of increased hauling 
costs, changes in milk supply and demand locations, changes in supply 
patterns resulting in longer hauls, and insufficient over-order 
premiums to cover the full cost of servicing the Class I market. The 
witnesses said the outdated assumptions embedded in the current Class I 
differentials threaten the willingness of milk suppliers to serve the 
Class I market.
    An NMPF witness argued current differentials are antiquated, since, 
other than the three southeast FMMOs, they have not been updated in 
almost 25 years. In that time, they said, fuel costs and hauling 
distances have increased due to changes in supply and demand locations. 
The witness stressed over-order premiums should not be considered an 
effective substitute for FMMO prices because they are very difficult to 
obtain and maintain at levels adequate to cover the cost of servicing 
the Class I market. The witness argued inadequate Class I differentials 
contribute to price inversions and incentives to depool, which further 
jeopardize the availability of milk to meet Class I demand.
    The NMPF witness described the methodology used to arrive at the 
proposed differential levels. According to the witness, NMPF requested 
an update of the U.S. Dairy Sector Simulator Model (USDSS) which was 
used during Order Reform as a basis for the differential levels adopted 
on January 1, 2000.
    The USDSS model owners testified on the methodology, the updated 
data and parameters, and explained the results. They explained the 
USDSS model evaluates the geographic value of milk at fluid milk 
processing plants across the U.S. by finding the lowest cost solution 
of assembling milk at farms and delivering it to plants. They said the 
model accounts for approximately 90 percent of the U.S. dairy 
processing and manufacturing plant capacity, and considers such factors 
as milk supply locations, transportation costs (both variable and 
fixed) associated with raw milk assembly, final and intermediate 
product distribution, per capita demand by county population, and road 
weight limits. In the model, plant capacity, products produced, and 
milk components demanded at each plant are constrained by a variety of 
government and private sources. The resulting values, said the 
witnesses, represent the value of an additional load of milk at a 
specific plant location (otherwise known as the ``marginal value'').
    The witnesses said two sets of USDSS model results were provided to 
NMPF, May and October 2021, to provide marginal values for both flush 
and deficit months. According to the witnesses, the results suggest 
considerable differences between the values of milk at fluid plants 
derived from spatial economic modeling and current Class I differential 
values, with differences as large as $3.00 per cwt in some locations. 
The witnesses attributed these differences to changes in the location 
of milk production, the composition of dairy product demand, changes in 
the location of dairy product demand from regional population shifts, 
and the cost of transportation. Both witnesses discussed how modeling, 
even though complex, is a simplification of reality and that there may 
be unaccounted factors in some areas that would justify deviations from 
the model results, including local traffic congestion, geography, 
infrastructure restrictions, and price alignment across orders. The 
witnesses said the model does not account for other factors, such as 
existing business relationships and FMMO regulations, because they 
could cause a departure from a market efficient solution. Lastly, the 
witnesses noted the USDSS model does not produce a base differential 
value; it merely provides the additional value

[[Page 95492]]

needed to move milk to a particular location.
    While NMPF cooperative member witnesses testified on how they used 
the USDSS model results to arrive at the proposed differentials, NMPF 
witnesses stated they followed the same iterative process applied 
during Order Reform, starting with the model results and adjusting for 
milk movements, plant locations and historic price relationships.
    One witness explained that NMPF started with a base differential 
assumption of $1.60 per cwt, as currently contained in the Class I 
differentials. The witness said the costs embedded in the base 
differential (Grade A maintenance, balancing, and a competitive factor) 
are still applicable and those costs have not decreased over the past 
25 years. The witness said the base differential should also serve to 
limit class price inversions, incentivize Class I milk deliveries, and 
ensure class price alignment. To accomplish these goals, the witness 
said that in some parts of the country the base differential is 
recommended to increase to $2.20 per cwt.
    One NMPF witness testified regarding the cost to dairy farmers to 
maintain Grade A status. The witness said that in order to participate 
in the FMMO program, dairy farmers incur costs associated with 
obtaining and maintaining Grade A licenses. The witness was of the 
opinion partial cost reimbursement for maintaining a Grade A license, 
which currently represent $0.40 per cwt in the base differential, 
should continue to be provided. The witness detailed standards for 
maintaining Grade A status, which include various infrastructure 
maintenance and sanitation requirements, and estimated a total current 
cost of $1.30 per cwt to meet those requirements.
    A series of NMPF witnesses testified on the regional considerations 
factored into the proposed Class I differentials contained in Proposal 
19. During their testimony they also touched on balancing costs faced 
by NMPF cooperative members and the continued need to include a 
competitive factor in the base differential. One witness described how 
the average of the May and October 2021 results was used as a starting 
point. From there, NMPF formed regional committees to evaluate the 
USDSS model's average results and use their local market knowledge to 
derive the final proposed differential values. According to the 
witness, a series of 19 anchor cities were selected for their proximity 
near the border of where two regions abutted. The regional committees 
used these anchor cities as common starting points to design a final 
Class I differential surface that ensured price alignment between 
orders. Each committee looked at current price relationships between 
plant locations and consumer demand areas, compared those to the USDSS 
model's averages, and designed a Class I differential structure that 
accounted for factors NMPF members thought were not adequately 
addressed in the model's results.
Northeast
    A DFA witness testifying on behalf of NMPF discussed the changes in 
the northeast marketing area, including increased hauling costs, 
changes in the milk production and location of farm and fluid 
processing plants, and an overall increase in production costs. The 
witness said milk production in 11 of the 12 northeast states declined 
from 2000 to 2022, except for New York which saw a 31.4 percent 
increase, resulting in a small overall increase in the region's milk 
production of 2.2 percent. During this time, the witness said the 
resident population increased by 9.1 percent. The witness noted the 
geographic shift in where milk is processed due to the closure of fluid 
plants in urban areas since 2000. The witness surmised local milk 
supplies in the northeast are used to meet increasing Class II and 
Class III needs, necessitating milk to travel farther distances to meet 
fluid demand. The witness estimated transportation costs paid by 
producers in the region have increased $0.70 per cwt.
    An Agri-Mark witness also testified regarding the changing 
marketing conditions in the northeast region and described some of the 
proposed differential differences from the USDSS model. The witness 
opined that if the USDSS model's averages were adopted for Maine, it 
would incentivize producers in Maine to supply Massachusetts, instead 
of remaining available to meet local demand. Therefore, the witness 
said NMPF proposed to flatten the differentials in Maine to maintain 
current competitive relationships. NMPF also proposed lower 
differentials in northern Vermont and New York in order to incentivize 
milk movements south and east. The witness said these changes from the 
USDSS model's average results are needed to preserve current milk 
movements and to maintain competitive relationships.
Mid-Atlantic
    An MDVA witness representing NMPF testified regarding the proposed 
differentials in the Mid-Atlantic region. The witness said MDVA 
operates two balancing plants in the region that help balance the 
market's reserves in both the Northeast and Appalachian FMMOs. 
According to the witness, there are large seasonal swings in milk 
delivered to those balancing plants, which result in significant costs 
to the cooperative and its members. The witness was of the opinion the 
base Class I differential should provide some balancing cost 
reimbursement to its members through its distribution through the 
marketwide pool. Transportation costs have also increased 
significantly, the witness said, to a point where Class I differentials 
are less effective in attracting milk from reserve supply areas to 
Class I plants. In order to meet fluid demand, the witness said 
cooperative members must pay for the additional cost through milk check 
deductions without any additional compensation through the Class I 
differential.
    The MDVA witness compared current and USDSS model average values 
for multiple plant locations in the region. According to the witness, 
the regional committee focused on the need to cover additional 
transportation costs of servicing the fluid market and maintaining 
current price relationships as principles when determining deviations 
from the USDSS model's average results. One example cited two plants in 
Landover, Maryland and Frederick, Maryland, located approximately 55 
miles apart with a current difference in differential values of $0.10. 
The witness said the USDSS model's average values would have resulted 
in a $0.35 difference and created an artificial regulated cost 
advantage for the lower zoned plant in Frederick, Maryland. Another 
example was in the southeastern region where two Virginia plants 
located 15 miles apart and currently in the same differential zone 
would have seen a $0.10 differential difference under the USDSS model's 
average scenario. In this case, said the witness, the committee decided 
to propose the same differential value for the two plants in order to 
preserve their competitive relationship.
Southeast
    A DFA witness representing NMPF testified on the proposed 
differentials in the southeast region. Similar to other witnesses, 
their testimony centered on the decline in dairy farmers and the 
closure of fluid processing plants which necessitate longer milk hauls 
at a greater expense to dairy farmers, particularly cooperative 
members. The witness spoke to the unique marketing conditions in the 
southeast region, with

[[Page 95493]]

a growing population, local fluid demand, and a significant milk supply 
deficit requiring supplemental milk supplies to be acquired from 
outside the region. The witness said the supplemental milk supplies are 
obtained at great expense to DFA cooperative members. The witness 
stated it is typical for supplemental loads to travel between 500-650 
miles or more, and while the transportation credits in the Southeast 
FMMO provide partial reimbursement, the fund is inadequate to cover the 
full cost. The witness said the proposed differentials contained in 
Proposal 19 would assist in covering transportation costs and support 
dairy farmers who supply the region.
Florida
    An SMI witness representing NMPF testified on the proposed 
differential for the Florida FMMO. The witness said there is an 
inadequate milk supply available in Florida to meet its Class I needs, 
necessitating significant volumes of milk deliveries from outside the 
marketing area from Georgia, for example. According to the witness, 
Florida milk production is quickly shrinking, declining more than 10.9 
percent in 2022, and necessitating more than 24 percent of its milk 
needs to come from other states.
    The witness discussed Florida's significant population increase and 
high Class I utilization, which has averaged greater than 82 percent 
since 2000. The witness described significant seasonal swings in fluid 
milk needs and SMI's efforts to balance those needs through purchasing 
additional milk tankers, marketing milk to non-pool plants at below 
FMMO values when needed and buying supplemental loads at above FMMO 
values during other times of the year. The witness said weather and the 
seasonal population influxes also complicate the region's milk 
balancing efforts. These dynamics make supplying the Florida region 
particularly expensive, estimating that SMI balancing costs for the 
first half of 2023 were $1.33 per cwt.
    The SMI witness testified the proposed Florida differentials 
maintain the historical differential slope while more adequately 
reimbursing for transportation costs, which the witness estimated has 
more than doubled in the past 20 years, from $2.31 in 2002 to $5.98 in 
May 2023. The witness said the Florida differentials contained in 
Proposal 19 are similar to the averages of the May and October 2021 
USDSS model results but were adjusted to preserve current competitive 
relationships. As a result, the witness concluded the region would be 
assured an adequate supply of milk for fluid use and fluid milk buyers 
would be better assured of equal raw product costs.
    The SMI witness was of the opinion the differentials should not be 
adjusted to reflect recently enacted Distributing Plant Delivery 
Credits in the Florida FMMO, as both are needed to ensure adequate 
supplies of fluid milk for the region.
Southeast/Southwest
    A Lone Star witness representing NMPF testified regarding the 
differentials between the southwest and southeast regions. The witness 
said the eastern portion of the Southwest FMMO and the three 
southeastern FMMOs are milk deficit regions. The witness emphasized the 
differential recommendations are designed to provide proper financial 
incentives through a steeper differential slope to move milk into and 
within those regions. The witness said other factors considered 
included keeping current city-to-city price relationships as well as 
competitive relationships between plants often clustered around 
metropolitan areas. While differentials in some areas were increased 
relative to the USDSS model's average to reflect NMPF member knowledge 
of milk movements and related transportation costs in the region, other 
differentials were lowered. The witness noted NMPF members believe the 
model overestimated balancing costs for parts of Virginia and the 
Carolinas, and subsequently is proposing muted differential increases 
for those regions.
    Regarding Florida, the witness said the NMPF members accepted the 
USDSS model average output of $7.90 as the differential for Miami, 
Florida. They then worked up through the state with a priority of 
maintaining competitive relationships between plants. The only 
deviation the witness noted was Myakka City, Florida, whose current 
differential is $0.40 higher than plants in the Tampa-Orlando corridor. 
The witness was of the opinion the spread was too large, and, 
consequently, Proposal 19 recommended the spread be reduced to $0.20.
    In the southwest region, the Lone Star witness said, milk must move 
significant distances from the supply region in the Texas panhandle and 
eastern New Mexico to the demand centers in east Texas. The witness 
said milk routinely travels anywhere from 400-650 miles to service the 
fluid needs of the state and stressed the current differentials in the 
region are inadequate in covering transportation costs for these 
routine milk movements. Consequently, Proposal 19 generally contained 
higher proposed differentials than the USDSS model average, with 
greater increases moving northwest to southeast to incentivize milk to 
move where needed. The witness added there is a single differential 
level proposed for New Mexico, reflecting what the witness described as 
primarily a captive in-state market for milk.
Mideast
    A DFA witness representing NMPF testified in detail on hauling 
assembly costs associated with the Mideast marketing area. The witness 
described the region's principal supply areas as central and northeast 
Michigan, northern Indiana and northwestern Ohio, and fluid demand 
areas centering around the region's large cities of Detroit, Grand 
Rapids, Indianapolis, Columbus, and Pittsburgh. The fluid plants 
compete for a milk supply with the numerous small to medium-sized 
cheese plants in northeast Ohio, two large cheese plants in central and 
western Michigan and one large cheese plant in western Pennsylvania, 
explained the witness.
    The DFA witness testified the Mideast region has increased milk 
production 20 percent over the last 23 years, while simultaneously 
seeing a 66 percent reduction in dairy farms. The region's Class I 
utilization was 37 percent in 2022, supplied by approximately 33 
distributing plants, down from 57 in 2000. The consolidation in both 
the supply and demand sectors, increased hauling distances to fluid 
plants, along with a robust manufacturing sector, has created 
challenges in encouraging milk to meet fluid demand.
    The DFA witness estimated that Ohio assembly and delivery costs 
have increased approximately 69 percent from 2006 to 2023, attributing 
most of the increase to fuel, labor and equipment costs. The witness 
said current differentials do not provide enough financial incentive to 
move milk from supply regions to Class I plants. As a result, said the 
witness, the cost of supplying fluid milk needs is largely borne by 
cooperatives and their members.
    For the Mideast area, the DFA witness said the committee 
concentrated on a select group of larger cities in the region to 
analyze the relative value differences. The overall objective was to 
determine the value needed to encourage milk to move from milk supply 
areas in the north and west to areas of demand. The committee started 
with Chicago, Illinois, and determined that even though no fluid plants 
operated in the Chicago region, its differential should align with

[[Page 95494]]

prices of locations that supply packaged milk, which are Grand Rapids, 
Michigan, Cedarburg Wisconsin, Rockford, Illinois, and Dubuque, Iowa. 
The committee ultimately determined a $3.10 differential appropriate 
for Chicago (Cook County). From there, the witness reviewed a series of 
city pairs and provided justification for why the proposed 
differentials were adjusted from the USDSS model average. Reasons given 
for the changes centered on distance from larger population centers 
and/or milk supply areas and providing enough financial incentive, in 
the committee's opinion, to encourage milk to move where needed. The 
witness mentioned another consideration was the willingness of milk 
haulers to deliver, referring to resistance of milk haulers to make the 
long hauls needed to deliver milk to central Ohio, for example.
    The DFA witness also detailed considerations for proposed 
differentials in western Pennsylvania, centering around plants in the 
Pittsburgh area, and plants in southwest Ohio and eastern Indiana. They 
said differentials were adjusted in those areas to account for what the 
committee believed were current competitive relationships. The witness 
said that, ultimately, the committee recommended more slope than the 
USDSS model by reducing the differential increases in the milk surplus 
areas of Michigan and increasing the slope when moving to the south and 
east.
    Another DFA witness spoke to increased hauling costs in the Mideast 
area. The witness said that as the number of dairy farms in the area 
has declined, so has the number of available milk haulers. Compounding 
the issue is competition with other industries who also rely on 
commercial haulers. As a result, milk hauling rates have increased as 
the fewer number of milk haulers must travel farther distances to 
assemble and deliver milk loads. The witness presented data on various 
factors that contribute to overall transportation costs, such as wages, 
diesel fuel prices, and equipment purchase costs.
    A witness from the Michigan Milk Producers Association (MMPA) 
testified on the unique Michigan marketing conditions that resulted in 
deviations from the USDSS model output. The witness said Michigan has 
experienced significant milk production growth, accounting for 68 
percent of the region's growth. Michigan milk production serves as a 
reserve supply for states south and east, which are considerably longer 
routes than when the differentials were adopted in 2000, said the 
witness. They testified current differentials are no longer adequate to 
cover current transportation costs and highlighted how the large flat 
differential zone in Michigan, covering 525 miles, makes it difficult 
to encourage milk to travel farther distances to supply fluid demand 
instead of satisfying local manufacturing plant demand. Therefore, NMPF 
proposed more, smaller pricing zones within the state to better reflect 
the cost to move milk. The witness estimated MMPA's hauling cost for 
transporting milk from mid-Michigan to eastern Ohio, approximately 287 
miles, was $1.06 per cwt per 100 miles.
    The MMPA witness testified that is has been more difficult to 
obtain over-order premiums to cover increased costs because national 
retailers with more bargaining power have replaced local independent 
stores. Consequently, the witness said, national retailers with a wider 
geographic footprint and higher milk volume needs have put downward 
pressure on premiums. The witness concluded that increasing Class I 
differentials to better reflect the cost of supplying the fluid market 
would be more equitable than an increasing reliance on a dairy farmer's 
ability to negotiate over-order premiums in a magnitude large enough to 
fully cover costs.
Upper Midwest
    A Prairie Farms witness representing NMPF discussed the proposed 
Minnesota and Wisconsin differentials. The witness said the USDSS model 
results had too much slope between the states that would have created 
too much financial incentive to move milk out of Minnesota, creating 
difficulties for Minnesota plants to compete for a milk supply. 
Consequently, the witness said NMPF is proposing fewer differential 
zones in the Upper Midwest FMMO region to ensure a local supply could 
be maintained. Further, in that region, NMPF was cognizant to propose 
differential levels that would minimize negative impacts on producer 
blend prices. This witness opined the differentials contained in 
Proposal 19 would not fully cover the cost of moving milk the long 
distances required to service the fluid market in regions where they 
operate. However, they said, the proposed differentials would encourage 
the availability of adequate milk supplies to support milk demand in 
distant markets.
Central
    The Prairie Farms witness also testified on the proposed Class I 
differentials in the Illinois, Iowa, Missouri, and Nebraska areas. The 
witness said that in the last 20 years the cooperative has become more 
dependent on supplemental milk supplies to serve markets in Illinois 
and Missouri, while Iowa has lost milk processing capacity in the 
eastern half of the state due to plant closures. In addition, the 
decline of milk production in southeast Iowa has made it more difficult 
for Prairie Farms to supply milk into the Appalachian and Southeast 
FMMOs to meets its supplemental milk needs. All these factors have 
contributed to changes in the region's milk movements and increased 
producer hauling costs, stressed the witness. The witness reviewed 
several equidistant Prairie Farms hauling routes and highlighted the 
disparity in differential gains. For example, some routes traveling 
approximately 300 miles may see a differential gain of $0.90, while 
other routes traveling a similar distance may only see a gain of $0.25. 
The witness stated the region's differentials need to be adjusted to 
remove some of the disparity and provide adequate financial incentive 
to supply fluid plants located in the south and east. The Prairie Farms 
witness said their cost to move milk to its four southern and 
southeastern fluid plants was approximately $5.25 to $5.50 per loaded 
mile, and costs to supply plants in central Illinois was similar.
    A DFA witness also testified to differentials proposed for the 
Central FMMO region. The witness echoed other testimony regarding 
decreased farm numbers, longer distances traveled, and increased 
hauling expenses. The witness estimated DFA hauling costs in the region 
have increased 151 percent from 2005 to 2022. The witness spoke to the 
proposed differential increases in the region and explained that 
Proposal 19 would increase the current differential values by $1.35 in 
Kansas City, $1.15 in Omaha and $1.65 in Wichita. The witness 
elaborated that the higher increase in Wichita reflects the area's lack 
of an adequate local milk supply. More specifically, the witness stated 
that only 27 percent of Wichita's demand is delivered from within a 
150-mile radius, while in Kansas City and Omaha, 47 percent and 55 
percent, respectively, comes from within 150 miles.
    Numerous NMPF witnesses testified about the proposed Colorado 
differentials. One DFA witness testified the USDSS model overestimated 
the amount of milk in Colorado available to meet the State's fluid 
needs because of private contractual relationships with manufacturing 
plants. Consequently, NMPF recommends deviations from the model to 
recognize current competitive

[[Page 95495]]

relationships, said the witness. The witness also discussed population, 
milk production, and fluid demand similarities between Denver and other 
regional cities to justify increasing the Denver area differentials to 
more closely align with differentials in those cities. The witness said 
adoption of the USDSS model output for Colorado, without adjustments, 
when combined with other changes that could result from this rulemaking 
would result in significant, unsustainable decreases in producer pay 
prices and, thus, blend price equity must be considered when making 
differential adjustments.
    Other DFA witnesses spoke in more detail on the potential producer 
price impact on Colorado dairy farmers. The witnesses testified hauling 
and feed costs in Colorado are higher than other parts of the region, 
which they believe were not properly accounted for in the USDSS model. 
One witness said producer prices in Colorado currently exceed those of 
the FMMO's base zone, however, if the USDSS model average were adopted, 
it would result in producer blend prices lower than prices announced at 
the base zone, causing significant financial harm to Colorado dairy 
farmers.
Arizona
    A United Dairymen of Arizona (UDA) witness representing NMPF 
testified in support of Proposal 19. UDA is a dairy farmer-owned 
cooperative association, with 36 cooperative members and a 
manufacturing plant located in Arizona. The witness cited many factors, 
such as weather, climate, transportation, fuel, and increased costs of 
producing Grade A milk as challenges for Arizona dairy farmers. The 
witness stressed the costs of maintaining Grade A status in the state 
exceeded $2.35 per cwt. According to the UDA witness, the proposed 
Arizona Class I differentials: generally follow the USDSS model, with 
deviations made to reflect local market conditions; maintain current 
price relationships between handlers within Arizona and the surrounding 
states; and establish a smooth differential transition from surrounding 
areas.
    The witness noted UDA operates a plant in Tempe, Arizona, that 
serves as a balancing plant for the market. The witness said the cost 
of operating the plant does increase in the summer months as less milk 
volume is run through the plant when milk supplies are lower.
California
    A CDI witness testified on the process for determining the proposed 
California differentials. The witness said the goal of the California 
differentials was to recognize regional cost drivers and local market 
conditions unique to servicing California urban areas, and to maintain 
price relationships with surrounding states. In the witness' opinion, 
the USDSS model did not account for the impact on producer prices, 
which could alter pool stability and incentives to supply the Class I 
market, and region-specific cost drivers such as geography or traffic. 
Those considerations form the basis for the deviations from the USDSS 
model output NMPF proposed.
    The CDI witness provided an overview of the similarities between 
the California Central Valley and Upper Midwest milksheds to justify 
the position that the lowest differential in both regions should remain 
similar. For that reason, said the witness, NMPF proposes a minimum 
differential zone of $2.50 in California, which is similar to the 
lowest Upper Midwest FMMO differential zone of $2.55. The witness also 
discussed dwindling milk supplies, increased population, pervasive 
traffic congestion, and the closure of manufacturing plants in southern 
California as reasons for making off-model adjustments. The witness 
described changes made in three California regions (Central Valley, Bay 
Area, and Southern California) to provide incentives for dairy farmers 
to serve the Class I market in urban areas.
    A DFA witness also testified on the proposed Class I differentials 
for California and northern Nevada. The witness advocated the 
maintenance of competitive equity between Class I and manufacturing 
plants in northern Nevada and California counties. The witness was of 
the opinion the USDSS model fell short in adequately capturing the cost 
of producing milk in California. The witness said the current $0.10 
difference in zones is not sufficient as it does not reflect the actual 
movements of milk or unique California State regulations, taxes, 
geography, and high milk production costs. The witness stated the 
current differentials do not cover the hauling costs in a state with 
high gas prices, heavy traffic, and road weight limits. The witness 
supported testimony from the CDI witness justifying the proposed 
California differentials. The DFA witness also expressed northern 
Nevada counties have a historic competitive relationship with northern 
California, which should be preserved. The witness noted that Proposal 
19 recognizes this dynamic by proposing a $2.90 differential for the 
region.
Pacific Northwest
    A witness representing Northwest Dairy Association (NDA) testified 
on behalf of NMPF regarding the proposed differentials in the Pacific 
Northwest region, which includes the States of Washington, Oregon, 
Idaho and Montana. NDA is a dairy farmer-owned cooperative that markets 
the milk of approximately 295 dairy farmers in Washington, Oregon, 
Idaho, and Montana, and conducts all processing and marketing 
operations through the wholly owned subsidiary Darigold. The witness 
described regional competitiveness at the farm level, ensuring 
incentives to supply Class I markets, and geographic and population-
influenced cost factors were the primary reasons the proposed 
differentials deviate from the USDSS model's averages. The witness was 
of the opinion proposed differentials in the Pacific Northwest FMMO 
urban areas should mirror those of the Central FMMO, as the urban areas 
of the two regions operate similarly. To ensure competitive equity and 
the balancing needs of distinct areas within the region, the witness 
said Proposal 19 recommended fewer pricing zones than produced by the 
USDSS model.
    The NDA witness also described market changes similar to those of 
other witnesses: declining milk production, increased population, 
longer haul distances, and increased transportation costs. The witness 
estimated NDA transportation costs for servicing Pacific Northwest 
Class I plants has increased $1.10 per cwt in the last 15 years.
    Regarding the unregulated areas of the northwest, the witness used 
King County, Washington, as the base at $3.00 per cwt, and kept the 
zones the same as they currently exist. In counties with little to no 
milk production, the differential was reduced to as low as $2.20 in 
Idaho. For areas with higher milk production, the differentials were 
proposed at $2.55, reflecting the same level of differentials in South 
Dakota.
    In its post-hearing brief, NMPF emphasized adoption of Proposal 19 
was necessary to ensure Class I differentials would be more reflective 
of the current costs of supplying the Class I market. NMPF maintained 
that the proposal would result in Class I differentials below actual 
costs, keeping with the FMMO principle of minimum pricing. NMPF 
reiterated testimony given at the hearing regarding the continued 
relevancy of the costs associated with the base differential and 
stressed that costs have increased since it was first adopted in 2000. 
NMPF reviewed its own testimony at the

[[Page 95496]]

hearing on what it believed were the appropriate regional 
considerations used to propose deviations from the USDSS model results. 
According to NMPF, adoption of Proposal 19 would only raise the 
regulated cost of Class I milk under FMMOs by slightly less than 8 
percent.
    NMPF reiterated the importance of Class I prices remaining the 
highest priced class to ensure producers move surplus milk to deficit 
regions to meet Class I demand. Without such pricing hierarchy, NMPF 
stated, milk in the higher-valued use class would not be pooled and it 
would result in non-uniform prices to producers.
    A witness representing the AFBF testified in support of Proposal 
19. The witness concurred with NMPF testimony on the increased costs of 
servicing the market since the differentials were adopted in 2000. In 
offering support for the differential adjustments, the witness said the 
purpose of the USDSS model was to mimic an ideal market solution, so it 
would be expected that actual market costs are higher. The witness 
mentioned that given the seasonality of milk demand, it could be 
considered more appropriate to start with the USDSS model's October 
2021 results, rather than the average of May and October. In its post-
hearing brief, the AFBF stressed that regulated Class I differentials 
provide for long-term stability; something that cannot be assured if a 
larger portion of milk prices is negotiated through over-order 
premiums.
    A witness representing IDFA testified in opposition to Proposal 19. 
The witness was of the opinion NMPF did not use a consistent 
methodology when determining differential level adjustments from the 
USDSS model results. Additionally, stressed the witness, some of the 
factors NMPF considered were not relevant and/or were unevenly applied 
(dairy farm production costs, private business relationships, blend 
price impacts, and regional dairy farm competitiveness), or were 
already factored into the USDSS model (transportation costs and 
maintaining handler equity). The witness was of the opinion that if 
milk suppliers and cooperatives experienced transportation costs higher 
than those provided for in the differentials, the additional cost 
reimbursement should be negotiated through over-order premiums with 
milk buyers. The witness also took issue with what they deemed an 
undefined base differential, proposed at $1.60 in some areas and $2.20 
in other areas, because they opined, there was no cost justification 
for the difference.
    The IDFA witness argued the purpose of Class I differentials is to 
bring forth an adequate supply of milk for fluid use. According to the 
witness, with an FMMO Class I utilization of 27 percent, the current 
milk supply is more than adequate to serve Class I needs and there is 
no justification for increasing Class I differentials. The IDFA witness 
cited a recent retail milk demand study that found milk demand is 
elastic and, thus, the quantity demanded is sensitive to price changes. 
The witness argued any increase in price would not only hurt Class I 
sales, but also increase government purchase costs for milk used in 
nutrition and feeding programs. The witness stressed retail fluid milk 
sales are declining and USDA should not hasten the decline by 
increasing Class I prices. The witness also added that eliminating or 
reducing the depooling of milk should not be a consideration when 
evaluating Class I differential levels. The witness said depooling is a 
necessary tool for manufacturing handlers when the Class III or Class 
IV price exceeds the blend price. They estimated that in some FMMO 
areas the Class I differential would have to increase to $41.32 per cwt 
in order to disincentivize depooling.
    The IDFA witness was of the opinion that if USDA recommends 
differential increases, they should not be increased in the three 
southeastern FMMOs as those provisions already require fluid milk 
handlers to pay transportation credits and distributing plant delivery 
credit assessments to encourage producers to service Class I demand in 
those deficit markets. The witness estimated those assessments already 
account for approximately 42 to 46 percent of the differential 
increases contained in Proposal 19.
    The IDFA witness also argued the $0.40 portion of the base 
differential attributed to maintaining Grade A status is no longer 
relevant given over 99 percent of all milk currently produced is Grade 
A. Consequently, said the witness, there is no longer a need to 
incentivize farms to become Grade A in order to service the Class I 
market and the base differential should be lowered to $1.20 per cwt.
    Two witnesses representing IDFA, Saputo and Plains Dairy, testified 
in opposition to Proposal 19 and offered support for the arguments put 
forth by the IDFA witness. The Saputo witness said increasing fluid 
milk prices may reduce the retail price spread between fluid milk and 
plant-based products, further depress fluid milk sales, and ultimately 
force fluid plants to switch from HTST to ESL processing. The witness 
speculated a further decline in HTST facilities will force cultured 
products to be made elsewhere and increase costs to consumers. In 
regard to obtaining milk supplies, the witness said Saputo pays over-
order premiums when necessary. The witness also opposed any increases 
in minimum regulated prices on the grounds that nonuniform increases 
would put some of its plants at a cost disadvantage. The Plains Dairy 
witness stated the increase from the model average results would impact 
consumer prices by $0.07 per gallon. Plains Dairy is a fluid milk 
processing facility in Texas.
    A witness representing MIG also testified in opposition to Proposal 
19 for many of the same reasons articulated by the IDFA witness. The 
MIG witness said NMPF failed to cost-justify any elements of the base 
differential, either at the $1.60 or $2.20 level, to support why it 
should be maintained. In echoing IDFA's arguments, the MIG witness also 
objected to NMPF's use of the USDSS model's averages as a starting 
point. As the FMMO system provides for minimum prices, the witness was 
of the opinion any evaluation of differential changes should start with 
the USDSS model's May results, which represent the flush season for 
milk production. The witness said Proposal 19's problems are compounded 
because NMPF failed to use a consistent set of principles to justify 
its deviations from the USDSS model results. In addition, many of the 
factors used to justify deviations, the witness said, were already 
factors considered by the model and, thus, are being double counted.
    The MIG witness characterized the NMPF deviations as substantial 
and presented a series of maps to visualize the magnitude of the 
disparate changes. The witness also pointed to areas where price 
changes are more dramatic between neighboring counties and suggested 
such price disparities could create incentives for disorderly 
marketing. The witness deemed the Proposal 19 differentials to be 
significantly different from current differentials and argued the 
increases were proposed despite a lack of evidence from NMPF that there 
is a shortage of milk available to meet Class I demand. Class I 
differentials should reflect the minimum cost of supplying Class I 
milk, stressed the witness. If there are additional transportation 
costs not provided for under the current differential, as alleged by 
NMPF, the witness testified, those would be reflected in negotiated 
over-order premiums in the market. Instead, many

[[Page 95497]]

areas of the country have no over-order premiums, which the MIG witness 
interpreted as an indication that FMMO prices are not minimums, but 
price enhancing. Similar to the IDFA witness, the MIG witness was of 
the opinion no changes should be made to the differentials in the three 
southeastern FMMOs until the full impact of the recent amendments to 
the transportation credits and establishment of the distributing plant 
delivery credits are known.
    Three witnesses representing Organic Valley testified in opposition 
to Proposal 19. Organic Valley consists of 1,600 farmer-owners who 
produce certified organic milk, three dairy manufacturing facilities 
which make Class III and IV products and a network of co-packers to 
process and distribute Class I products. The witnesses opposed the NMPF 
proposed differentials as they would increase Organic Valley's 
obligation to FMMO marketwide pools.
    The Organic Valley witnesses described the differences between the 
organic and conventional milk markets (both at the producer and 
processor levels). They were of the opinion Proposal 19 failed to 
account for these differences and would result in inefficient milk 
movements if adopted. The witnesses countered arguments that the 
conventional market balances the organic market, claiming only around 2 
percent of organic milk finds its way into conventional products.
    A witness from Aurora testified in opposition to Proposal 19. 
Aurora is a vertically integrated organic milk supplier with four 
organic dairy farms located in Colorado and Texas. The witness was of 
the opinion no justification exists to increase Class I differentials 
as the areas surrounding the Aurora plants have adequate organic milk 
supplies, something that was not accounted for in the USDSS model. The 
witness described the organic milk market and argued its structural 
differences from the conventional milk market make any change to the 
Class I differentials as applied to organic milk unwarranted. Similar 
arguments were made by a MIG witness on behalf of Danone and Crystal 
Creamery.
    A witness for Maple Hill Creamery (Maple Hill) testified in 
opposition to Proposal 19. Maple Hill purchases grass-fed organic milk 
for processing and national distribution but does not own a fluid milk 
plant. The witness opposed the proposed Class I differentials and 
estimated their Class I marketwide pool obligation could increase up to 
80 percent as a result. The witness made arguments similar to other 
organic processors and concluded that increasing Class I differentials 
would result in a choice between paying a lower organic fixed price to 
its dairy farm suppliers and jeopardizing supply or raising retail 
prices and jeopardizing sales.
    A witness representing Shamrock, a member of MIG, testified in 
opposition to Proposal 19. The witness said adoption of Proposal 19 
would increase their raw milk costs anywhere from 29 to 62 percent. The 
witness testified Shamrock pays over-order premiums which they believed 
cover any additional costs associated with servicing their plants in 
excess of the Class I differential value. The witness noted an 
inconsistency in NMPF methodology, as the differential for their 
Virginia plant is proposed at the USDSS model average, while the 
differential at their Arizona plant is $0.65 greater than the average.
    A witness for AE, a MIG member, also testified in opposition to 
Proposal 19. The witness was of the opinion NMPF had not provided 
justification for the Class I differential increases. They specifically 
objected to the Class I differential changes that would, in the 
witness' opinion, give its nearest competitor a $0.15 greater advantage 
than currently exists.
    A MIG member witness for HP Hood testified in opposition to 
Proposal 19. HP Hood also operates four standalone Class II plants in 
the northeast. Similar to the AE witness, the HP Hood witness testified 
the proposed Class I differentials would create competitive 
disadvantages for their plants in relation to nearby cooperative owned 
plants. The witness criticized what they believed was the lack of 
uniformity used by NMPF in developing differentials that deviated from 
USDSS model results. The witness said there were ample milk supplies to 
meet Class I needs and any increase in the Class I price would only 
serve to decrease fluid milk sales.
    A witness from Turner Dairy, a MIG member, testified in opposition 
of Proposal 19. The witness objected to the continued relevance of the 
three base differential components. The witness said Turner Dairy had 
not had difficulty finding adequate milk supplies through its 
independent dairy farm supply. The witness said any Class I 
differential increases would be paid into the FMMO marketwide pool, not 
to its direct suppliers. The witness said this would make it harder to 
compete for dairy farm suppliers, particularly with competitors in the 
unregulated area to their east. Similar to other witnesses, the Turner 
Dairy witness detailed how the proposed Class I differentials created 
competitive disadvantages for their plants relative to nearby 
cooperative plants and would decrease fluid milk consumption.
    A MIG witness testifying on behalf of fairlife opposed Proposal 19. 
The witness argued that if more money is needed to attract fluid milk 
supplies, it should be negotiated in the marketplace, not mandated in 
FMMO pricing provisions. The witness said fairlife regularly pays over-
order premiums for even day receiving, transportation costs, and 
quality attributes. In the witness' opinion, there were ample fluid 
milk supplies and any increase in differential would only serve to 
create market winners and losers.
    A witness from Shehadey, testified in opposition to Proposal 19. 
Shehadey operates four manufacturing plants in California, Nevada, and 
Oregon, producing Class I and Class II products. The witness argued the 
Class I differentials proposed for their plant locations should not be 
increased as the local milk supply was adequate to meet their fluid 
needs. The witness took particular objection with the disproportionate 
increase by the Fresno, California, plant in relation to their 
competitors located farther from the state's primary milk supply in the 
Central Valley. The witness added that their Oregon plant has a more 
distant milk supply relative to their other plants, and over-order 
premiums are used to compensate dairy farmers for the additional costs 
of servicing the plant.
    A witness representing United Dairy, Inc. (United) testified in 
opposition to Proposal 19. United is a fluid milk processor operating 
three plants in West Virgina, Ohio, and Pennsylvania, which are 
primarily supplied by independent dairy farms. The witness testified 
their plants received adequate milk supplies and pay over-order 
premiums when needed to ensure their milk needs are met. The witness 
opined the market should depend on over-order premiums, not unduly high 
regulated prices, to direct milk where needed. Similar to other 
witnesses, the United witness argued FMMO prices should not be 
increased because it would negatively impact Class I sales. The witness 
objected to the uneven application of differential increases, 
highlighting the differential increases for the United plants are 
higher than every other plant in the region, even when United has had 
no milk supply shortages. A West Virginia independent dairy farm 
supplier of United also testified in opposition to Proposal 19. The 
witness expressed concern the proposed differential increases would 
ultimately

[[Page 95498]]

lead to the closure of the independent fluid milk processors in the 
State, leaving local dairy farmers with few, if any, local market 
outlets, and would widen the nutritional gap that already exists in the 
Appalachian area as higher prices would reduce fluid milk consumption.
    A witness representing Lamer's testified in opposition to Proposal 
19. The witness said increasing Class I differentials would not benefit 
consumers or processors as higher prices would lead to a decline in 
fluid milk consumption and the closure of more fluid milk plants. The 
witness was of the opinion that limiting or disallowing the depooling 
of manufacturing milk would be a more beneficial change for all dairy 
stakeholders. A post-hearing brief filed by Lamers contended the 
hearing record contained no evidence of Class I demand not being 
fulfilled, thus, any increase in Class I prices was not justified. The 
brief argued that if additional transportation costs of moving milk to 
Class I plants exist, they should be negotiated through over-order 
premiums.
    A series of academic researchers testified regarding milk price 
elasticity. One researcher testified on behalf of NMPF regarding the 
potential impact to fluid milk demand as a result of regulated price 
changes. The witness referred to this as price elasticity, which 
estimates the percentage change in demand (quantity) due to a 1 percent 
change in price. The witness said any price elasticity less than the 
absolute value of 1 is considered price inelastic--a 1 percent change 
in price would result in less than a 1 percent change in demand--
implying increased revenue due to the price change would more than 
offset the decreased revenue from fewer sales.
    The NMPF witness reviewed 38 empirical studies, conducted between 
1964 and 2022, measuring milk price elasticity at the retail level. The 
witness found the study average elasticity of 0.35 percent, and a 
median of 0.2 percent, concluding milk demand is inelastic. The witness 
said consumers remain price insensitive because milk continues to be 
considered a staple food. To illustrate its price inelasticity, the 
witness elaborated the real price of milk relative to all goods and 
services has declined 7 percent since 2013, during which time milk 
demand has decreased 18.3 percent. If milk was elastic, said the 
witness, a decline in price should have resulted in an increase in 
demand. The witness reviewed other factors which they believed were 
driving decreased milk consumption, including increased competition in 
the beverage market from new products and alternative beverages, an 
increase in the amount of food consumed away from home, and the lower 
proportion of young kids in the population.
    The NMPF witness evaluated the average increase in differentials 
contained in Proposal 19, $1.49 or an 8.6 percent Class I price 
increase, to estimate the impact on demand. Assuming a 55 percent 
retail price transmission rate (1 percent change in the Class I price 
would cause a 0.55 percent change in the retail price), the witness 
estimated Proposal 19 would lead to a 1.6 percent decrease in demand. 
The witness concluded the decrease in demand would be lower than the 
increase in Class I revenue, resulting in a net increase of dairy 
farmer revenue.
    Another researcher testified on behalf of IDFA. The witness 
presented the results of a study evaluating the impact milk price 
changes have on the consumption of milk (in five disaggregated 
varieties) and various alternatives, including soft drinks, bottled, 
water, juices, and for the first time considered plant-based 
alternatives. The witness utilized weekly scanner data from 2017 
through August 2023 to evaluate three distinct time periods (pre-COVID, 
COVID and post-COVID). The witness estimated the data represented 
approximately 84 percent of the milk volume sold at retail outlets, or 
64 percent of overall milk volume. The witness attributed the remaining 
36 percent to milk sales through untracked retail, foodservice, 
schools, and shrinkage. The witness noted it is likely the elasticity 
for the unaccounted milk volume was highly inelastic.
    The IDFA witness said the study found the own-price elasticities 
for traditional white, flavored, and lactose-free milk to be elastic, 
and when all five categories of milk were combined, it had an 
elasticity of -1.26 in the post-COVID time period. Utilizing some of 
the NMPF researcher's assumptions (8.6 percent increase in Class I 
prices and a retail price transmission rate of .55 percent), the 
witness estimated adoption of Proposal 19 would result in an overall 
5.98 percent decrease in fluid milk sales and a 2.1 percent increase in 
gross dairy farmer revenue. The witness concluded this study revealed 
retail fluid milk sales are more sensitive to price changes than 
previously thought. The witness also noted other demand studies that 
utilize AMS estimated fluid milk sales, not weekly scanner data, do not 
reflect the current retail marketplace because they incorporate highly 
inelastic sales to schools, colleges and universities, long-term care 
and senior living facilities, hospitals, and correctional institutions.
    A third academic researcher, also testifying on behalf of IDFA, 
provided results of a study evaluating the market effects of Proposal 
19. Looking at milk production, fluid milk consumption, and producer 
price statistics since 2000, the witness concluded there are sufficient 
milk supplies nationally to meet Class I demands. The witness was also 
of the opinion sufficient milk supplies, at reasonable prices, exist 
for the high Class I utilization FMMOs (the Appalachian, Southeast, and 
Florida), because retail prices in the three markets were below those 
of a 30-city average retail milk price when compared to other regions 
of the country. The witness commented that elasticity studies not 
accounting for non-dairy alternatives were not representative of the 
current retail market. The witness reviewed recent fluid demand studies 
and concluded adoption of Proposal 19 would increase fluid milk prices, 
decrease consumption, and result in more milk use in manufactured 
products.
    A post-hearing brief submitted on behalf of Select supported 
increasing Class I differentials, but not to the levels contained in 
Proposal 19. Select contended deviations from the USDSS model results 
made by NMPF may be appropriate but disagreed with the type and extent 
of those included in Proposal 19. Select took exception to the proposed 
adjustments in the mideast and southwest regions where they have member 
farms. Select noted reasons for making deviations were not applied 
uniformly, especially in areas that have similar supply and demand 
environments. Select stated increased transportation costs and shifts 
in milk production and processing locations justify increasing Class I 
differentials and offered support for using the average of the May and 
October 2021 USDSS results, with minor adjustments and smoothing of the 
surface as appropriate.
    A post-hearing brief submitted on behalf of MIG opposed adoption of 
Proposal 19, arguing hearing evidence supported lowering, not raising, 
Class I differentials. MIG cites the abundance of milk available to 
serve the Class I market and FMMO adjustments to shipping percentages 
as evidence to deny Proposal 19. MIG reiterated its objection to the 
methodology used and deviations made by NMPF in developing the proposed 
differentials. The brief contended raising Class I

[[Page 95499]]

differentials would be disorderly because it would lower Class I demand 
and aggravate challenges already faced by fluid milk processors. MIG 
also noted Class I differential changes should not be considered until 
the impact of recent changes to transportation cost-related provisions 
in the Appalachian, Florida, and Southeast FMMOs were known.
    A post-hearing brief submitted on behalf of IDFA opposed Proposal 
19 on the grounds its adoption would cause market disorder by raising 
fluid milk prices, decreasing fluid milk consumption, harm consumers, 
and divert milk into manufacturing uses. IDFA reiterated hearing 
testimony in its brief regarding the price elasticity of fluid milk and 
concluded adopting Proposal 19 would reduce fluid milk consumption by 
5.98 percent, resulting in over 2.2 billion pounds of milk being 
diverted to manufacturing uses.
    Similarly, IDFA objected to NMPF's methodology in determining the 
differential levels offered in Proposal 19. IDFA objected to NMPF's use 
of dairy farm production costs to justify increases to the Class I 
differentials and referenced existing milk production as more than 
adequate to meet fluid milk demand. IDFA maintained Class I 
differentials should instead be lowered by $0.40 per cwt because the 
Grade A maintenance cost consideration is obsolete and inaccurate.
    A MIG witness testified in support of Proposal 20, seeking to 
reduce the base differential to $0.00. The witness' testimony centered 
around the continued relevance of the cost components currently 
provided for in the base differential: Grade A maintenance, balancing, 
and Class I incentive costs. The witness was of the opinion the base 
differential results in market enhancing prices that induce 
overproduction and reduce fluid milk consumption. The witness said that 
since almost all U.S. produced milk meets Grade A standards, it is no 
longer necessary to provide compensation through Class I differentials 
for those costs as they are not unique to producers supplying the Class 
I market. They argued these costs are already provided for in market-
clearing Class III and IV prices where most of the U.S. milk supply is 
utilized.
    The MIG witness said the balancing cost factor is no longer 
justified as fluid milk processors have either invested in 
infrastructure to balance their own milk supply or pay over-order 
premiums to their suppliers for balancing services. The witness was of 
the opinion incorporating balancing costs within the Class I price 
results in processors paying for balancing services they do not receive 
or paying twice for such services--once through the Class I price and 
again in an over-order premium. Lastly, the MIG witness argued the 
$0.60 Class I incentive cost factor was no longer necessary to attract 
adequate supplies of fluid milk given the low, and continually 
declining Class I utilization.
    Witnesses from MIG member companies testified in support of 
Proposal 20. MIG's members echoed the previous MIG testimony 
challenging the relevance of the base differential cost factors in the 
current market environment. In particular, the MIG witnesses argued 
that through plant investments, particularly ESL processing or 
additional milk silos, combined with over-order premiums paid to their 
milk suppliers, they were directly paying for their individual milk 
balancing needs. The witnesses all opined that through the base 
differential they were being double charged for such services. All MIG 
members testified that if additional monies are needed for balancing 
services or to obtain adequate milk supplies, it is more appropriate 
for those costs to be negotiated in the marketplace and paid directly 
to their milk suppliers, rather than as part of a regulated minimum 
price shared with all pooled producers.
    Another MIG witness testified regarding the relevancy of the base 
differential in the current marketplace. The witness was of the opinion 
the base differential should be reduced to $0.00, and if cost recovery 
is needed by producers, it can be negotiated with milk buyers. The 
witness utilized the USDSS model to compare the value of Class I and 
Class III milk at the county level. The witness presented the results 
and explained in some parts of the country, where Class III milk is 
more valuable, it would take additional incentives to service a Class I 
plant rather than remain at the higher valued manufacturing plant. In 
other areas of the country, namely the southeast, northeast, and 
California, the value of Class I is higher, representing the cost to 
balance the region's Class I demand. The witness said the national 
average value of the differences was negative $0.38, indicating 
nationally, it is more valuable for milk to service Class III plants. 
The witness drew the conclusion this analysis supports the argument for 
lowering the base differential to $0.00 and allowing fluid plants to 
negotiate and pay premiums directly to their milk suppliers.
    A post-hearing brief submitted on behalf of MIG reiterated its 
witnesses' testimony that the base differential is no longer 
economically justified. MIG argued the current oversupply of Class I 
milk is caused, in part, from high FMMO blend prices. According to MIG, 
adoption of Proposal 20 would correct this disorder by allowing a 
greater proportion of fluid milk costs to be negotiated and paid 
directly to suppliers. The brief reviewed MIG witness testimony on the 
relevancy of the costs associated with the base differential and the 
steps taken by its fluid milk processor members to balance and obtain a 
milk supply.
    A Lone Star witness, appearing on behalf of NMPF, testified in 
opposition to Proposal 20. The witness argued a base differential of 
$0.00 would result in the elimination of any Class I differential for 
large portions of the U.S., amounting to approximately $650 million 
annually, with no guarantee the money could be recovered through over-
order premiums. Additionally, said the witness, the lower differentials 
would lead to disorderly marketing conditions through increased 
occurrences of negative PPDs, higher volumes of depooled milk, and 
reduced or eliminated incentives to supply the Class I market. The 
witness stressed that costs to maintain Grade A status and balance the 
market's milk supply are real and significant. The witness said 
adoption of Proposal 20 would be akin to adopting individual handler 
pools in much of the country, an idea which they said has been found to 
cause disorderly marketing conditions.
    The NMPF witness maintained that milk has an inelastic demand, so 
any reduction in Class I prices will not have a significant impact on 
Class I sales. The witness also said that despite opposition testimony 
regarding the perils of setting regulated prices too high, there are 
also negative consequences for setting the regulated price too low. In 
the witness's opinion, dairy farmers face a market power imbalance when 
negotiating prices above FMMO minimums, reiterating previous testimony 
on the difficulty cooperatives faced when negotiating and maintaining 
over-order premiums.
    The NMPF witness concluded by emphasizing the objective of the FMMO 
system is to set prices to ensure a sufficient quantity of milk for 
fluid use. The witness stressed providing for prices that reflect the 
current costs of supplying the market as demonstrated through NMPF 
testimony should be a priority of this proceeding.
    In their post-hearing brief, NMPF argued Proposal 20 incorrectly 
assumes the cost of servicing Class I demand has not increased and 
reiterated witness testimony on the continued relevancy and need for 
the base differential. NMPF

[[Page 95500]]

stressed that costs recognized in the base differential continued to be 
incurred by dairy farmers in servicing the Class I market and took 
exception with the position such costs could be adequately recovered 
through over-order premiums. NMPF maintained Class I demand is 
inelastic and reiterated the need for Class I prices to continue to be 
the highest priced class in order to ensure an adequate supply.
    The AFBF witness also expressed opposition to Proposal 20. The 
witness testified the cost factors provided for in the base 
differential are still relevant and in fact higher than when the 
differential was adopted. The witness suggested the Department consider 
raising the base differential and provided current cost estimates for 
each of the three factors, which resulted in a base differential 
increase of approximately $0.60 per cwt. The witness stressed the 
importance of the base differential in contributing to the proper 
alignment of classified prices which they considered a critical element 
of orderly marketing. The AFBF's post-hearing brief reiterated its 
witnesses' hearing testimony and concluded adoption of Proposal 20 
would lead to disorderly marketing conditions.
    A post-hearing brief filed by Lamers offered support for Proposal 
20. Lamers stated its adoption would better reflect the real value of 
milk and all four classes would have a closer price relationship. 
Lamers asserted high Class I differentials were no longer needed to 
supply the fluid market given that 98 percent of milk produced is Grade 
A. A post-hearing brief submitted by New Dairy also offered support for 
Proposal 20.
    Select's post-hearing brief expressed opposition to Proposal 20 and 
asserted a base differential of $1.60 should be maintained. Select 
opined the cost of maintaining Grade A status still exists and has 
increased, as have the costs associated with balancing and competing 
for a milk supply.
    A post-hearing brief submitted by Edge, while not offering support 
or opposition to Proposals 19 or 20, did contend Class I milk prices 
should not be raised beyond necessary levels and not be raised merely 
to offset the negative producer impact of increasing make allowances.
    The AFBF witness also testified in support of Proposal 21, seeking 
to increase the Class II differential from $0.70 to $1.56 per cwt. The 
witness explained the proposed differential reflects updated drying 
costs based on the current NFDM make allowance. The witness did not 
believe the proposed increase would lead to the substitution of Class 
IV powders in lieu of Class II fresh milk. The witness estimated that 
adoption of Proposal 21 would increase annual FMMO marketwide pool 
values by $122 million and reduce the likelihood of negative PPDs and 
depooling. These views were reiterated in AFBF's post-hearing brief.
    Several witnesses representing MIG including Turner Dairy; HP Hood; 
AE; Shamrock; CROPP; Aurora; Shehadey; Crystal Creamery; and fairlife 
testified in opposition to Proposal 21. The MIG witnesses indicated 
adoption of Proposal 21 would result in Class II standalone plants 
choosing not to participate in the FMMO system, putting fully regulated 
Class I plants with Class II production at a competitive disadvantage. 
This sentiment was emphasized by witnesses from Turner Dairy and 
Shehadey, whose fully regulated Class I plants also produced notable 
volumes of Class II products. The witness from Crystal Creamery 
provided an analysis of CME NFDM and Class II nonfat solids prices, 
projecting an increase of 20 to 50 percent in the use of Class IV 
nonfat solids if Proposal 21 was adopted. Lastly, a witness from 
fairlife predicted adoption of Proposal 21 would cause some 
manufacturers to reformulate products in order to avoid paying the 
higher Class II price.
    In its post-hearing brief, MIG reiterated hearing testimony and 
added that cream, a Class II product, must be made with fluid milk in 
accordance with the standards of identity established by the U.S. Food 
and Drug Administration. As such, according to MIG, a pooled Class II 
manufacturer of cream could not reformulate and, further, would 
experience an estimated 3.5 percent increase in its FMMO marketwide 
pool obligations.
    Several witnesses representing IDFA, including Saputo, Galloway, 
and Lakeview Farms, also testified in opposition to Proposal 21. The 
witness for Saputo indicated the demand for Class II skim solids is 
likely to decrease if Proposal 21 is adopted, as alternative milk 
solids would have a greater substitution value. Further, according to 
the witness, costs to consumers for cream would likely increase.
    The witness for Galloway testified that adoption of Proposal 21 
would not increase blend prices or limit depooling and negative PPDs, 
as alleged, because Class II manufacturers would instead utilize more 
Class IV powder ingredients in lieu of fresh milk. In the witness' 
opinion, increasing the Class II differential would only serve to 
promote disorderly marketing through the displacement of the local milk 
supply and permanent investment in equipment to enable the use of Class 
IV ingredients. The witness said once a manufacturer makes the costly 
capital investment decision, they do not switch back to use fresh milk 
in the future. The witness estimated adoption of Proposal 21 would 
result in a $99.4 million loss to producers through the use of lower 
valued Class IV ingredients. A witness from Lakeview Farms supported 
the statements of other witnesses, emphasizing the likely increase in 
costs to the customer. This witness added that innovation of more oil-
based formulations to offset the price volatility of dairy fat would 
lead to a disruption in the dairy supply chain.
    In its post-hearing brief, IDFA reiterated testimony from the 
hearing which stressed that there is already an adequate supply of milk 
for Class I and Class II needs and opined the current Class II price 
formula is working well as is. As such, according to IDFA, there is no 
evidence that suggests a need to increase the Class II differential. 
IDFA argued further that farmers are likely to receive lower net prices 
as a result of Proposal 21 due to the anticipated substitution of lower 
cost Class IV NFDM for Class II nonfat solids. Lastly, IDFA focused on 
the likely disproportionate impact of Proposal 21 on Class I handlers 
that also manufacture Class II products. Without the ability to depool, 
these handlers could not take advantage of lower NFDM prices, IDFA 
wrote.
    An MMPA witness appearing on behalf of NMPF also testified in 
opposition to Proposal 21. The witness' testimony mirrored other 
witnesses cautioning that adoption could cause substitution with Class 
IV powder ingredients. The witness said not only does the Class II and 
Class IV price difference need to be considered, but so does the 
significantly lower transportation cost of powder versus fresh milk. 
Under the current Class II differential, Class II milk already has an 
incentive not to be pooled, said the witness. Increasing the 
differential would only heighten the incentive and create competitive 
disadvantages for Class I plants making Class II products, while 
simultaneously lowering marketwide pool values. In its post-hearing 
brief, NMPF added that adoption of Proposal 21 may incentivize the 
practice of substituting less expensive milk powder for fresh milk to 
make Class II products. NMPF also elaborated on its members' concerns 
regarding the likely increase in depooling of Class II milk if Proposal 
21 was adopted.

[[Page 95501]]

    USDA received post-hearing briefs related to Proposal 21 from three 
additional stakeholders: New Dairy, Select, and Lamers. New Dairy 
expressed its opposition to the AFBF's Proposal 21, emphasizing that 
the current milk supply is sufficient, and it shared the concerns of 
other hearing participants regarding the potential competitive 
disadvantages for Class I handlers manufacturing Class II products. 
Select explained that the AFBF's proposal deviates from the rationale 
and methodology USDA utilized to establish the Class II differential 
during Order Reform and, thus, according to Select, Proposal 21 likely 
overstates an appropriate Class II differential. Further, Select was of 
the opinion increasing the Class II differential would discourage the 
use of fresh milk and cream in lieu of Class IV ingredients. Lastly, 
Lamers expressed its concern that the adoption of Proposal 21 would 
lead to disorderly marketing and stated no evidence was presented to 
suggest a need to increase the Class II differential.

Discussion and Findings

    An FMMO (or ``order'') is a regulation issued by the Secretary of 
Agriculture (Secretary) that places certain requirements on the 
handling of milk in a defined geographic marketing area. FMMOs are 
authorized by the AMAA. The declared policy of the AMAA is to ``. . . 
establish and maintain such orderly marketing conditions for 
agricultural commodities in interstate commerce . . .'' 7 U.S.C. 
602(1). As specified by the AMAA, the principal means of meeting the 
objectives of the FMMO program are through classified milk pricing and 
the marketwide pooling of returns. This rulemaking concerns and is 
limited to classified milk pricing.
    FMMOs announce prices each month for milk received by plants during 
that month, according to its use classification. Since 2000, the FMMO 
program has used product price formulas that rely on the wholesale 
price of bulk products to determine the minimum classified prices 
handlers pay for raw milk in the four classes of utilization. Class III 
and Class IV prices are announced on or before the 5th day of the 
following month to which they apply. The Class III and Class IV price 
formulas form the base, also known as the mover, from which Class I and 
Class II prices are determined.
    The Class I price is announced in advance of the applicable month. 
It is determined by adding the Class I differential assigned to the 
plant's location, plus the average of advanced Class III and Class IV 
prices (computed by using the most recent two weeks' DPMRP data 
released on or before the 23rd of the preceding month), plus $0.74. The 
Class II skim milk price, announced at the same time as the Class I 
price, is determined by adding $0.70 per cwt to the advanced Class IV 
skim milk price. Thus, the advanced prices pertaining to milk marketed 
in a particular month use the same formulae as the calculation of Class 
III and IV prices for milk marketed in that same month, but the 
specific data are from different time periods. The Class II butterfat 
price is announced at the end of the month, at the same time as the 
Class III and Class IV prices, by adding $0.007 per pound to the Class 
IV butterfat price.
    Component prices are based on prices for the selected bulk products 
collected through the AMS-administered DPMRP, which collects weekly 
wholesale prices for four manufactured dairy products in various bulk 
package sizes (cheese, butter, NFDM, and dry whey powder). Weekly 
average prices for cheddar cheese (the weighted average of block and 
barrel prices), butter, NFDM, and dry whey are reported in the 
NDPSR.\1\ Butterfat prices for milk used in products in each of the 
four classes is determined through surveyed butter prices. Protein and 
other solids prices for milk used in Class III products are derived 
from surveyed cheese and dry whey prices, respectively. The nonfat 
solids price for milk used in Class II and Class IV products is 
calculated from surveyed NFDM product prices.
---------------------------------------------------------------------------

    \1\ Official Notice is taken of the Notice of Equivalent Price 
Series: 77 FR 22282 (April 18, 2012). The National Dairy Product 
Sales Report was deemed as equivalent to the price series previously 
released by the National Agricultural Statistics Service.
---------------------------------------------------------------------------

    The butterfat, protein, other solids, and nonfat solids prices are 
derived through the weighted average monthly NDPSR survey prices of 
each corresponding commodity, minus a manufacturing (make) allowance, 
multiplied by a yield factor. The make allowance factor represents the 
fixed and variable processing costs manufacturers incur in making raw 
milk into one pound of product. The yield factor represents the 
approximate quantity of product that can be made from a cwt of milk 
received at the plant, assuming a certain component composition of the 
milk and the final products. Among other factors used to determine 
yield, the milk received at a plant is adjusted to reflect farm-to-
plant shrinkage compared to farm weights. This relates to the basic 
question of how much milk is required to make a pound of product.
    This product pricing system was implemented as a part of Order 
Reform on January 1, 2000. 64 FR 70868 (Dec. 17, 1999). While 
individual pieces of the price formulas have been updated occasionally 
since that time, this proceeding is the first time since their adoption 
that the Department is considering a comprehensive update to all four 
classified price formulas. 68 FR 7063 (Feb. 12, 2003); 71 FR 78333 
(Dec. 29, 2006); 78 FR 24334 (Apr. 25, 2013).
    The objective of this proceeding is to evaluate whether market or 
other economic conditions have changed and if the price formulas need 
to be updated to reflect current conditions, including economic and 
technological factors related to processing, transportation, and other 
relevant market functions or services. Twenty-one proposals, divided 
into five main topic areas, were considered: milk composition factors--
two proposals; surveyed commodity products--four proposals; Class III 
and Class IV formula factors--six proposals; base Class I skim milk 
price (often referred to as the ``higher of'')--six proposals; and 
Class I and Class II differentials--three proposals.
    The record supports the findings that some price formula factors 
should be amended to reflect current market conditions that were 
evidenced in this proceeding. The proposed changes, which are discussed 
in detail below, include:
    1. Milk Composition Factors: Update the factors to 3.3 percent true 
protein, 6.0 percent other solids, and 9.3 percent nonfat solids.
    2. Surveyed Commodity Products: Remove 500-pound barrel cheddar 
cheese prices from the DPMRP survey and rely solely on the 40-pound 
block cheddar cheese price to determine the monthly average cheese 
price used in the formulas.
    3. Class III and Class IV Formula Factors:
    a. Update the manufacturing allowances as follows:
    i. Cheese: $0.2519;
    ii. Butter: $0.2272;
    iii. NFDM: $0.2393; and
    iv. Dry Whey: $0.2668.
    b. Update the butterfat recovery factor to 91 percent.
    4. Base Class I Skim Milk Price: updating the formula as follows:
    a. Class I milk used in ESL products: The average of the advanced 
Class III and Class IV skim milk prices, plus a rolling monthly 
adjuster. The rolling monthly adjuster would be equal to the average of 
the difference between the

[[Page 95502]]

higher-of and the average-of, for 24 months, with a 12-month lag.
    b. Milk used in all other Class I products: the higher-of the 
advanced Class III or Class IV skim milk prices for the month.
    5. Class I and Class II differentials: Update the Class I 
differentials to generally reflect the United States Dairy Sector 
Simulator May results contained in evidence.

Milk Composition Factors

    Milk composition factors contained in the product price formulas 
represent assumed component levels of skim milk on a cwt basis. These 
factors were adopted on January 1, 2000. Currently, the formulas assume 
3.1 pounds of true protein, 5.9 pounds of other solids, and 9 pounds of 
nonfat solids in 100 pounds of skim milk.
    The level of assumed components in milk ultimately impacts minimum 
regulated prices paid by handlers, although the impact varies since 
there are variations in how components are used to value milk between 
FMMOs. All handlers regulated by the Arizona, Southeast, Florida, and 
Appalachian FMMOs pay for milk used in all four classes on a volume 
(cwt) basis, regardless of the components contained in the skim milk 
they receive (referred to as skim/fat pricing). Simply put, handlers 
pay for the pounds of skim and pounds of butterfat in milk they 
purchase from dairy farmers, where the butterfat payment is calculated 
according to actual pounds of butterfat received but the skim milk is 
specified at a standardized composition. In the remaining seven FMMOs, 
handlers pay for manufacturing milk based on the actual pounds of 
components in milk they purchase (referred to as multiple component 
pricing). Milk used in fluid milk products (Class I) is paid on skim/
fat basis as described above. Because of these pricing differences, 
changing the milk component factors primarily impacts Class I minimum 
prices paid by fluid milk processors in all 11 FMMOs, and to a lesser 
extent manufacturing handlers purchasing milk for Class II, III, and IV 
uses on skim/fat FMMOs.
    Proponents of changing the milk component factors argue actual 
average milk component levels in farm milk have increased since January 
1, 2000, and milk should be priced to buyers to reflect the value of 
those components. NMPF proposes (Proposal 1) component levels at 
observed 2022 levels (3.39 true protein, 6.02 other solids, and 9.41 
pounds of nonfat solids). NMPF also proposes an updated methodology 
whereby components could be updated once every three years, without a 
rulemaking proceeding, if the nonfat solids levels in FMMO producer 
skim milk changed by 0.07 percentage points or more from the level 
stated in regulation. In its proposal, NAJ seeks an automatic annual 
update, with no change threshold to be met (Proposal 2).
    Both NMPF and NAJ argue that because component levels in producer 
milk have risen but are still accounted for in the price formulas at 
2000 levels, the difference between Class I prices and manufacturing 
milk prices (Class III and IV) has narrowed. Put another way, milk used 
in manufacturing in the multiple component FMMOs is paid based on 
actual component levels, so producers are paid for all component pounds 
delivered to manufacturing plants (approximately 85 percent of FMMO 
manufacturing milk is pooled on the 7 multiple component orders). 
Consequently, payments for milk delivered to manufacturing plants 
increase as component levels delivered to those plants increase. 
However, milk delivered to Class I plants is paid on a skim/fat basis 
whose formulas contain component levels that are fixed and do not 
change either over time or across producer milk receipts. Thus, as milk 
component levels have risen, Class I plants have continued to pay for 
milk based on the static component levels contained in the formulas. 
Proponents argue the result has been a narrowing between fluid and 
manufacturing prices, thereby creating marketing challenges, one of 
which is a preference of suppliers to sell higher component milk to 
manufacturing handlers. They argue this is especially problematic in 
the milk deficit skim/fat markets in the southeastern region that must 
compete with manufacturing milk demands in multiple component orders to 
procure a supplemental Class I milk supply. Proponents also alleged the 
narrowing of the difference between Class I and manufacturing milk 
prices increases the occurrence of price inversions and depooling.
    The record of this proceeding reveals FMMO component levels in raw 
milk have increased since January 1, 2000, most notably since the mid-
2010s. National FMMO average component data before 2000 is not part of 
this hearing record. The Order Reform decision did not address 
specifically why the current assumptions were adopted, other than 
stating they were based on prevailing protein tests as reported by AMS/
USDA, as correctly cited by NAJ in its brief and public comment. While 
a preliminary Basic Formula Price report does purport to provide 
average protein levels, none of the Reform related reports in evidence 
in this proceeding provide an adequate level of detail as to what 
exactly the data used represented. However, given the data in evidence 
in this rulemaking shows component levels observed in FMMO skim milk in 
2000 were 3.1 percent true protein, 5.9 percent other solids, and 9.0 
percent nonfat solids, it is reasonable to assume they were set at 
those levels because at the time they were representative of all pooled 
milk in the FMMO system. Evidence from this proceeding reveals that 
from 2000, component levels were relatively flat with only a slight 
increase through the mid-2010s. Beginning in 2016, observed data shows 
a marked increase in component levels. The data also clearly shows 
component levels throughout the country vary by season, with levels 
lower in the spring and summer, and higher in the fall and winter. 
Hearing testimony revealed numerous reasons for the recently observed 
milk component increases, including genomics in dairy cattle selection 
and breeding, higher cull rates of less productive cattle, and 
improvements in cattle nutrition and animal husbandry.
    Opponents of increasing component levels, primarily fluid milk 
handlers, argued three general reasons an increase is not justified. 
First, fluid milk handlers, who would be primarily impacted by these 
proposals, do not receive producer milk at the proposed component 
levels. They contend higher component milk is delivered to 
manufacturing plants, leaving the lower component milk for fluid milk 
handlers. Second, fluid milk handlers testified they receive no 
additional market revenue for higher components in milk because their 
customers purchase on a volume basis (e.g., gallons) not on the skim 
component levels in their fluid milk products. Therefore, they argued, 
they could not recover an increased cost for their raw material from a 
higher finished product price. Third, opponents argued updating 
component levels also would unduly harm manufacturing handlers in the 
skim/fat orders who pay for milk based on a skim/fat basis. They argued 
the proposed component levels are higher than those delivered to 
plants, both fluid and manufacturing, in the four skim/fat orders. An 
evaluation of the record evidence for each of these claims follows.
    First, regarding the composition of producer milk received by Class 
I handlers, testimony from fluid milk handlers during the hearing was 
incomplete and mixed. Some fluid milk handlers would not reveal 
component levels for the Department to consider, citing confidentiality 
concerns. Other

[[Page 95503]]

fluid handlers offered data that showed a range of average component 
levels in skim milk received: true protein ranged from 3.09 to 3.63 and 
other solids ranged from 5.83 to 6.10. Many producers who testified 
also discussed the rise in their farm component levels because of the 
decisions and investments made at the farm. While some producers could 
cite data, for example true protein tests ranged from 3.12 to 3.83, 
many who could not cite specifics did contend a general increase in 
their component levels. The testimony supported an increase in skim 
milk component levels since 2000, but precise increases that apply to 
all milk or all Class I milk was not presented.
    Second, regarding market compensation for higher skim components in 
finished Class I products, the record clearly shows fluid milk handlers 
sell fluid milk products based on volume. Proponents of changing the 
composition levels provided anecdotal evidence, such as marketing 
claims and product description, to assert that some fluid milk products 
can garner additional market revenue for higher component levels. 
However, no data was provided to prove there is a general industry-
accepted norm or practice that allows handlers to recover a value for 
nonfat milk solids in excess of the nutrition label claim.
    Finally, concerning the claim that the level of components assigned 
to skim milk can create disorder in the procurement of milk for 
manufacturing versus Class I uses, the record contains actual component 
tests of producer milk in the multiple component pricing orders. 
However, component data for the four skim/fat orders could only be 
estimated as producers in those orders are paid based on the volume of 
skim milk and butterfat produced, not component levels. Record evidence 
contains USDA estimated data showing component levels in milk have 
consistently been above the current assumptions in all four skim/fat 
orders. Estimated protein and other solids levels of skim milk pooled 
in the three southeastern orders have been above the assumed levels in 
most months since January 2018, and below the levels contained in 
Proposal 1 in all months. Estimated protein and other solids levels of 
skim milk pooled in the Arizona Order have been above the assumed 
levels in all months since January 2018, and above the levels contained 
in Proposal 1 some months. Dairy Herd Improvement Association (DHIA) 
component data was offered at the hearing. This data is from farms who 
elected to use DHIA services and are neither a proper statistical 
sampling of the US nor a census of the US; however, it is a large data 
set that covers many farms of different sizes and locations. The DHIA 
data is consistent with estimated data provided by USDA. In the four 
skim/fat orders, average protein levels from 2020-2022 were above the 
current formula assumptions but below those contained in Proposal 1.
    This decision is considering how the price formulas should be 
updated to reflect current market conditions. Milk composition levels 
are one piece of the formulas being addressed. However, as with all the 
factors adopted at the time of Order Reform and updated through 
subsequent rulemakings, the question before the Department is what 
level is representative of current supply and demand conditions, as 
required by the AMAA. Some parties argued milk composition factors 
should not be changed because not all milk would meet the levels 
proposed by NMPF. Price formulas in the FMMO system have never had 
factors that assumed all milk was identical, just as it has not been 
assumed that each plant has the same cost of manufacturing or yields. 
Because FMMOs utilize a national pricing system, price formulas have 
always relied on benchmarks to set levels representative of market 
conditions. The nature of any representative number is that some milk 
will fall above or below the specified level. This was true with the 
milk composition levels that were adopted in 2000, and similar to other 
factors used in the formulas such as make allowances, survey commodity 
prices, and butterfat recovery percentages.
    While the record does not contain a comprehensive data set of milk 
component levels received at all fluid milk plants, it does contain 
data on milk component levels of all milk pooled on the FMMOs, as well 
as evidence submitted by some producers on the component levels in 
their milk, and information from some fluid milk handlers on the 
component levels they receive. Importantly, fluid plant operators 
testified the milk components received at their respective plants are 
higher than currently assumed in the formulas, but less than what was 
proposed by NMPF and NAJ.
    The record clearly supports that producer milk now contains higher 
levels of skim milk components compared to when the current composition 
factors were established in 2000. As FMMO provisions should reflect 
current market conditions to ensure orderly marketing, the question 
becomes what specific composition standards best reflect the current 
market and are consistent with the practice of specifying levels that 
ensure minimum prices are most consistent with supply and demand 
conditions. The review of record evidence described earlier reveals 
many factors should be considered: the component levels of pooled 
producer milk, the variability in milk components regionally and 
seasonally, the discrepancy in milk component levels received by fluid 
milk handlers compared to manufacturing handlers, and the variability 
of component levels from farm to farm. These factors were not 
specifically mentioned as being considered in the Order Reform decision 
when the current levels were set. However, given the evolution of the 
dairy industry in the past 24 years, milk composition benchmarks are 
relevant for consideration in this proceeding.
    The record indicates milk composition levels should be increased, 
but the levels in Proposal 1 are not justified. Given the variability 
and seasonality of component level information contained in the record, 
this decision continues to find the average component levels in the 
FMMOs from 2016-2022 to be the most appropriate benchmark to represent 
producer skim milk components, and result in a valuation of skim milk 
reflecting current market conditions. Accordingly, this decision 
continues to recommend the following: 3.3 percent true protein, 6.0 
percent other solids, and 9.3 percent nonfat solids.
    Estimated data for the three southeastern orders shows component 
levels exceeding these proposed levels in recent months, thus 
addressing opponents' claims that manufacturing handlers in the 
southeastern orders receive lower component milk than other FMMOs.
    In its comment on the recommended decision, NMPF suggested the 
2018-2022 time period would be more appropriate. However, this decision 
continues to find the 2016-2022 time period the most appropriate as it 
maintains a proper balance between sellers' and buyers' concerns 
expressed in this rulemaking and would provide for more orderly 
marketing.
    In public comments submitted on the recommended decision, IDFA and 
MIG reiterated previous arguments offered that fluid milk handlers do 
not receive milk with higher nonfat solids levels and, even if they 
did, cannot recover a higher value for them in traditional fluid milk 
products (e.g., gallons and half gallons) which encompass a vast 
majority of Class I sales. They presented a number of arguments: (1) 
the Department failed to justify a policy

[[Page 95504]]

change as it had previously stated Class I prices should not be priced 
on components because there is no additional value in Class I products; 
(2) the Department failed to address why updated milk composition 
levels support orderly marketing and therefore meet the objective of 
the AMAA; and (3) the Department ignored fluid milk handler testimony 
regarding the components levels they receive.
    On the other hand, NAJ's public comment argued that by not 
increasing composition standards to the levels proposed by NMPF and 
NAJ, the Department is artificially constraining the manufacturing and 
Class I milk price relationship and failing to address the resulting 
instances of disorderly price inversions and depooling.
    This final decision is not recommending a Class I policy change, as 
some commenters suggest. This decision continues the Class I pricing 
policy adopted as part of Order Reform. Prior to Order Reform, FMMO 
prices were based on prices determined by the competition for Grade B 
milk supplies updated by a product price formula (referred to as the 
Basic Formula Price (BFP)). During Order Reform, the Department sought 
to find a replacement that would: (1) meet the supply and demand 
criteria set forth in the AMAA; (2) not deviate greatly from the 
general level of the current BFP; and (3) demonstrate the ability to 
change in response to changes in supply and demand. 64 FR 16026, 16091 
(Apr. 2, 1999).
    The BFP, and its predecessor Minnesota-Wisconsin price (M-W price), 
represented a competitive cost of Grade B milk in the Minnesota and 
Wisconsin area as it was the value for milk at the farm sold into 
manufacturing uses in those areas. A butterfat differential, reflecting 
the value of milkfat, was subtracted to determine the value of milk 
having no fat--i.e., skim milk. Class I skim prices at the time were 
determined by adding a location differential to the BFP skim price. As 
it was a survey of prices paid for raw milk in manufacturing, updated 
by the value of commodity products, the BFP met the objective of the 
AMAA to reflect market supply and demand conditions. The BFP had the 
ability to change in response to changes in milk component levels and 
their value to the manufacturer. By the same token, changes in a 
manufacturer's costs of manufacturing or yields could also be demand 
factors that could move the BFP. A change in the BFP due to any of 
these underlying factors, including milk composition, could be passed 
through to the Class I price which was based off the BFP.
    With the adoption of product price formulas to replace the BFP in 
2000, Class prices became determined, in part, from the value of 
commodity dairy products in wholesale markets whose values were 
translated to an implied value for farm milk used in each Class. The 
Class I skim price became determined through the higher of the Class 
III or Class IV skim price. The new pricing system also required a new 
method for determining these Class III and Class IV skim milk values. 
Under the new system, a value of skim milk had to be built up from its 
underlying milk components as there was no farm milk price to start 
with, only product prices. Hence, specifying underlying composition 
levels of skim milk based on either a skim solids standard or protein 
plus other solids standards was necessary. At the time of the 
transition from BFP to product price formulas, the Class I price 
reflected the supply and demand conditions for all milk products, as 
the BFP replacement was designed to not deviate greatly from the BFP 
price levels at the time of Reform. As highlighted in the decision, 
``The supply and demand for Grade A milk is not limited to one category 
of products. The same milk may be used for fluid or soft manufactured 
products as well as the Class III and Class IV products used to 
determine the BFP. As a result, the minimum prices established for 
Class III and Class IV reflect supply and demand for the milk used in 
all products'' (64 FR 16026, 16095).
    The record of this current proceeding has highlighted that under 
the current product price formulas, the standard component assumptions 
in the Class III and Class IV formulas are not able to automatically 
adjust to reflect the value of milk used in all products. Data reveals 
the current formulas reflect the value of very few products in the 
market as current average FMMO milk composition levels are consistently 
exceeding the assumed standard levels. Further, as highlighted earlier, 
fluid milk handlers testified to routinely receiving milk at 
composition levels greater than the current assumptions. USDA data on 
MCP orders show market average components consistently above the 
current standard components since Order Reform, with a noticeable 
increase in the rate of change since 2016. When combining MCP order 
data with USDA estimated data for the fat/skim markets, market averages 
have exceeded the assumed standard component levels since 2021.
    Some commenters claimed data entered by fluid milk plants was 
ignored and that, instead, USDA relied on less relevant FMMO data. This 
decision rejects the claim that FMMO data is less relevant to the 
determination of skim milk composition standards in the formulas than 
the evidence presented by the plants in question. The current 
assumptions reflect FMMO data from when the standards were first 
adopted, and such consideration remains relevant as a change is being 
considered. As described earlier, the objective of the product price 
formulas is to represent the value of milk used in all products. Milk 
composition standards are part of that valuation, and as such, it 
remains valid to consider FMMO data that reflects the composition of 
milk used in all products.
    As described earlier, aggregated data supplied by MIG through a 
survey of members of its fluid milk plants regulated by MCP Orders show 
components levels consistently exceeding current assumed levels but 
below those proposed by NMPF and NAJ. This information was specifically 
listed as a factor in determining the proposed skim milk composition 
levels.
    This decision finds updating the skim milk composition standards 
will provide for more orderly marketing as they will better reflect the 
supply and demand conditions for milk used in all products, as was one 
of the stated objectives when the product price formulas were first 
adopted. As is the nature of fixed factors such as milk composition 
standards, much like make allowances, are changed through rulemaking. 
This decision continues to find updating milk composition, as described 
earlier, will ensure prices paid by handlers and received by producers 
reflect the supply and demand of milk, a tenet of the AMAA.
    NAJ argued the decision ignored testimony presented on the impact 
of price inversion and depooling and insisted adoption of the proposed 
levels maintains a narrow spread between Class I and manufacturing 
prices. Much testimony was given on the impact of price inversions and 
depooling and attributed at least some cause to inadequate skim milk 
composition levels. While record evidence demonstrated the occurrence 
and magnitude of price inversions and depooling, such outcomes are not 
a reason for changing milk composition levels. This decision finds that 
milk composition levels should be increased to better reflect current 
market conditions. While this change may decrease the occurrence and/or 
magnitude of price inversions and depooling, this was not a determinant 
in proposing the change as this decision

[[Page 95505]]

does not find it an appropriate reason for updating the valuation of 
skim milk.
    A comment filed by Crystal Creamery stated the proposed levels will 
cause a disproportionate burden for fluid milk handlers in California 
that must fortify Class I products to meet the State nonfat solids 
standard. As required by the AMAA, FMMO class prices are applied 
uniformly across all handlers regulated by a FMMO. Any additional costs 
a handler might incur due to State requirements are outside the purview 
of USDA, and outside the scope of this proceeding.
    During the hearing and in its post-hearing brief, Edge proposed, in 
addition to updating skim component levels, that the assumed butterfat 
level of 3.5 percent should also be updated to facilitate risk 
management. This idea was not proposed by USDA in the recommended 
decision.
    Edge's public comments on the recommended decision reiterated its 
request to update the butterfat standard, citing hearing testimony but 
providing no new arguments. A comment by Sabrosura Foods made the same 
request. Some commenters indicated not changing the butterfat standard 
would cause issues related to their risk management positions.
    This decision continues to find changing the butterfat standard is 
not needed to maintain orderly marketing of milk within the FMMO 
system. Risk management programs, which often utilize FMMO prices, are 
maintained in the private sector. These programs can adapt as necessary 
to facilitate the use of updated FMMO price formulas. Additionally, the 
butterfat standard does not impact FMMO prices paid by handlers, both 
fluid and manufacturing, because in all orders handlers pay for the 
actual pounds of butterfat received. Therefore, the request to amend 
the butterfat standard continues to be denied.
    The NMPF and NAJ proposals contained alternative updating and 
implementation schedules for the skim milk composition levels. NMPF 
proposed the composition levels be updated once every three years, but 
only if there was a 0.07 percent or greater change in nonfat solids 
levels, compared to what was in regulation. For example, if Proposal 1 
was adopted, milk composition factors could only be updated three years 
later if the average nonfat solids levels in pooled FMMO milk was 9.48 
percent (9.41 x 1.007). NAJ proposed the levels be updated annually, 
regardless of the magnitude of increase. Both proponents requested a 
12-month implementation lag because of the implications such a change 
could have on producer risk management positions. Edge proposed a 
longer implementation lag of 15\1/2\ months because of risk management 
positions tied to the DRP.
    The development and use of dairy risk management tools is 
relatively new, and the Department has never before been asked to delay 
implementation of FMMO changes in consideration of risk management. 
However, testimony made clear producers' concern regarding the negative 
financial impact that could occur if regulatory changes did not account 
for the growing use of risk management tools.
    Producers testified to the use of numerous market-based risk 
management tools, including the CME futures and options, and the two 
USDA-Risk Management Agency approved insurance products, DRP and 
Livestock Gross Margin--Dairy (LGM-Dairy). Use of risk management tools 
by producers testifying at the hearing varied, with some not using any 
tools, some only enrolling in the DMC program which does not involve 
futures prices, and fewer using DRP insurance or the CME hedging tools. 
The record reflects 32 percent of U.S. milk production was covered in 
2022 under DRP, and with a much smaller use of LGM-Dairy.
    Producers testifying were particularly concerned with the 
implementation schedule for the initial change, as risk management 
positions could be as far out as 18 to 24 months. Evidence shows that 
from 2018 through 2022, almost all CME contracts, 97.34 percent, 
expired within 12 months. According to producers, any change to the 
milk composition level assumptions during the contract period could 
result in basis risk to producers not covered by the hedge. A CME 
witness testified they saw a 54 percent drop in contracts with 
expiration dates over 360 days in 2022 as compared to 2018, which the 
CME attributed to the industry already anticipating a regulatory change 
based on the outcome of this hearing.
    Record evidence depicted the concern regulatory changes could have 
on risk management tools, particularly the impact on the usability of 
these tools during a transition period. However, producer equity 
requires that risk management usage be considered against the interest 
of other producers who do not use risk management tools, because it 
would delay recognition of the higher components in producer milk.
    Risk management issues are not an appropriate consideration in 
whether milk composition standards should be changed or to what level 
they should be changed. However, this decision finds the timing of a 
regulatory change could impact producer hedging decisions made before a 
regulatory pricing change. This decision continues to find it 
appropriate to consider an implementation timeframe in an attempt to 
mitigate potential financial harm to producers who utilize risk 
management tools.
    The recommended decision proposed a 12-month implementation lag, 
beginning when other changes from this proceeding become effective. The 
12-month lag was selected to cover hedge positions for the vast 
majority of producers utilizing these tools There was considerable 
public comment from six dairy farmers, five State Farm Bureaus, and 
four producer-led organizations opposing the 12-month implementation 
delay on the proposed skim milk composition levels. The producers and 
producer organizations requested the standards be implemented 
immediately so producers would be properly compensated for the 
components in their milk without delay. Some producers questioned why 
an implementation delay was proposed for skim milk composition 
standards but not for other factors such as make allowances that also 
impact Class III and Class IV prices. As noted in the summary of 
testimony, proponents of the delay explained they assume additional 
basis risk if a change in a price formula factor results in a price 
higher than what was locked in when they placed a hedge. As described 
in testimony, additional basis risk is not assumed if a price formula 
change results in a lower price.
    Record testimony from the CME, as described earlier in the summary 
of testimony, indicated a decrease in the number of contracts with 
expiration dates over 12 months due to the regulatory uncertainty 
created by the unknown implementation timeline of this rulemaking 
proceeding. A comment submitted by the CME in response to the 
recommended decision noted a continuing decline in the volume of 
contracts over 12 months. This indicates the market is already 
adjusting to potential FMMO changes.
    Accordingly, while this decision continues to find it appropriate 
to offer an implementation lag for the skim milk composition standards 
because of the impact to producer hedging positions, the record 
evidence indicates that shortening the implementation lag to 6 months 
is appropriate. When combined with the additional rulemaking steps 
still needed to determine producer approval and issuance of a final 
rule if approved by producers, this implementation timeframe still 
offers

[[Page 95506]]

adequate notice to the vast majority of producers utilizing risk 
management tools, while also allowing Class I skim milk prices to more 
quickly reflect milk supply and demand conditions. The implementation 
lag would still begin when the other changes from this rulemaking 
became effective.
    Lastly, this decision does not support an automatic update of the 
milk composition levels, as contained in Proposal 1 or Proposal 2. It 
is clear from the record that many factors, as described earlier, 
should be considered when making a change. Those factors can only be 
considered through the course of a rulemaking. This is the same 
rationale for changes to make allowances and yield factors, the other 
two sets of fixed parameters in the pricing formulas, which data shows 
tend to change over the long term rather than short term (i.e., 
monthly), but outside of the normal, predictable seasonal swings in 
milk components. The nature of all of these fixed parameters, including 
skim milk components, involve complexities that are difficult to 
anticipate, as discussed throughout this final decision, and therefore 
demand robust consideration through a rulemaking proceeding.

Surveyed Commodity Products

    USDA administers the Dairy Product Mandatory Reporting Program to 
gather weekly wholesale prices of four manufactured dairy products. 
Average survey prices are released weekly in the National Dairy Product 
Sales Report, and monthly average commodity prices are released by AMS 
on or before the 5th of the following month. The monthly product prices 
are then used in the FMMO price formulas to determine component values 
in raw milk. The same four commodities have been surveyed since 2000. 
The National Agricultural Statistics Service administered the survey 
from 2000 to 2012; submitting data was voluntary until 2008, and then 
mandatory and verified from 2008 to 2012. AMS has administered the 
survey since 2012 with the data being mandatory and audited 73 FR 34175 
(June 17, 2008).
    This proceeding is considering four proposals that would add or 
remove a variety of products in the DPMRP survey. Because FMMOs enforce 
minimum raw milk pricing, the overarching question for the Department 
in this decision is whether the current surveyed commodities are an 
appropriate representation of market clearing, wholesale commodity 
products whose prices provide an accurate reflection of the minimum 
value of raw milk. DPMRP currently surveys cheddar cheese, butter, 
nonfat dry milk, and dry whey. Proposals submitted in this proceeding 
offer changes to the cheese survey (Proposals 3, 4, and 6) and changes 
to the butter survey (Proposal 5). No proposals seek changes to the 
NFDM or dry whey surveys.
Cheese Survey
    Currently, FMMOs utilize a weighted average DPMRP survey price of 
40-lb cheddar cheese blocks and 500-lb cheddar cheese barrels to 
determine the protein price used in the Class III price formula. 
Although both products meet the definition of cheddar cheese, the 
different package styles reflect that their intended uses are 
different. Cheddar cheese barrels are intended to be further processed 
into processed cheeses. Cheddar cheese blocks can also be used for that 
purpose, but they are produced with the intention of use in a natural 
cheese with minimal further processing (for example cutting into 
consumer packages or shredding.) DPMRP weights the cheese price by the 
volume of surveyed blocks and barrels, which according to record 
evidence, is typically around 50 percent blocks and 50 percent barrels.
    Proposal 3 seeks to drop barrels from the survey and solely rely on 
a survey of 40-lb blocks. Proponents offered a few reasons for dropping 
barrels. First, they believe barrels are overrepresented in the survey 
because the weighting methodology is based on the production 
percentages included in the survey and not actual production across the 
entire cheddar cheese market. Proponents believe the percentage of 
cheddar cheese manufactured and priced off 40-pound block prices is 
significantly higher than 50 percent of the U.S. natural cheese market. 
Second, proponents argue that having what amounts to two products in 
the survey results in an average price that is not representative of 
either blocks or barrels. They say this has been particularly evident 
since 2017, when market prices between blocks and barrels began to 
significantly diverge, both in magnitude and direction, from the 
historical average difference of $0.03. Barrel prices were even 
occasionally higher than blocks (historically, block prices have been 
higher than barrel prices). Proponents argued that when barrel prices 
have been well below the assumed $0.03 difference, the current 
weighting methodology results in a lower average cheddar price than 
would have been if the two prices were weighted in accordance with 
actual, total production of each product. Members of NMPF testified a 
block-only survey would contain adequate survey volume to be 
representative of the cheese market.
    Opponents of dropping barrels asserted: (1) it is not appropriate 
to eliminate approximately half of the current cheese survey volume; 
(2) barrels are a market-clearing product and should continue to be 
included in the survey; and (3) blocks and barrels together represent 
the national cheese market as they are both commodity products with 
different commercial uses. Opponents also disputed the claim that most 
cheese is priced off the block market.
    During the hearing, Edge offered an alternative that would reweight 
the survey average price based on the U.S. production volume of blocks 
and barrels as determined by NASS, instead of volume from respondents 
to the AMS survey. They opined barrels should not be removed from the 
survey because in months where the barrel price exceeded blocks, the 
Class III price would have been lower than it otherwise was, and 
consequently producer revenue would be less. Instead, Edge argued a 
better solution to the issue of overweighting barrels was to use a 
weighting methodology reflective of actual U.S. cheddar cheese 
production.
    Proposal 4, submitted by AFBF, seeks to add 640-lb blocks of 
cheddar cheese to the survey. This type of cheddar cheese is made using 
the same process as 40-lb blocks and differs only in the final 
container for the cheese curd. Both sizes represent an intermediate 
product requiring further processing before it can be consumed. The 
proponent's primary justification is the additional survey volume that 
would be added. The AFBF agreed with NMPF that barrels are 
overrepresented in the survey, and their proposed solution is to add 
survey volume through the addition of 640-lb blocks. This argument 
implicitly assumes the accuracy of milk valuation is improved when a 
larger volume of cheese is surveyed.
    Opponents to adding 640-lb blocks argued: (1) most 640-lb blocks 
are already priced off 40-lb blocks, so their inclusion would not 
enhance price discovery; and (2) 640-lb blocks are typically customer-
specific which would exclude those blocks from the survey. The 
opposition is premised on the additional survey volume not adding new 
price information either because the prices are already reflected in 
the 40-pound block price, or because the customized products are value-
added and should not be included for minimum pricing.
    Proposal 6, offered by CDC, seeks to add mozzarella cheese to the 
survey. Proponents argue mozzarella is the

[[Page 95507]]

largest volume of cheese produced in the U.S., and revenue from 
mozzarella products should be captured in the survey and ultimately 
reflected in prices paid by Class III handlers. Further, proponents 
argued a higher Class III price should be reflected in producer prices 
to offset increasing farm production costs.
    Opponents argued there is no one standard of identity for 
mozzarella cheese, making it difficult to delineate what mozzarella 
product would have a substantial volume of reportable sales to 
represent the market value of mozzarella cheese. In addition, opponents 
stated no manufacturing cost data is available to be evaluated for 
inclusion in the manufacturing allowance calculation for cheese. 
Lastly, opponents asserted mozzarella is not a market-clearing product 
and therefore should not be considered when determining minimum prices.
    While there were three proposals offering changes to the cheese 
survey, two of them lack data and evidence to support adoption. First, 
the addition of mozzarella is not supported by the record. The record 
reveals multiple standards for different mozzarella cheese products, 
but no evidence was presented to show which of those would be 
appropriate to survey as an improvement in finding a minimum value for 
milk. Furthermore, no evidence was presented on what would define a 
commodity mozzarella product, rather than a value-added product, which 
is a general rule for inclusion in the DPMRP. Proponents offered 
information on mozzarella in consumer sized packages (e.g. mozzarella 
sticks), but little to no evidence on what should be considered a 
commodity mozzarella product. Evidence shows that a majority of what is 
considered mozzarella production is driven by customer specification 
and would not meet any of the standards of identities offered, 
indicating it would be considered a value-added product and excluded 
from the survey. Lastly, the record indicates mozzarella products are 
already typically priced based on the 40-pound cheddar cheese block 
price. Therefore, adoption of Proposal 6 would only result in 
significant costs associated with determining a commodity mozzarella 
product to be surveyed and the ongoing cost of surveying said product, 
without adding measurable new price information to the DPMRP cheese 
survey.
    Most public comments submitted regarding changes to the surveyed 
commodity products supported the continued exclusion of mozzarella 
cheese. A public comment submitted by Leprino stated that continued 
exclusion of mozzarella cheese from the Class III price formula would 
limit complexity and more accurately reflect a standard market price. 
Two individual dairy farmers also submitted comments in support of 
excluding mozzarella cheese.
    In its comments, CDC requested reevaluation of the decision, 
reiterating arguments expressed at the hearing that more products 
should be included in the DPMRP survey and inclusion of mozzarella 
would raise producer revenue. Similar comments were also submitted by 
the National Family Farm Coalition.
    Ten dairy farmers from California and Wisconsin submitted public 
comments supporting the inclusion of mozzarella cheese. The farmers 
generally expressed that mozzarella should be included because it is a 
key milk price indicator, and its higher value should be reflected in 
their milk check. A Wisconsin dairy farmer was of the opinion the 
cheese value should not be determined from only one type of cheese.
    This decision continues to find exclusion of mozzarella cheese 
appropriate. Hearing testimony and public comments made in support of 
including mozzarella primarily centered around generating additional 
revenue for producers as mozzarella garners a higher price in the 
market. FMMO prices represent minimum prices paid by handlers for milk 
used in market-clearing commodity products. The DPMRP survey 
specifically excludes value added products, and the record contains no 
evidence that mozzarella is considered a market-clearing commodity 
product. Consequently, Proposal 6 continues to be denied.
    The record lacks evidence to support adoption of Proposal 4, adding 
640-lb blocks. The record reflects widespread industry consensus that 
640-lb blocks are typically priced off 40-lb blocks. Because of this 
price relationship, numerous industry witnesses testified that no new 
price information would be captured by including 640-lb blocks. In 
addition, several witnesses testified 640-lb blocks are largely made-
to-order on long-term price contracts which would exclude the sales 
from the survey because of these marketing characteristics. No data was 
presented to evaluate whether any additional price information gained 
through inclusion of 640-lb blocks would offset the burden (lack of 
efficiency) to both the industry and USDA for their inclusion.
    One individual dairy farmer and the AFBF submitted comments on the 
recommended decision taking exception with the continued exclusion of 
640-lb blocks. The AFBF reiterated its testimony that inclusion of 640-
lb blocks would add volume to the survey to ensure more accurate and 
representative pricing. Similar comments were submitted by the New 
York, Michigan, Wisconsin, Minnesota, and Arizona Farm Bureaus. AFBF 
further claimed that without inclusion of 640-lb blocks, manufacturers 
switch between 40-lb and 640-lb block production to avoid reporting 
prices to the DPMRP survey. There is no evidence on the record to 
support that such price manipulation would or does happen given that 
640-lb blocks are currently not reported. This decision continues to 
exclude 640-lb blocks as the record does not demonstrate price 
discovery is aided by its inclusion. In addition, this decision 
continues to find it appropriate that more orderly marketing conditions 
are best maintained through price discovery of a single commodity 
product, as further discussed below. Accordingly, Proposal 4 continues 
to be denied.
    The Department considered the idea presented by Edge to reweight 
blocks and barrels in the survey to reflect total U.S. cheddar cheese 
production volumes by packaging type, instead of survey volumes. 
However, the record lacks evidence regarding the market dynamics of 
barrel production to analyze how this idea would be implemented, or the 
impact it may have on prices, to evaluate whether it would result in a 
more appropriate cheese price. In addition, as is made clear below, 
this final decision continues to find that surveying two cheese 
products is no longer an appropriate method for providing orderly 
marketing in today's marketplace, rendering further discussion of a 
more proper weighting methodology unnecessary.
    A comment submitted by Edge in response to the recommended decision 
maintained reweighting blocks and barrels was a more appropriate 
alternative to removing 500-lb barrels from the survey. However, the 
comment did not address a methodology to determine how such a proposal 
would be implemented. This decision maintains that surveying two cheese 
products, regardless of how they were weighted in the survey, results 
in a cheese price that does not represent a single product.
    What is left to consider is whether 500-lb barrels should remain in 
the survey. When determining which products are appropriate to be 
included in surveys, the Order Reform Final Decision is instructive. As 
described in the decision, ``The importance of using minimum prices 
that are market-clearing for milk used to make cheese

[[Page 95508]]

and butter/nonfat dry milk cannot be overstated. The prices for milk 
used in these products must reflect supply and demand and must not 
exceed a level that would require handlers to pay more for milk than 
needed to clear the market and make a profit.'' 64 FR 16026, 16094 
(Apr. 2, 1999). To effectuate that objective, FMMOs use survey prices 
of market-clearing commodity products.
    In the Order Reform decision, both block and barrel cheese were 
included in the survey to increase the sample size and give a better 
representation of the cheese market. Since Order Reform was 
implemented, an evaluation of which products should be included in the 
cheese survey has occurred twice. In 2000, shortly after implementation 
of Order Reform, the Department considered both the addition and 
subtraction of cheese products into the survey, which at that time was 
administered by the NASS. 65 FR 20094 (April 14, 2000). In 2007, the 
Department again considered changing the products in the cheese survey, 
including the removal of 500-lb cheddar cheese barrels. 72 FR 6179 
(Feb. 9, 2007). In both proceedings, the Department maintained that 
inclusion of both 40-lb blocks and 500-lb barrels was representative of 
the cheese market at the time.
    While not contained in the hearing notice of the 2000 proceeding, 
there was testimony at the hearing for incorporation of other cheeses 
in addition to cheddar. The idea was denied because ``If the survey 
included other descriptions of cheddar and other types of cheese, such 
as mozzarella, it would not be possible to consider the reported price 
as representative of the value of any particular product.'' 67 FR 
67906, 67926 (Nov. 7, 2002). This reasoning illustrates an important 
consideration of which products should be contained in the survey; 
products whose resulting prices are representative of a distinct 
product.
    For all other product pricing formulas (butter, nonfat dry milk, 
and dry whey), DPMRP only surveys one product. The butter survey 
collects prices of 80 percent salted Grade AA butter, the NFDM survey 
collects prices of USDA Extra Grade NFDM, and the dry whey survey 
collects prices for USDA Extra Grade dry whey. While all three of these 
products can be in varying bulk packaging sizes as specified in 
regulation, the product itself is essentially the same. 7 CFR 1170.8 
Consequently, the resulting survey prices represent single, distinct 
products.
    The same cannot be said of the two cheddar cheese products 
surveyed. Forty-pound block cheddar cheese is typically colored, and 
primarily sent for further processing into consumer type packages such 
as ``cut and wrap'' and shredded products. Barrel cheese, on the other 
hand, is typically white (uncolored) and used primarily for processed 
cheese and cheese-flavored products. The hearing record demonstrates 
the two products are not interchangeable but rather are produced for 
two distinctly different uses which have their own supply and demand 
factors. These fundamental qualities have not significantly changed 
since Order Reform. At the time of Order Reform, and during the 
subsequent two rulemakings considering changes to the cheese survey, 
the prices of blocks and barrels were relatively close, and it was 
determined the additional volume added with the inclusion of barrels 
was a benefit to orderly marketing as it ensured a robust survey 
sample.
    Testimony and evidence presented showed the historical price 
alignment of the two products, estimated at $0.03 per pound, until 
2017. Proponents argued the market changed significantly in 2017 when 
there was a dramatic increase in price volatility both within each 
product and in the relationship between the two products. To determine 
statistical validity of that claim, the differences in the monthly 
average block and barrel prices from 2001-2023 were analyzed to 
identify breaks in the structure of the block-barrel spread. The 
analysis found December 2016 to be a statistically significant month, 
indicating the period between 2001 to 2016 and 2017 to 2023 were 
statistically different in terms of the block-barrel spread volatility. 
Historically, prices for blocks and barrels were similarly priced. From 
2001-2016, the block-barrel spread averaged $0.01 per pound, while from 
2017-2023 the spread significantly increased to $0.115 per pound.
    When surveying prices of two products that recently are so 
divergent, the resulting average cheese price does not represent either 
of the products surveyed. For example, in October 2020, cheddar block 
prices averaged $2.5692 per pound and cheddar barrel prices averaged 
$0.6052 per pound lower at $1.9640 per pound. The weighted average 
cheese price for October used to compute FMMO component prices was 
$2.2921, a price reflecting neither of the two survey products. 
Accordingly, after careful analysis of the record, this final decision 
continues to find the DPMRP cheese survey should only include 40-lb 
cheddar cheese blocks. Evidence reveals a clear and statistically 
significant shift in the cheddar markets occurred in 2017, which 
witness testimony attributed to a number of market factors including 
plant investments and increased production of white whey. As a result, 
inclusion of both blocks and barrels in the cheese survey has resulted 
in average cheese prices used in FMMO formulas that are not 
representative of any one cheese product. Therefore, this decision 
continues to recommend adoption of Proposal 3.
    Comments submitted by NMPF, Select, and DFA in response to the 
recommended decision supported the exclusion of 500-lb barrels to 
provide for an appropriate market clearing cheese price representative 
of a single product. Comments submitted by two individual dairy farmers 
and state Farm Bureaus from Arizona, Wisconsin, Minnesota, Michigan, 
and New York expressed concern that the exclusion of 500-lb barrels 
could affect market transparency and price accuracy. Prices used in the 
FMMO system are collected through the DPMRP, which has a robust 
reporting and auditing component to ensure reporting handlers are 
complying with program regulations and reporting all qualifiable 
products. In addition, Annual Validation surveys are conducted with all 
current and potentially qualifying plants (any entity marketing and 
selling one million pounds or more of product) to verify current 
reporters know and understand all reporting requirements and if 
potentially qualifying plants are still exempt from reporting. 
Consequently, given the safeguards described, this decision does not 
find price accuracy and market transparency will be negatively impacted 
by the exclusion of 500-lb barrels.
    There was significant testimony regarding how cheddar barrel makers 
would be impacted if 500-lb barrels were no longer surveyed. It was 
clear there was no industry consensus, not even between barrel makers, 
on the impact. What is paramount to any rulemaking is to ensure FMMO 
provisions provide for orderly marketing conditions, as required by the 
AMAA. The ultimate consideration is which set of bulk, market-clearing, 
commodity type dairy products provide the most accurate and efficient 
means of determining the minimum value of milk components. One facet of 
this is to ensure prices used in the formula best represent the 
fundamental products selected for their purpose. As described above, 
that goal is not being met by using both blocks and barrels in the 
survey.
    One concern expressed by some barrel cheese manufacturers is that 
the Class

[[Page 95509]]

III price resulting from a block-only calculation would often be too 
high to ensure a profitable return to barrel cheese makers. Multiple 
considerations are worth noting. One, there are numerous styles of 
cheese represented in Class III. Manufacturers of each have no 
guarantees on their net returns, and, hence, manage their business by 
taking minimum pricing into account. To that end, there are many steps 
remaining in this rulemaking process, including publication of a final 
decision, producer referendum, and if passed, an implementation period. 
These steps should allow barrel manufacturers ample time to determine 
if changes are needed in their business practices to adjust to the 
prices that would result from this recommended price survey. As FMMOs 
only enforce minimum regulated prices on pooled milk, it should not be 
overlooked that barrel manufacturers choose whether to pool milk 
subject to minimum prices.
    Since this decision proposes to remove 500-lb barrels from the 
DPMRP survey, this decision also proposes a conforming change to the 
cheese pricing reporting specifications in the Dairy Product Mandatory 
Reporting Program regulations (7 CFR 1170.8).
Butter Survey
    Currently, FMMOs utilize the monthly average DPMRP survey price of 
80 percent salted Grade AA butter in 25-kilogram and 68-pound boxes to 
determine the butterfat price used in all 4 classified pricing 
formulas. Proposal 5 seeks to add unsalted butter to the survey. 
Proponents argue the volume of U.S. butter production captured by the 
survey has been decreasing, and adding unsalted butter would increase 
the sample size and yield more robust survey results.
    Testimony in opposition to Proposal 5 asserted the production of 
unsalted butter is mostly manufactured to a particular customer order. 
Because the lack of salt results in a shorter shelf life, unsalted 
butter is generally not manufactured unless its sale is imminent. On 
the other hand, because salted butter can be stored, when milk needs to 
clear the market and butter manufacturers lack a buyer, they will make 
salted butter to store and sell later. Opponents also noted unsalted 
butter is typically exported, often facilitated through premium-
assisted sales, rendering those sales unreportable.
    The record lacks evidence to support adoption of Proposal 5. 
Although data was entered showing the amount of unsalted butter graded 
by the USDA Dairy Grading Program tripled between 2005 and 2022, the 
USDA butter grading program is voluntary; hence, the data does not give 
a complete picture of the U.S. butter market. Furthermore, there was no 
indication regarding what percentage of the graded butter volume would 
be reportable given testimony noting the structure of the unsalted 
butter market would likely make a large share of it nonreportable. No 
data was presented to evaluate whether any additional price information 
gained through inclusion of unsalted butter would outweigh the burden 
to both the industry and USDA for its inclusion. In fact, the record 
demonstrates that unsalted butter is not a market clearing product 
given its shorter shelf-life and on-demand production.
    The record evidence supports salted butter as the market clearing 
butter product and continuation as the only butter product in the 
survey. In addition, as discussed in evaluating the cheese survey, 
having two commodity products surveyed (such as blocks and barrels) can 
have the unintended consequence of resulting in a component price that 
does not represent either product produced. As no price information was 
entered into evidence to evaluate how salted and unsalted butter prices 
compare, the Department could not determine if a similar situation 
might occur by adding unsalted butter to the survey.
    A comment submitted by CDC in response to the recommended decision 
advocated for increasing the number of products surveyed, including 
unsalted butter, but provided no additional arguments for why unsalted 
butter should be considered a market clearing product. Accordingly, 
Proposal 5 continues to be denied.

Class III and Class IV Formula Factors

    The Class III and IV formula factors include four distinct 
elements--manufacturing (make) allowance, butterfat recovery, farm-to-
plant shrinkage, and nonfat solids yield.
a. Make Allowances
    Make allowances represent the costs of converting raw milk into the 
four manufactured dairy products surveyed by USDA. The current make 
allowance levels were determined through a 2007 rulemaking that became 
effective October 1, 2008, and are as follows ($/per pound): cheese--
0.2003; butter--0.1715; NFDM--0.1678; and dry whey--0.1991. The 2007 
rulemaking used an average of two surveys: a voluntary, unaudited 2006 
nationwide cost survey conducted by the Cornell Program on Dairy 
Markets and Policy (CPDMP), and a mandatory, audited 2006 cost survey 
of plants located in California conducted by the CDFA. This proceeding 
must determine whether manufacturing costs have increased such that a 
change from the current levels is warranted, and if so, what are 
appropriate levels.
    Four manufacturing cost data sets were entered into the record for 
consideration in this proceeding. The first was conducted by the 
University of Wisconsin, on behalf of USDA, and was a voluntary survey 
of manufacturing plants throughout the U.S. (2021 survey). This survey 
was similar to the 2006 CPDMP survey used to determine current make 
allowances, as the primary researcher authored both. The 2021 survey 
collected cost information provided from manufacturing plants of cheese 
(10 plants), butter (12 plants), NFDM (27 plants) and dry whey (8 
plants). Annual data submitted by plants primarily represented calendar 
year 2019, and included labor, utilities, non-labor processing, 
packaging, general and administrative, and return on investment cost 
categories. The 2021 survey results were presented as total averages, 
and high and low-cost plant averages.
    The 2021 survey methodology was similar to the 2006 study, except 
for the allocation of non-allocated costs. Some fixed or overhead costs 
could not be allocated directly. Some costs were inherently direct 
costs but were not collected in a manner that allowed them to be 
assigned to a particular processing activity or product. When that 
occurred in previous studies, unallocated costs were allocated on a 
solids basis, which testimony revealed to be a common practice, 
according to some manufacturers. In some facilities making multiple 
products, such as butter and powder plants, not all plant operators had 
the infrastructure to allocate costs to the different products. A 
common example was plant utilities wherein the plant only had a single 
electric meter. If an operator utilized 70 percent of the solids 
received at the plant in butter, then 70 percent of the unallocated 
costs (e.g. electricity) were allocated to butter production, and the 
remaining 30 percent were allocated to NFDM production. This allocation 
method was referred to by the study author as the ``non-
transformation'' method.
    In the 2021 survey, the author used what they believed to be a 
better method for addressing costs the manufacturer could not directly 
allocate. Unallocated costs were allocated based on an estimation of 
the degree of processing transformation the raw milk underwent to 
transform into a manufactured product. On a scale from 1 to 10, 
products with minimum processing

[[Page 95510]]

(liquid whey) were assigned a 1, while products with a high degree of 
transformation (whey protein concentrate) were assigned a 10. The 
survey author argued this somewhat subjective and ordinal measure of 
costs could provide a more logical allocation of certain costs that 
were inarguably not properly attributed through the non-transformation 
cost allocation method. The most obvious example was the highly energy 
consuming process of drying for NFDM powders. For example, operating a 
milk dryer requires significant energy, resulting in an assumption that 
it was more appropriate for a higher percentage of the plant's energy 
costs to be attributed to its powder production.
    A second data set was a survey conducted by the same author, 
administered on behalf of IDFA, seeking to capture more current costs 
and increase the number of respondents. This survey, referred to as the 
2023 survey, was similar to the 2021 survey, except for two elements. 
First, the plants that voluntarily submitted data were different in 
number and type: 18 cheese, 13 butter, 15 NFDM, and 9 dry whey plants 
participated. The survey author explained that while the number of 
participating plants were similar for butter and whey across both 
surveys, the structure of the plants was noticeably different. 
Consequently, most of the variability in average costs between the 2021 
and 2023 surveys is attributed to the plant sample, rather than actual 
cost increases over time. For example, the 2021 butter plants surveyed 
tended to be larger than the 2023 butter plants surveyed, accounting 
for a significant portion of the cost difference between the two 
surveys. Some witnesses at hearing also noted the 2023 survey captured 
2022 costs, a time of historically high inflation which has since 
moderated.
    The second notable difference was the 2023 survey used the non-
transformation methodology of allocating unallocated costs on a solids 
basis. The survey author indicated mixed industry feedback on the 
transformation allocation methodology used in the 2021 survey, as many 
participants stated allocating costs on a solids basis is standard 
practice. To facilitate comparison of the two surveys the author also 
presented updated 2021 survey results using the non-transformation 
allocation methodology.
    In support of a separate data set, mandatory and audited 2004-2016 
California manufacturing cost survey results, conducted by the CDFA, 
were entered. These surveys formed the historical data used to forecast 
current costs in the CA Forecast described below. The 2006 CDFA study 
was used by USDA when determining the current FMMO make allowances.
    The fourth data set, entered on behalf of IDFA, was a result of a 
statistical model that used data from the 2004-2016 California 
manufacturing cost surveys and other known input prices and 
productivity data (for example, the producer price index) to project 
future California manufacturing costs, referred to hereinafter as the 
CA Forecast. The study author testified the model predictions were a 
better estimate of costs than a simple trend analysis since they 
accounted for the impacts of other factors, such as accelerating 
inflation, that are known to describe changes in manufacturing costs in 
California. Unlike the 2021 and 2023 surveys which evaluated six cost 
categories (processing labor, utilities, packaging, non-labor or 
utilities processing, general and administrative, and return on 
investment), the CA Forecast only estimated three cost categories 
(labor, utility, and other). Other costs were defined as the remaining 
costs after labor and utility costs were deducted. Inasmuch as the CDFA 
results were used by USDA when previously amending make allowances, 
proponents argued this statistical estimation of what CA manufacturing 
costs might have been for 2022 would be a helpful indicator to validate 
other manufacturing cost data entered into the record.
    These data sets were the basis of the manufacturing allowance 
levels proposed by stakeholders at the hearing. Two sets of make 
allowance levels were offered ($/pound):

----------------------------------------------------------------------------------------------------------------
                                    Proposal 7                           Proposals 8 and 9
                                 -------------------------------------------------------------------------------
             Product                              IDFA/WCMA year  IDFA/WCMA year  IDFA/WCMA year  IDFA/WCMA year
                                       NMPF              1               2               3               4
----------------------------------------------------------------------------------------------------------------
Cheese..........................          0.2400          0.2422          0.2561          0.2701          0.2840
Dry Whey........................          0.2300          0.2582          0.2778          0.2976          0.3172
NFDM............................          0.2100          0.2198          0.2370          0.2544          0.2716
Butter..........................          0.2100          0.2251          0.2428          0.2607          0.2785
----------------------------------------------------------------------------------------------------------------

    NMPF asserted that their proposed levels take a balanced approach 
between recognizing increased manufacturing costs and the impact to 
producers if there is a significant increase from current levels. They 
testified that while they evaluated the 2021 survey when developing 
their proposal, the levels they ultimately proposed were a consensus 
judgment of all NMPF members. By their own description, the proposal is 
not intended to reflect the entirety of current manufacturing costs. 
NMPF witnesses argued that their proposal would update make allowances 
to be a closer reflection of manufacturing costs, but further increases 
could not be justified because of the potential impact to producers. 
They argued at the hearing, as well as in their public comments in 
response to the recommended decision, that until a mandatory cost 
survey can be conducted to provide assurances of accuracy in 
manufacturing cost calculations, any increases larger than they 
proposed would reduce producer revenue, lower already slim (if any) 
margins, and negatively impact the availability of adequate supplies of 
milk for fluid use. They considered such consequences disorderly.
    NMPF stressed current make allowances are too low and have resulted 
in cooperative reblending as a method of sharing losses among 
cooperative members who own manufacturing plants. NMPF witnesses also 
testified to receiving reduced premiums from manufacturing plant 
customers as they attempt to recoup costs not covered by the current 
make allowance levels. Reduced and/or deferred plant investment caused 
by inadequate make allowances was also a theme discussed by many 
witnesses. Cooperative witnesses spoke of the disproportionate burden 
on cooperatives with balancing plants, which inherently have higher 
manufacturing costs as they do not operate continuously at full 
capacity because of the market-wide balancing role they necessarily 
assume.
    NMPF cooperative witnesses and dairy farmer members presented 
evidence on increasing farm production

[[Page 95511]]

costs and slim farm margins. They opined at the hearing, as well as in 
their public comments to the recommended decision, that the impact to 
producers' profitability should be considered when determining 
appropriate make allowance levels.
    WCMA and IDFA offered separate, but identical, proposals. Their 
proposed make allowance levels were derived from the average of the 
2023 study and the CA Forecast, plus a $0.0015 marketing cost factor. 
The proposals contained a 4-year implementation schedule with 50 
percent of the increase implemented in year 1 and the remaining 50 
percent implemented evenly across the next 3 years. Proponents offered 
a phased implementation schedule in recognition of the impact that 
sudden, large increases in make allowances would have on producer 
revenue.
    WCMA and IDFA witnesses asserted there are limits to a 
manufacturing handler's ability to lower costs through efficiencies. As 
make allowances have not been increased in over 15 years, the witnesses 
stated plants have reached the limit on capturing cost efficiencies, 
and inadequate make allowances are now impacting innovation and capital 
investments. Manufacturing handlers testified their costs of 
manufacturing have increased and are in line with the 2021 and 2023 
survey results. As a consequence of inadequate make allowances, the 
witnesses said classified prices are overvaluing raw milk. To 
substantiate the claim, witnesses compared producer mailbox prices with 
FMMO blend prices. In regions where mailbox prices (which contain 
premiums and deductions reflecting reblending) are below blend prices, 
the witnesses asserted regulated prices are too high, as manufacturers 
have lowered market premiums to make up for high manufacturing costs.
    The record clearly demonstrates that current make allowance levels 
are not reflective of the costs manufacturers incur in processing raw 
milk into the finished bulk products of cheese, butter, NFDM, and dry 
whey. This was one of the only facts to which all participating parties 
agreed and offered evidence in support, as discussed above. However, 
there were divergent views on what should constitute adequate make 
allowance values going forward.
    Since 2000, when product pricing was adopted, FMMO decisions have 
consistently relied on surveys of observed manufacturing costs to 
determine proper make allowance levels. Previous make allowances have 
been derived in whole, or in combination with, surveys conducted by 
CPDMP, CDFA, and the USDA Rural Business Cooperative Service. The 
importance of relying on actual, observed costs cannot be overstated. 
FMMO price formulas determine the classified prices handlers pay to 
dairy farmers. It is important that all variables reflect actual market 
conditions.
    While the use of modeling is helpful for policy analysis, the 
evidentiary record of this proceeding contains adequate observed market 
data to determine make allowance levels without the need to rely on 
model assumptions. Modeling involves a host of assumptions made by the 
modeler, as was described by the CA Forecast author, which result in 
estimates with a wide confidence interval. In other words, cost 
estimates could have a wide range of possible values consistent with 
the model. The confidence interval for the cost estimates widens when 
some indexes used to forecast are not specific to dairy manufacturing. 
Economic modeling was considered and rejected during Order Reform as a 
replacement for the Basic Formula Price. This decision affirms the 
Department's long-held position that this type of modeling, requiring 
extensive assumptions, is not an appropriate methodology for 
determining make allowances when superior information is available. As 
it is common for participants to not reveal confidential information 
such as manufacturing costs, the cost surveys contained in evidence 
provide the best available information on observed costs for this 
proceeding. Accordingly, this decision does not find justification for 
using the CA Forecast in determining appropriate make allowances 
levels.
    In opposition to Proposals 8 and 9, cooperatives and dairy farmer 
members offered substantial testimony regarding the potential impact to 
dairy farmers should make allowances be significantly increased. 
Accordingly, they recommend adoption of the NMPF proposal as it 
attempts to temper the impact to producers.
    FMMOs are designed to provide for orderly marketing through 
classified prices paid by handlers and marketwide pooling to determine 
average minimum blend prices paid to producers. As FMMO formulas are 
market-oriented, the product prices that drive classified prices are 
chosen to reflect current supply and demand conditions. This was last 
reiterated by the Department in 2013, writing ``when the supply of milk 
is insufficient to meet the demand for Class III and Class IV products, 
the prices for these products increase as do regulated minimum milk 
prices paid to dairy farmers; because the milk is more valuable, and 
the greater value is captured in the pricing formulas.'' 78 FR 9248 
(Feb. 7, 2013). Further, the Secretary is expressly authorized in the 
AMAA to set prices to reflect ``. . . the price of feeds, the available 
supplies of feeds, and other economic conditions which affect market 
supply and demand for milk or its products. . . .'' 7 U.S.C. 608c(18). 
This concept was discussed and validated by a federal court and is 
relevant to this proceeding. Bridgewater Dairy, LLC et al. v. USDA, No. 
3:07-cv-104, 2007 WL 634059 (N.D. Ohio, 2007). Therefore, the potential 
impact to producers remains an inappropriate factor in determining make 
allowance levels. While many stakeholders look to the FMMO program to 
provide stability, it is not within FMMO authority to support dairy 
farmer income.
    Accordingly, record evidence does not support adoption of Proposal 
7, whose make allowances levels are not reflective of observed costs 
provided in evidence and is designed to dampen the impact to producers.
    A vast majority of hearing participants supported a USDA-
administered, mandatory, and audited survey as the most appropriate 
method for obtaining observed cost data to determine make allowance 
levels. Some witnesses asserted at the hearing, as well as in public 
comments to the recommended decision, that make allowances should not 
be changed until such a survey is administered and results published. 
Conducting such a survey is not currently authorized by law. The lack 
of a mandatory survey has not been reason to delay two previous updates 
to make allowance levels, and its continued lack of existence now is 
not a reason for delaying such an update in this proceeding. As 
discussed, the record of this proceeding clearly demonstrates 
manufacturing costs have increased since make allowance levels were 
last changed. Given the body of evidence, this final decision continues 
to find it appropriate to increase make allowances to ensure the price 
formulas better reflect manufacturing costs and provide for more 
orderly marketing conditions.
    The record reveals the voluntary, unaudited nature of the 2021 and 
2023 surveys are not considered an accurate representation of costs by 
some stakeholders, particularly the producer community. Forty dairy 
farmers located throughout the U.S. and 10 dairy farmer organizations 
who submitted comments to the recommended decision opposed the make 
allowances levels contained in the hearing notice and proposed by USDA 
due to the unaudited and voluntary nature of the surveys on which they 
were based; further, DFA and NMPF mentioned that the surveys

[[Page 95512]]

and hearing record do not include cost data from several large 
manufacturers, potentially leading to an upward bias in the make 
allowances contained in the recommended decision. The AFBF; the 
Arizona, Florida, New York, Michigan, and Tennessee Farm Bureaus; and 
some dairy farmers argued in their comments that make allowances should 
not be changed without a mandatory audited survey, reiterating 
testimony on the weaknesses of the 2021 and 2023 surveys. In their 
joint comment, the Wisconsin and Minnesota Farm Bureaus rejected 
raising make allowances, as the survey data is unaudited and voluntary. 
Raising make allowances, they commented, will be detrimental to dairy 
farmers in the Upper Midwest and other regions with high Class III and 
IV utilization, speeding up dairy farm consolidation and bankruptcies. 
NMPF and DFA comments expressed support of an increase in make 
allowance levels at this time but maintained the NMPF-proposed make 
allowances in Proposal 7 are best supported by the record until a 
mandatory survey can be conducted.
    Questions regarding plant sampling, cost allocation methodology, 
and capturing a high-cost time period expressed in testimony and public 
comments are legitimate considerations. Issues with the results of 
voluntary, unaudited surveys are not new to the process of determining 
make allowances. Similar situations occurred in both the 2006 and 2007 
rulemakings. In both instances, make allowances were determined by 
using parts of different survey results. The record of this proceeding 
continues to support the use of unaudited, voluntary surveys for 
determining make allowances, as has been done in the past.
    What remains for the Department to consider is determining 
representative make allowance levels given the evidentiary survey data: 
the 2021 survey, the 2023 survey, and the 2016 CA survey. The record 
does not support consideration of the 2021 survey results that relied 
on the transformation cost allocation method for allocating unallocated 
costs. Hearing participants expressed skepticism of this method as it 
is standard industry practice to allocate costs on a solids basis. 
Although the study author explained how the transformation numbers were 
assigned to products, the record does not contain sufficient evidence 
to validate the new methodology. Whether or not the transformation 
methodology is theoretically more accurate is not relevant. What is 
germane is that manufacturers allocate costs, manage their plants, and 
make marketing and pricing decisions in accordance with the traditional 
method of allocating fixed and unallocated costs on a pro-rata basis of 
milk solids in the final products. Accordingly, the 2021 survey results 
utilizing this methodology were not considered when determining the 
proposed levels in this decision. Select's alternative methodology 
presented in its post-hearing brief, which relied on the transformed 
2021 survey numbers, was not considered further.
    The recommended decision found usage of the revised non-transformed 
2021 and 2023 surveys and the 2016 CA survey appropriate to determine 
the proposed make allowances. The decision found that relying on a 
combination of these survey results provided a consensus set of data to 
determine appropriate make allowance levels and was superior to relying 
only on one survey.
    The Department received 75 comments regarding amendments to make 
allowances, submitted by dairy farmers (mostly small), cooperatives, 
processors, trade associations, and advocacy groups from 23 different 
states.
    Dairy farmers and organizations representing dairy farmers, 
including the AFBF; state Farm Bureaus representing Florida, Michigan, 
Minnesota, New York, Tennessee, and Wisconsin; Farm Women United; the 
National Family Farm Coalition; and the Ohio Farmers Union opposed the 
make allowance levels in the recommended decision. The comments said 
increasing make allowances would reduce farm income, particularly for 
small and medium-sized farms, potentially leading to more closures and 
accelerating industry consolidation.
    In their comments, NMPF and DFA also opposed the make allowance 
levels specified in the recommended decision and continued to advocate 
for the NMPF-proposed levels in Proposal 7. They reiterated hearing 
testimony that dairy farmer cost of production should be considered 
when determining make allowances to ensure orderly marketing 
conditions. In its comment, NMPF cited a 2008 amendment to the AMAA 
stipulating the price for feed and fuel should be considered when 
determining whether to adjust make allowances. (7 U.S.C. 608c(17)(G)). 
The provision cited by NMPF applies to hearings commencing prior to 
September 20, 2012, and the provision was not extended in the 2012 Farm 
Bill. The Department continues to find it to be inappropriate to 
consider producer income as a factor in determining make allowance 
levels.
    In its comment to the recommended decision, Edge reiterated 
arguments from its post-hearing brief that make allowances should be 
based on plants at the technological frontier, rather than inefficient 
plants they claim were represented in the voluntary surveys whose 
results are part of this hearing record. Since Edge offered no details 
in their comment on how this methodology would be implemented given 
this proceeding's evidence, no further consideration was given.
    Also opposing the make allowances contained in the recommended 
decision, IDFA and WCMA advocated in their comments for use of the 2023 
survey data only. IDFA and WCMA argued that after eliminating the 2022 
CA Forecast from consideration, the only reasonable data remaining is 
the 2023 survey results. They both objected to the use of the 2021 
survey to moderate the influence of prices during an inflationary 
period. According to IDFA and WCMA, unless price deflation occurred, 
which they argued did not, there is no reason for adopting anything 
other than the 2023 survey results for all four commodities.
    Inflation describes a general price level increase across the whole 
economy, whereas deflation describes a general price level decrease. 
Price decreases can occur in an inflationary environment just as price 
increases can occur in a deflationary one, and producer price indexes 
(PPIs) are one way to evaluate such price movements. A series of 
Federal Reserve Bank of St. Louis input indexes and U.S. Energy 
Information Administration price data relevant to dairy commodity 
manufacturing, from June 2022 (marking the end of most pandemic-related 
programs) to June 2024 (the last full month before the recommended 
decision was issued) was evaluated to analyze IDFA and WCMA comments. 
While this decision does not find it appropriate to rely on indexing or 
forecasting to determine make allowances levels, the consideration of 
indexes can serve as a check that the proposed levels are reasonable 
and reflect current costs given the totality of evidence in this 
rulemaking.
    As stated in the recommended decision, there have been price 
decreases in sectors relevant to the manufacturing process that 
indicate manufacturing costs were high in 2022 and thus are not 
reflective of current costs. The PPIs from June 2022 to June 2024 for 
Corrugated Materials, which declined approximately 14 percent, and 
Lumber, which declined more than 21 percent, as well as the Henry Hub 
(U.S. Energy Information Administration) average spot price for natural 
gas, which declined more than 67 percent, serve as

[[Page 95513]]

examples of prices that declined during an inflationary period. The PPI 
for All Commodities, which decreased nearly 9 percent from June 2022 to 
2024, is another more general indicator that input prices for 
commodities were particularly high in 2022 compared to 2024. Other 
examples of elevated input prices highlighted in the IDFA and WCMA 
public comments include labor, legal, insurance, and administrative 
costs. The presence of cost categories that have not declined do not 
preclude objective declines in other categories. The record indicates 
that even after accounting for wage increases of nearly 9 percent, 
according to the Employment Cost Index from the U.S. Bureau of Labor 
Statistics, declines in other areas outweigh increased labor costs, 
leading to an overall decrease in manufacturing costs. These overall 
input price decreases are relevant to all surveyed products; thus, the 
Department continues to find sole reliance on the 2023 survey is 
inappropriate in determining make allowances that reflect current 
costs.
    IDFA and Leprino commented the Department should continue to 
incorporate a $0.0015 marketing allowance in all make allowances, based 
on the necessary costs to get commodity products to market, historical 
precedent, and lack of supporting data to merit its removal. IDFA 
stated the $0.0015 marketing allowance was first adopted as part of 
Order Reform to cover the cost of moving commodity products to market, 
which include maintaining and staffing warehouses, supporting a 
marketing and sales staff, and transporting product to market. Leprino 
commented that the marketing allowance is necessary to reflect 
commodity costs at the same stage in the value chain as commodity 
prices in the NDPSR. In its comment, Leprino pointed to the make 
allowance levels since Order Reform as examples of the rationale in 
maintaining the $0.0015 marketing allowance without new data to merit 
its removal. IDFA commented that, while no specific data was offered to 
estimate the current marketing allowance cost level, a review of the 
record reveals no evidence to support its removal.
    The Department reevaluated the record for testimony related to the 
marketing allowance. The 2021 and 2023 cost surveys included costs 
through product packaging. Post-packaging costs such as warehousing and 
marketing were specifically excluded. Testimony from a cheese 
manufacturer estimated the $0.0015 marketing allowance covers post-
packaging costs unaccounted for in the 2021 and 2023 cost surveys. 
Further, the DPMRP requires manufacturers to report prices that 
incorporate all costs associated with the product before it is shipped 
to market. It is important that prices reported to DPMRP and released 
through the NDPSR relate to the costs accounted for in the make 
allowance. Since marketing costs are included in prices reported 
through DPMRP, it is appropriate for such costs to also be accounted 
for in the make allowance. Therefore, this decision finds it 
appropriate for make allowances to include a $0.0015 marketing 
allowance.
    Additional public comments were submitted which pertained to 
specific make allowance levels proposed in the recommended decision. 
Those comments are addressed in the respective sections below.
Cheese

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2021               2023            2016                                   USDA proposed
                                                         ---------------------------------------------------               USDA proposed      (final
                                                                                                               Current     (recommended    decision-inc.
                                                           Non-transformed    Non-transformed    CA survey                   decision)       marketing
                                                                                                                                            allowance)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost................................................  .................            $0.2201  ...........  ...........  ..............  ..............
High Cost...............................................  .................            $0.3181  ...........  ...........  ..............  ..............
Average.................................................            $0.2365            $0.2643      $0.2454      $0.2003         $0.2504         $0.2519
# Plants................................................                 10                 18            4  ...........  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The recommended decision proposed a $0.2504 per pound cheese make 
allowance, derived from the average of the 2021 and 2023 non-
transformed survey results. The 2023 survey incorporates a 
representative sample size, accounting for 55.6 percent of NASS cheddar 
cheese production. The record indicates the 2023 survey, which 
collected cost data primarily from 2022, covered a period of relatively 
high inflation and rising input costs. An example is packaging costs, 
including lumber and corrugated materials, which testimony indicates 
and the input index analysis described earlier confirms, have receded 
since peaking in 2022. Absent any other data on the record, this final 
decision continues to find it appropriate to utilize an average of the 
2023 and 2021 non-transformed survey results to ensure the proposed 
cheese make allowance is not disproportionately affected by higher 2022 
costs that have since moderated. The decision continues to find use of 
the 2021 and 2023 surveys provides a manufacturing allowance reflective 
of the national cheddar cheese market. In 2022, California cheddar 
cheese production represented approximately 6.9 percent of reported 
NASS cheddar cheese production. As incorporation of the 2016 CA survey 
would result in an over representation of California cheese 
manufacturing costs, this decision does not support its consideration.
    In its public comment, AFBF wrote the current cheese make allowance 
is clearly adequate as there has been considerable investment in cheese 
plants; thus, the recommended cheese make allowance is too high. While 
anecdotal testimony on investments in cheese plants was presented at 
the hearing, data on the record clearly indicates costs of processing 
commodity cheese have increased since make allowances were last 
updated.
    The AFBF, as well as dairy farmers from Iowa and Pennsylvania, 
commented in opposition of all make allowance increases, but specific 
to cheese they argued that only about half the number of DPMRP 
reporting manufacturing plants are represented in the data. The 
Department continues to find it appropriate to use the 2021 and 2023 
survey results, as the two samples together provide a reasonable 
representation of cheddar cheese processing.
    This final decision therefore recommends a $0.2519 per pound cheese 
make allowance, derived from the average of the 2021 and 2023 non-
transformed survey results plus the $0.0015 marketing allowance.
Butter

[[Page 95514]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2021               2023            2016                                   USDA proposed
                                                         ---------------------------------------------------               USDA proposed      (final
                                                                                                               Current     (recommended    decision-inc.
                                                           Non-transformed    Non-transformed    CA survey                   decision)       marketing
                                                                                                                                            allowance)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost................................................  .................            $0.2616      $0.1838  ...........  ..............  ..............
High Cost...............................................  .................            $0.4210      $0.2149  ...........  ..............  ..............
Average.................................................            $0.1338            $0.3176      $0.1938      $0.1715         $0.2257         $0.2272
# Plants................................................                 12                 13            7  ...........  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The recommended decision proposed a $0.2257 per pound butter make 
allowance, derived from the average of the 2021 and 2023 non-
transformed survey results. While the 2021 and 2023 surveys had roughly 
the same number of reporting plants and represented roughly the same 
volume of NASS U.S. butter production (approximately 80-82 percent), 
the plant samples differed significantly. The study author claimed 
sampling was the main driver for the notably different survey results. 
The 2023 survey captured data from both smaller and larger plants while 
the 2021 survey consisted of a more homogenous sample of larger and 
more efficient plants. The record indicates the 2023 survey, which 
collected cost data primarily from 2022, covered a period of relatively 
high inflation and rising input costs. According to the Producer Price 
Index for All Commodities (PPI), published by the Bureau of Labor 
Statistics, prices have moderated since their June 2022 peak. Thus, 
this final decision continues to find it appropriate to average the 
2023 and 2021 non-transformed surveys to account for the differences in 
plant sampling, and to ensure the proposed butter make allowance is not 
disproportionately affected by higher 2022 input costs that have since 
moderated. The decision continues to find use of the 2021 and 2023 
surveys provides a manufacturing allowance reflective of the national 
butter market, as both surveys represent over 80 percent of 2022 NASS 
butter production volumes. This decision does not support incorporating 
the 2016 CA survey in the calculation as it would overrepresent 
California butter manufacturing costs.
    The Department received no public comments in response to the 
recommended decision specifically addressing the butter make allowance. 
However, since this decision finds it appropriate to continue to 
incorporate a marketing allowance into all make allowances, the final 
decision recommends a $0.2272 per pound butter make allowance, derived 
from the average of the 2021 and 2023 non-transformed survey results 
plus a $0.0015 marketing allowance.
NFDM

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2021               2023            2016                                   USDA proposed
                                                         ---------------------------------------------------               USDA proposed      (final
                                                                                                               Current     (recommended    decision-inc.
                                                           Non-transformed    Non-transformed    CA survey                   decision)       marketing
                                                                                                                                            allowance)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost................................................  .................            $0.2302      $0.1854  ...........  ..............  ..............
High Cost...............................................  .................            $0.3247      $0.2786  ...........  ..............  ..............
Average.................................................            $0.2454            $0.2750      $0.2082      $0.1678         $0.2268         $0.2393
# Plants................................................                 27                 15            8  ...........  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The recommended decision proposed a $0.2268 per pound NFDM make 
allowance, derived from the average of the 2021 non-transformed survey 
and 2016 CDFA cost of processing survey results. In 2022, California 
represented 43.7 percent of U.S. NFDM production. This supported 
hearing testimony describing the importance of California manufacturing 
facilities in the total U.S. production of NFDM powder. Therefore, the 
recommended decision found it appropriate to place more emphasis on 
California NFDM plant costs considering the dominant share of NFDM 
production by California plants. As stated previously, given all the 
cost surveys contained in the evidentiary record had shortcomings, the 
recommended decision found it appropriate to use an average of two 
surveys when recommending make allowances. The recommended decision 
concluded that it was best to combine the 2021 survey and the 2016 CDFA 
cost of processing survey to determine the NFDM make allowance. The 
2021 survey was selected over 2023 due to a better plant sample and 
because the 2023 survey represented costs during a period of high 
inflation, in particular for energy-intensive (natural gas) dried 
products like NFDM.
    Comments from IDFA, CDI, and Agri-Mark specifically opposed the 
NFDM make allowance contained in the recommended decision, advocating 
for different methodologies to be applied. IDFA argued the NFDM make 
allowance should at least be based on a weighting of the 2021 non-
transformed cost of production survey and the 2023 non-transformed cost 
of production survey for all plants, or at most an adjustment to the 
2023 survey to address higher energy costs in 2022 could be made. Agri-
Mark and CDI argued that data sources for the NFDM make allowance 
should be reconsidered, questioning whether use of 2016 data was too 
old and not reflective of current costs, especially given its 50 
percent weighting in the computation. While the 2023 survey was not 
used due to higher-than-normal natural gas prices that have since 
moderated, Agrimark argued in their comment, other cost categories have 
not similarly moderated. CDI commented that the NFDM make allowance 
should be determined using a similar methodology to dry whey, taking 
the simple average of the non-transformed 2021 survey and the 2023 low-
cost survey, which would equal $0.2378.
    This decision continues to find it appropriate, given the 
shortcomings of the cost surveys in the record, to use an average of 
two surveys to determine appropriate make allowance levels. However, 
after a review of public comments and a reevaluation of record

[[Page 95515]]

evidence, this final decision finds it appropriate to apply a 
consistent methodology for NFDM and dry whey, as described in CDI's 
comment.
    The 2023 survey represents the most recent cost data but 
significantly fewer participating plants than the 2021 survey. 
Additionally, as NFDM production is heavily reliant on natural gas, the 
2023 survey captured the historically high energy costs, particularly 
natural gas. Natural gas prices increased substantially between 2019 
and 2022. The Henry Hub Natural Gas Spot Price increased 153 percent 
between 2019 and 2022. However, prices declined from June 2022 to June 
2024, with the spot price falling over 67 percent. Natural gas prices 
in 2024 were comparable to prices in 2019, with the June 2024 spot 
price only 5 percent higher than in 2019. This data suggests current 
natural gas prices are similar to price levels observed during the 2021 
survey. Cost breakdown of the 2023 survey show that utilities (energy) 
costs constituted 15 percent of the total manufacturing costs of dry 
whey. This is in contrast to utilities representing 7 percent of total 
costs for butter and 6 percent for cheese. As the record reveals the 
major component of this difference in utilities costs share is from 
drying the product, this cost category is sensitive to movements in 
natural gas prices.
    The record reveals the 2021 survey represents more NFDM plants than 
the 2023 survey (27 vs. 15), while the 2023 survey represents a larger 
volume of NDFM production than the 2021 survey (91.2 percent vs. 64.8 
percent). Utilizing a simple average of the 2021 and the low-cost 2023 
surveys results in a better representation of NFDM production across 
the universe of plants making the product, while moderating the 
influence of the high inflationary period in 2022 as described earlier 
in the PPI analysis, with particular consideration of declining 
utilities costs described above. Therefore, in the final decision, the 
Department recommends a $0.2393 per pound NFDM make allowance, derived 
from the average of the 2021 non-transformed survey and the 2023 non-
transformed low-cost survey result, plus a $0.0015 marketing allowance.
Dry Whey

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2021               2023            2016                                   USDA proposed
                                                         ---------------------------------------------------               USDA proposed      (final
                                                                                                               Current     (recommended    decision-inc.
                                                           Non-transformed    Non-transformed    CA survey                   decision)       marketing
                                                                                                                                            allowance)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost................................................  .................            $0.2848  ...........  ...........  ..............  ..............
High Cost...............................................  .................            $0.3952  ...........  ...........  ..............  ..............
Average.................................................            $0.2457            $0.3361  ...........      $0.1991         $0.2653         $0.2668
# Plants................................................                  8                  9  ...........  ...........  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The recommended decision proposed a $0.2653 per pound dry whey make 
allowance, derived from the 2021 non-transformed survey and 2023 non-
transformed low-cost survey result. Similar to NFDM, dry whey 
production is heavily energy (natural gas) dependent, and the same 
concerns regarding the 2023 survey results exist for dry whey, as 
discussed above. Absent any other data on the record, the recommended 
decision found it suitable to utilize the 2023 non-transformed low-cost 
average ($0.2848) with the 2021 non-transformed survey to ensure the 
proposed dry whey make allowance is not disproportionately affected by 
higher 2022 natural gas and utilities costs that have since moderated.
    Several comments were received specifically on the dry whey make 
allowance contained in the recommended decision. IDFA and WCMA opposed 
the methodology used and opined the dry whey make allowance should be 
based solely on the 2023 non-transformed cost of production survey for 
dry whey plants. Due to 2022 being a period of particularly high 
prices, this decision continues to maintain their proposed methodology 
is not appropriate. Earlier analysis of relevant price indices 
contained in the record support this conclusion.
    In its public comment, the AFBF wrote that the current dry whey 
make allowance is clearly sufficient, as there has been considerable 
investment in dry whey plants; thus, the amended dry whey make 
allowance contained in the recommended decision is too high. While 
anecdotal testimony on investments in dry whey plants was presented at 
the hearing, data on the record clearly indicates costs of processing 
commodity dry whey have increased since make allowances were last 
updated.
    The AFBF, as well as dairy farmers from Iowa and Pennsylvania, 
commented in opposition of all make allowances, but especially dry 
whey, as only about half the number of DPMRP reporting plants provided 
cost data. This decision continues to find it appropriate to use two 
surveys in the make allowance calculation, as together they provide 
sufficient representation of dry whey production.
    A public comment filed by the American Dairy Coalition (ADC) 
opposed all make allowances in the recommended decision and advocated 
for reevaluation of all proposed changes. ADC specifically addressed 
the proposed increase in the dry whey make allowance relative to its 
small market price and advocated implementing a snubber to prevent 
negative producer values for other solids. Per ADC's suggestion, if the 
market price for dry whey is less than the make allowance in a given 
month, the other solids price would be zero rather than a resulting 
negative value. For historical context, the Class III price formula 
briefly contained a similar snubber from Order Reform implementation 
(January 2000) to October 2001, but it was removed as it was found to 
mute market signals and arbitrarily adjust prices. There is 
insufficient evidence on the hearing record of this proceeding to 
support ADC's comment suggesting a change to the other solids snubber. 
Similar to NFDM, utilities represent a larger share of manufacturing 
costs for dry whey at 10 percent of total cost, rather than the 7 
percent and 6 percent for butter and cheese, respectively, which are 
not dried during the manufacturing process. Accordingly, the same 
consideration of declining utility costs evaluated in the NFDM section 
apply to dry whey. Utilizing a simple average of the 2021 and low-cost 
2023 surveys results in a better representation of dry whey production 
across the universe of plants making the product, while moderating the 
influence of the high inflationary period in 2022 as described earlier 
in the PPI analysis, with particular consideration of declining 
utilities cost since 2022. Therefore, this decision recommends a 
$0.2668 per pound dry whey make allowance, based on the

[[Page 95516]]

average of the 2021 non-transformed survey and 2023 low-cost dry whey 
surveys, plus a $0.0015 marketing allowance.
    The Department finds the proposed make allowances in this final 
decision are more representative of manufacturing costs than current 
make allowances, which were last changed in 2008. Record evidence 
clearly supports updates. However, as previously mentioned, each of the 
observed costs surveys have weaknesses. The proposed make allowance 
levels are the best representation of manufacturing costs, given 
publicly available data and evidence contained in this proceeding's 
record.
b. Butterfat Recovery
    Currently, the Class III formula contains a 90-percent butterfat 
recovery assumption. This represents the percentage of butterfat in raw 
milk that can be recovered during the cheesemaking process, recognizing 
that for both theoretical and practical reasons, 100% of utilization of 
butterfat (or any other raw milk component) in the production of a 
dairy product is impossible. Proposal 10 seeks to increase the 
butterfat recovery assumption to 93 percent. Proponents claimed modern 
cheesemaking equipment and better cheese handling techniques make a 
higher butterfat recovery not only attainable, but common in practice.
    Opponents mainly consisted of manufacturers asserting that while 
some cheese plants attain butterfat recovery percentages in excess of 
90 percent, yield assumptions that increase producer revenue, such as 
butterfat recovery, should not be amended outside a comprehensive 
review of all assumptions that determine yield factors. Multiple 
opponents mentioned the overvaluation of whey cream as an example of a 
potential issue.
    This rulemaking proceeding sought to consider changes to the FMMO 
pricing formulas. Industry participants were invited to submit 
proposals concerning the current pricing provisions of the FMMOs. Those 
opposing changes to the butterfat recovery percentage had an 
opportunity to submit proposals on any of the yield factors, as they 
fall within the provisions of the pricing formulas. None, other than 
those submitted by Select, were received. This decision does not find 
it appropriate to deny consideration of any yield related proposal 
presented in this proceeding on the basis of a potential future 
evaluation of all yield factors.
    The record contains testimony from several expert witnesses 
explaining the cheesemaking process and use of more modern cheese 
equipment and technology, including improvements in coagulants and curd 
handling, allowing handlers the ability to capture a larger percentage 
of butterfat in cheese. Testimony also described how cheese fines, or 
small particles of cheese left in whey during the cheesemaking process, 
represent a significant source of fat loss to a cheese manufacturer, 
and are not returned to the finished cheese product due to concerns of 
bacterial contamination. As butterfat recovery numbers are considered 
confidential information, the record does not contain a well-developed 
picture of recovery levels currently attained in U.S. cheese plants. 
The record indicates the age of equipment and technology used in cheese 
plants varies widely. While evidence was submitted describing high 
butterfat retention rates that are achievable using new equipment, it 
does not demonstrate those rates are reflective of the general industry 
conditions. Other than a few new, very modern plants, the record does 
not support a 93 percent butterfat recovery factor as attainable by 
most cheese plants.
    The record contains considerable testimony estimating current 
butterfat recovery rates in the universe of cheese plants with varying 
ages of equipment and technology. Expert witnesses estimated butterfat 
recovery in cheddar plants ranged from 88 to 93 percent, attributing 
much of the difference to cheddar vat equipment. It is important that 
the product price formulas reflect current, not theoretical, conditions 
for the general population of plants. Experts generally offered that 
most commodity cheddar cheese plants can obtain greater than 90 percent 
recovery, but few obtain 93 percent, with a 91 percent butterfat 
recovery rate considered the industry average. Accordingly, this 
decision recommends a 91 percent butterfat recovery rate. Such an 
increase necessitates a change to the butterfat yield factor in cheese 
from 1.572 to 1.589.
    The Department received comments in support of the amended 
butterfat recovery factor contained in the recommended decision, 
including from several state Farm Bureaus (Arizona, Florida, Michigan, 
Minnesota, New York, Tennessee, and Wisconsin) and five California 
dairy farmers. These commenters support increasing the butterfat 
recovery factor from 90 to 91 percent, as it more accurately reflects 
modern cheesemaking technology and plant efficiencies.
    Several comments were also submitted in opposition of the proposed 
butterfat recovery factor. Commenting in opposition, Select continued 
to contend that the factor should be updated to 93 percent. Select 
pointed to testimony from its expert witness claiming that 93 percent 
butterfat recovery is attainable by most plants. Even with older cheese 
making equipment, Select reiterated 93 percent butterfat recovery can 
be achieved. This decision maintains that the butterfat recovery 
percentage should represent what is currently attained by the universe 
of U.S. cheese manufacturing plants, not what can theoretically be 
attained or may be attained in modern plants. Therefore, this decision 
maintains a proposed 91 percent butterfat recovery factor.
    In its comment, Crystal Creamery argued that cheese moisture levels 
and other factors in the cheese making process should also be 
considered in the amended butterfat recovery factor and requested 
conforming changes to the butterfat-to-protein ratio, from 1.17 to 
1.16. Sufficient testimony and evidence was not provided on the record 
to justify a change to the butterfat-to-protein ratio, therefore, the 
proposed conforming change is denied.
c. Farm-to-Plant Shrinkage
    Currently, the FMMO formulas assume a farm-to-plant shrinkage 
factor of 0.25 percent and 0.015 pounds per cwt of additional butterfat 
loss. This represents normal milk losses that occur when milk is 
delivered from the farm to a plant. Under the FMMO system, most 
handlers purchase milk from producers based on farm weights and tests. 
The farm-to-plant shrinkage factor recognizes that when milk is pumped 
from a farm bulk tank to a milk tanker, and then from milk tanker to 
the plant silo, milk, and to a greater degree butterfat, sticks to the 
sides of the pipes and tanks. Milk and butterfat can also be lost in 
the milk hauling process when milk haulers must make multiple farm 
stops to fill a load. As a result, plants often physically receive less 
milk and butterfat than was measured at the farm. The record reflects 
that as the nature of milk and butterfat has not changed, it still 
sticks to equipment. In recognition of this reality, the yields are 
slightly reduced to reflect the amount of milk and butterfat actually 
available to make a product, as compared to the amount of milk picked 
up on farms.
    The proponents asserted that producers shipping full tanker loads 
is common in the Southwest where they operate. They testified to and 
provided cooperative data regarding the steps they have taken to reduce 
shrinkage. Proponents said increased average farm size results in fewer 
stops by the milk

[[Page 95517]]

hauler to fill up a load, thus lowering overall shrinkage. They opined 
shrinkage should no longer be a reality for farms as losses can be 
managed on any size farm through adoption of farm scales, flow 
measurements, and other technologies to improve accuracy.
    Opponents argued only a small percentage of dairy farms are able to 
produce enough milk to fill an entire tanker load. While the number of 
large farms has grown, opponents testified removing the shrinkage 
factor could further incentivize manufacturers to prefer large over 
small farms. Consequently, they opined the farm-to-plant shrinkage 
factor should remain.
    Record evidence reveals most dairy farms are unable to fill a 
tanker load per day. According to the NASS, daily milk production per 
cow averaged 66.5 pounds in 2022. Assuming an average tanker load of 
milk is approximately 48,000 pounds, it would require a milking herd of 
722 cows to fill a tanker. In 2022, of the 24,470 U.S. dairy farms with 
milk sales, only 3,451 farms (approximately 14 percent) had 500 or more 
milk cows, and 2,013 (approximately 8 percent) had 1,000 or more milk 
cows.
    For the approximately 90 percent of farms that are not able to ship 
full tanker loads of milk, the record indicates farm-to-plant losses 
remain a reality for most producers and cooperatives operating within 
the FMMO system. As most handlers pay producers based on farm weights 
and tests, it remains appropriate to provide recognition in the 
formulas for milk solids paid for but not physically received at the 
handler's facility.
    Leprino submitted a public comment in support of maintaining the 
farm-to-plant shrinkage. In contrast, Select commented in opposition of 
the amended shrinkage in the recommended decision, reiterating 
arguments in the hearing that it should be eliminated. According to 
Select, the recommended decision underestimates the number of farms 
capable of shipping a full tanker. Select contends that more than 75 
percent of milk is produced on farms shipping full tanker loads and 
asserts the recommended decision did not address unsupported additional 
butterfat shrink.
    While the recommended decision inadvertently failed to mention the 
0.015 pounds per cwt of additional butterfat loss, the entirety of the 
farm-to-plant shrinkage within the formulas and the evidentiary record 
was evaluated. The record contains evidence that additional butterfat 
losses occur as butterfat naturally clings to equipment. While Select 
offered evidence its cooperative has developed operating practices that 
have greatly reduced observed shrinkage, no other data was offered to 
validate that it is being attained by other industry stakeholders. 
Thus, this decision continues to find it appropriate to include the 
0.25 percent shrinkage factor and the 0.015 pounds of additional 
butterfat loss in the formulas as these factors should be based on what 
is attained, on average, rather than only attainable by some. 
Accordingly, this decision continues to reject Proposal 11.
d. Nonfat Solids Yield
    Currently, the FMMO Class IV price formula contains a NFDM yield 
factor of 0.99, representing the pounds of NFDM that can be made from 
one pound of nonfat solids of raw milk delivered from the farm. This 
factor is less than 1.0, as it recognizes both farm-to-plant shrinkage 
and the portion of nonfat solids utilized in NFDM.
    Select offered Proposal 12 to adjust the NFDM yield factor to 
account for both the NFDM and buttermilk powder that can be 
manufactured from the same pound of nonfat solids, and proposed an NFDM 
yield factor of 1.03. Proponents claim producers are not compensated 
for nonfat solids that end up in buttermilk powder since such 
production is not accounted for in the yield factor.
    A review of previous rulemakings reveals numerous changes to the 
NFDM yield factor both during and since Order Reform. The Order Reform 
recommended decision contained a nonfat solids yield factor of 0.96 as 
a divisor (equivalent to a 1.04 multiplier) in the nonfat solids price 
equation. It represented the percent of nonfat solids in a pound of 
NFDM. In other words, if a NFDM plant had 1 pound of nonfat solids, it 
could make 1.04 pounds of NFDM due to the moisture content in the final 
product. The factor was changed in the Order Reform final decision to a 
1.02 divisor (equivalent to a 0.98 multiplier) as stakeholders 
commented it should represent both the NFDM and buttermilk powder that 
could be produced from one pound of nonfat solids. In other words, the 
yield factor, when converted to a multiplier, was less than one to 
reflect that only a portion of the nonfat solids that arrive at a plant 
are utilized in NFDM.
    The nonfat solids yield factor was again considered in a 2000 
rulemaking. Initially, the factor was amended to 1.00. 65 FR 82832 
(Dec. 28, 2000). During that proceeding, stakeholders argued the yield 
factor should reflect that more than one pound of NFDM can be 
manufactured from one pound of nonfat solids, resulting in a divisor 
less than one, or a multiplier greater than one. Evidence from that 
proceeding was used to demonstrate a calculation using only the NFDM 
price, NFDM make allowance, and a multiplier of 1.00 would be 
equivalent to a more complex formula attempting to combine the NFDM and 
buttermilk net prices using corresponding yield factors.
    The final decision in the 2000 rulemaking changed all yield 
factors, including the nonfat solids yield, from divisors to 
multipliers. 67 FR 67906 (Nov. 7, 2002). Keeping in line with only 
reflecting the nonfat solids used in NFDM, the nonfat solids yield 
multiplier changed from 1.0 to 0.99, with the incorporation of a farm-
to-plant shrinkage factor of 0.25 percent. As calculated, for 1 pound 
of nonfat solids leaving the farm, 0.9975 pounds entered the plant 
(1.00 - 0.0025 = 0.9975). Subtracting an estimated 0.0479 pounds of 
nonfat solids ending up in buttermilk powder left 0.9496 pounds of 
nonfat solids in NFDM (0.9975 - 0.0479 = 0.9496). It was assumed NFDM 
is 96.2 percent nonfat solids, resulting in a NFDM yield factor 
calculation of 0.9496/0.962 = 0.9871, which was rounded to 0.99. The 
final decision made clear the 0.99 should be considered a NFDM yield 
factor, no longer a nonfat solids yield factor as was the case when 
Order Reform was implemented.
    Proposal 12 requests buttermilk powder again be incorporated into 
the NFDM yield. Proponents testified that without accounting for 
buttermilk powder, producers are not compensated for all the nonfat 
solids they sell to a Class IV manufacturer. Record evidence does not 
support such a claim. Class IV manufacturers are required to pay the 
nonfat solids price for pooled milk purchased, regardless of whether 
those nonfat solids end up in NFDM, butter, buttermilk powder, or any 
other Class IV product. The same can be said for other classified 
products whose component prices are computed similarly, even if there 
are numerous products in the category. For example, the other solids 
price is determined through a survey of dry whey prices and a dry whey 
make allowance. Manufacturers pay the other solids price even if they 
are making other products in the category, such as whey protein 
concentrate or whey protein isolate.
    Additionally, while the rulemaking history of the NFDM and nonfat 
solids yield factors is complex, the record evidence in this proceeding 
does not support reflecting two products (buttermilk powder and NFDM) 
in the NFDM yield would provide for more

[[Page 95518]]

orderly marketing conditions. As such, the recommended decision 
maintained the current NFDM yield factor to only reflect one product 
and did not propose the adoption of Proposal 12.
    Leprino, as well as the Arizona Farm Bureau, offered comments on 
the recommended decision in favor of maintaining the 0.99 nonfat solids 
yield, as they said it properly reflects a widely attainable NFDM 
yield. In its comment, Select objected to the continuation of the 0.99 
NFDM yield, and reiterated arguments presented at the hearing that the 
value of buttermilk powder should be included.
    This decision maintains that yield factors are not intended to 
represent the value of milk components utilized in various products, 
but rather the quantity of a specific product that can be manufactured 
from a given quantity of milk components. As stated in the recommended 
decision, the NFDM yield factor represents the quantity of NFDM that 
can be produced from one pound of nonfat solids in producer milk. This 
decision continues to find the current NFDM yield factor, and the 
nonfat solids price formula, appropriately represent the value of NFDM 
to the nonfat solids utilized in manufacturing NFDM. This decision 
finds no basis to support the claim that powder manufacturers are not 
paying for solids in the buttermilk powder they produce. To the 
contrary, all nonfat solids entering a plant are accounted and paid for 
at the appropriate use classification. Thus, nonfat solids ending up in 
buttermilk powder are paid for at the nonfat solids price. This is 
similar to other products such as whey protein concentrate (WPC), whose 
other solids are priced at the FMMO other solids price which is based 
on dry whey yields and prices and does not specifically account for WPC 
yields and prices.
    This decision continues to find it appropriate for component price 
formulas to utilize a single product price and an associated make 
allowance and yield factor to determine the value of milk components, 
which can then be used to value the components utilized in all products 
under a given class. Accordingly, this decision continues to find it 
appropriate to maintain the NFDM yield factor of 0.99.

Base Class I Skim Milk Price

    Currently, the base Class I skim milk price, also referred to as 
the ``Class I mover'' or ``mover,'' is the simple average of the 
monthly advanced Class III and Class IV skim milk pricing factors, plus 
an adjuster of $0.74 per cwt. This formula was implemented under the 
2018 Farm Bill, which amended the AMAA to revise the provisions related 
to determining the monthly Class I skim milk price. Public Law 115-334, 
132 Stat. 4490 Sec.  1403. Congress exempted this amendment from the 
formal rulemaking process, and USDA implemented the change through a 
final rule. The formula has been in effect for milk marketed on and 
after May 1, 2019. 84 FR 8590 (March 11, 2019). Prior to the change, 
the base Class I skim milk price was the higher of the advanced Class 
III or Class IV skim milk prices (the ``higher-of''), announced on or 
before the 23rd of the prior month. The higher-of formula had been in 
effect since January 1, 2000.
    Industry stakeholders offered six proposals to amend the Class I 
mover. Proposal 13 would return to the previous higher-of Class I 
mover. NMPF explained the change to the average-of was supported at the 
time by both NMPF and IDFA, as it was intended to be revenue neutral 
for producers and provide Class I processors the ability to utilize 
hedging for risk management.
    IDFA and MIG proposed maintaining the average-of mover but argued 
for different adjuster calculations. Proposal 14, offered by IDFA, 
incorporates an adjuster that resets every January and would be the 
higher of either: (1) $0.74; or (2) the 24-month average difference 
between the higher-of and the average-of the advanced Class III and 
Class IV skim milk pricing factors. The 24-month calculation would run 
from August of three years prior to July of the previous year. For 
example: the 2024 adjuster would have been calculated by subtracting 
the average of the advanced Class III and IV skim pricing factors from 
the higher of the advanced Class III or Class IV skim pricing factor 
for each month of August 2021 through July 2023, then averaging the 
differences of the 24 months. The result for the August 2021 to July 
2023 time period is $0.95, which is higher than $0.74, and thus would 
have been the adjuster effective January 1, 2024, for the calendar 
year. For the month of January 2024, the advanced Class III and IV skim 
pricing factors were $5.74 per cwt and $9.25 per cwt, respectively, 
averaging to $7.50 per cwt. With the addition of the adjuster, the 
January 2024 base Class I skim milk price would have been $8.45 per cwt 
($7.50 + $0.95) under Proposal 14.
    Proposal 15, offered by MIG, incorporates a monthly rolling average 
adjuster calculated as the difference between the higher-of and the 
average-of, for 24 months, with a 12-month lag. For example, the 
adjuster for January 2024 would have been $1.01 per cwt, calculated 
from the 24-month average difference of the higher of the advanced 
Class III or Class IV skim pricing factor less the average of the 
advanced Class III and IV skim pricing factors from January 2021 to 
December 2022. The January 2024 advanced Class III skim pricing factor 
was $5.74 per cwt and advanced Class IV skim pricing factor was $9.25 
per cwt, resulting in an average of $7.50 per cwt. The average-of, with 
the addition of the adjuster, would result in a January 2024 base Class 
I skim milk price of $8.51 per cwt ($7.50 + $1.01) under Proposal 15.
    Edge offered Proposals 16 and 17. The Class I mover in Proposal 16 
would be the announced Class III skim milk price, plus an adjuster 
reflecting the 36-month average of the difference between the higher-of 
the advanced \2\ Class III or Class IV skim milk prices and the 
announced \3\ Class III skim milk price from August of four years prior 
to July of the previous year. The adjuster would be calculated annually 
and be effective January of each year. For example: The adjuster for 
2024 would be $1.64 per cwt, calculated from the 36-month average 
difference of the higher of the advanced Class III or Class IV skim 
pricing factor and the announced Class III skim milk price from August 
2020 to July 2023. The announced Class III skim milk price for January 
2024 was $4.92 per cwt, and with the addition of the adjuster would 
result in a January 2024 base Class I skim milk price of $6.56 per cwt 
under Proposal 16. Proposal 17 would return to the previous higher-of 
calculation. Both Proposals 16 and 17 would eliminate advanced pricing 
for Class I and Class II milk. Edge preferred Proposal 16, stating it 
would facilitate Class I hedging.
---------------------------------------------------------------------------

    \2\ Advanced refers to prices announced on or before the 23rd of 
the prior month.
    \3\ Announced refers to prices announced on or before the 5th of 
the following month.
---------------------------------------------------------------------------

    The AFBF offered Proposal 18, which is nearly identical to Proposal 
17. Both Edge and the AFBF stressed the importance of eliminating 
advanced pricing as a means for limiting price inversions that result 
in significant volumes of milk not pooled.
    NMPF presented testimony describing how the 2019 mover change was 
not revenue neutral, which is why they seek a return to the higher-of. 
NMPF and dairy farmers described volatile markets in response to the 
COVID-19 pandemic. Even as the COVID-19 pandemic has ended, prices have 
remained volatile, and stakeholders opined they expect volatility to 
continue. NMPF witnesses asserted that because of the current formula 
and volatile markets, there is no way for the impact to dairy farmers 
to be revenue neutral in the long term.

[[Page 95519]]

    According to NMPF, an unanticipated consequence of the average-of 
mover is the asymmetric risk borne by dairy farmers. NMPF explained the 
static nature of the $0.74 adjuster means that dairy farmers only 
benefit from the average-of when the difference between the advanced 
Class III and Class IV skim milk prices is less than $1.48. When the 
difference is greater, producers are paid less, sometimes significantly 
less, than they would have been under the higher-of mover. During the 
50-month period from May 2019-June 2023, the average-of mover was lower 
than the higher-of in 27 months. NMPF asserted when the average-of 
exceeded the higher-of, it did so by no more than $0.74, regardless of 
the magnitude of the difference between Class III and Class IV skim 
milk prices. However, when the average-of was lower than the higher-of, 
the reduction could be significantly more than $0.74. NMPF cited 
October 2022 as an example. At that time, the average-of was lower than 
the higher-of by $2.08. According to NMPF, from May 2019 to August 
2023, producers were paid $998.3 million less than they would have if 
the higher-of mover had been in place.
    Both IDFA and MIG asserted their adjusters would result in revenue 
neutrality to producers over time because of regular updates to better 
reflect current market conditions, whereas the current static $0.74 
adjuster reflects market conditions from 2000-2018. IDFA further 
claimed the $0.74 floor contained in Proposal 14 ensures producers 
would receive Class I skim milk prices at least equating to what they 
receive under the current formula. MIG opined a rolling average 
adjuster would provide better dynamic market signals while also 
stabilizing prices through more gradual monthly changes.
    In justifying these methods to continue an average-of mover, IDFA 
and MIG witnesses stressed the importance of maintaining the ability 
for Class I processors to hedge their future prices. The use of an 
average-of mover would allow them to continue to spread risk by taking 
equal positions in the Class III and Class IV futures and options 
markets. IDFA and MIG maintained hedging is a critical tool for certain 
processors, particularly ESL, to remain competitive with alternative 
beverages, such as bottled water, juice, and milk alternatives that do 
not face the same regulatory pricing framework as fluid milk. The 
ability to lock in a future price makes their cost known and allows a 
longer price horizon. They further asserted promoting and growing the 
sale of milk is a goal of the AMAA, which can be achieved using 
hedging. Both proponents explained a processor's ability to hedge is 
not negatively impacted by the adjuster calculation (whether monthly or 
annually), so long as it is announced well in advance. IDFA was 
amenable to either adjuster calculation, so long as the average-of 
mover is maintained.
    Proponents of maintaining an average-of mover argued Congress 
amended the AMAA to facilitate risk management for Class I, and as it 
directed the Department to adopt the average-of mover, the Department 
must now continue that policy and refrain from taking action that would 
inhibit risk management. However, in the 2018 Farm Bill, Congress 
stipulated the average-of mover must be maintained for a period of not 
less than two years, at which time the formula could be modified 
through the standard FMMO amendment process. Congress did not direct 
that risk management consideration must be maintained beyond the two 
years following implementation of the 2018 Farm Bill.
    To evaluate the NMPF claim regarding asymmetric risk, AMS analyzed 
May 2019-December 2023 prices (56 months). The analysis found the 
current average-of mover to be greater than the higher-of mover in 23 
months, resulting in $334 million in additional revenue paid to 
producers in those months. The two movers were equal in 2 months, and 
in the remaining 31 months, the average-of mover was less than the 
higher-of mover, resulting in $1.4 billion less in revenue paid to 
producers in those months than would have been without the mover 
change. The net result to dairy farmers during those 56 months was 
negative $1.066 billion. Further, in months when the average-of was 
more than the higher-of mover, the difference was never greater than 
$0.74 and, mathematically, could never be greater than that amount 
under the current average-of system. However, in months when the 
average-of was less than the higher-of mover, the difference was as 
great as $5.19. This analysis supports NMPF's assertion of the 
asymmetric risk borne by producers under the current mover calculation.
    The record reveals the $0.74 static adjuster was adopted because, 
at the time, it represented the additional value paid to producers 
through the higher-of versus what would have been the average-of mover 
from 2000-2017. Evidence shows $0.74 is no longer representative of the 
additional higher-of value to producers as Class III and IV prices have 
become significantly more divergent in recent years. A comparison of 
advanced Class III skim and Class IV skim milk prices from January 
2000-April 2019 and from May 2019-December 2023 illustrates the 
increased volatility. From January 2000-April 2019, when the Class I 
skim milk price was determined by the higher-of mover, the monthly 
difference in advanced prices ranged from $0 to $6.77. From May 2019 
through December 2023, the range was $0 to $11.86, equating to an 
increase of slightly more than 75 percent.
    Testimony described rapidly changing Class III and IV prices 
resulting not only in months when the Class I mover was significantly 
lower than it would have been under the higher-of formula, but times 
when the Class I price (announced before the month) was less than the 
Class III and/or Class IV price (announced after the month). As 
handlers have the option to pool Class III and Class IV milk, this 
price inversion led to many months when the higher-valued manufacturing 
milk was not pooled. Testimony on the record described several 
consequences: (1) manufacturing handlers opted out of pool 
participation, keeping the higher market revenue instead of sharing it 
with all pooled producers; (2) instances when a manufacturing handler 
opted out of pool participation, and the historically high market 
revenue was not shared with their own producer suppliers; and (3) 
significant disparity in payments to pooled and nonpooled producers in 
some months.
    Testimony detailed the conditions in 2020 when the demand for 
cheese relative to butter rapidly widened the spread between Class III 
and Class IV Prices. For example, the base Class I skim milk price for 
June 2020 (announced May 20, 2020) was $7.08 (based on an $6.68 
advanced Class III skim milk price and an $5.99 advanced Class IV skim 
milk price). Cheese prices rose rapidly during the month, resulting in 
a $15.06 Class III skim milk price and $6.62 Class IV skim milk price. 
According to record evidence, high volumes of Class III milk were not 
pooled in order to avoid paying the higher valued Class III price into 
the marketwide pool.
    Record data reveals a significant increase in the estimated volume 
of milk not pooled in 2020 and 2021, which NMPF attributed to price 
volatility. Data shows milk volumes not pooled in 2020 and 2021 were 
approximately 60 percent greater than in 2019. Testimony and evidence 
pointed to pronounced price volatility being considered the norm, not 
the exception, going forward.
    Record evidence also shows how the lower average-of mover value 
resulted in muted blend prices in some regions

[[Page 95520]]

of the county, making it difficult to attract milk supplies for fluid 
use. This was particularly a concern in the southeastern FMMOs which 
experienced a disproportionate reduction in blend prices relative to 
other FMMOs because of their high Class I utilization. Testimony 
described how blend prices between the Southeast FMMO and nearby orders 
narrowed, making it difficult to attract supplemental milk to meet the 
fluid demand in the milk deficit region.
    During Order Reform, the Department considered numerous options for 
determining Class I prices as it evaluated an appropriate Class I 
pricing system. In the Order Reform recommended decision, several 
variations of an average mover were considered, including a moving 
average and a declining average weighted most heavily by the current 
month's price, along with a higher-of option based on the second 
preceding month's prices. When considering its recommendation, the 
Department evaluated each option's ability to improve price stability 
while maintaining appropriate producer price signals to ensure an 
adequate supply of milk for fluid use.
    The Department initially recommended a 6-month declining average of 
the higher-of the Class III and Class IV skim milk prices. The goal was 
to ``decrease monthly Class I price volatility while minimally 
affecting the long-run price.'' 63 FR 4802, 4886 (Jan. 30, 1998). 
Analysis of that option compared to the higher-of option showed only a 
two-cent difference based on data from 1992-1997, thus supporting the 
notion an average-of price would not impact prices in the long run. 
Public comments in response to the recommended decision cautioned the 
Class I price should be closely and directly linked to manufacturing 
prices. Commenters opposed a six-month declining average because it 
would delay the linkage with the Class I price, resulting in counter-
cyclical pricing--something noted in the final decision, which stated 
that, for example, if Class I prices are undervalued, ``it reduces 
producers' pay prices at a time when the producers should be receiving 
a positive price signal.'' 64 FR 16026, 16102 (Apr. 2, 1999). Analysis 
conducted for the Order Reform final decision evaluated prices post-
1998 and found using a 6-month average mover during times of increased 
price volatility would have led to price inversions. The decision 
explained how price inversions could lead to depooling under which 
disorderly marketing conditions may arise. As a result, the final 
decision also articulated, on the same page as the most recently noted 
quotation, ``because handlers compete for the same milk for different 
uses, Class I prices should exceed Class III and Class IV prices to 
assure an adequate supply of milk for fluid use.'' Accordingly, the 
final decision recommended the higher-of mover which remained in place 
until May 2019.
    Record evidence clearly shows that the price inversions and 
depooling predicted in the Order Reform final decision occurred after 
the average-of mover was implemented in 2019. The principle of 
maintaining a proper link between Class I and manufacturing prices to 
avoid price inversions and depooling remains an important consideration 
in evaluating change to the Class I mover in this rulemaking.
    Proponents offering modifications to the average-of mover 
acknowledge price inversions and depooling have occurred with greater 
frequency and duration. However, they maintain hedging is a critical 
risk management tool that should be preserved and cannot be achieved 
using the higher-of mover. Record evidence highlights that although 
both HTST and ESL are fluid milk products, there are notable 
differences between HTST and ESL processing and sales. ESL products 
require unique processing techniques and packaging that significantly 
increase product shelf-life. The record indicates ESL products have a 
shelf-life of at least 65 days; some ESL processors stated their 
products have a shelf-life of 120 days or more.
    ESL processors described marketing differences between the two 
types of products. ESL products: (1) have a longer shelf-life which 
facilitates a wider distribution; (2) are typically shipped to 
centralized retail warehouses (distribution centers) and from there are 
distributed to individual stores by the store owners; and (3) are sold 
to retail customers who prefer long-term contracts and a long lead time 
for any price changes, often 60-90 days or more. This is significantly 
different than HTST products that: (1) have a significantly shorter 
self-life (common range is 14-21 days) necessitating more local 
distribution; (2) are typically distributed through direct-store-
delivery (DSD); and (3) whose retail customers are accepting of FMMO 
Class I prices that vary monthly.
    ESL processors explained the average-of mover has enabled them to 
meet customer demand for long-term price-fixed contracts by using the 
futures and options market to hedge the risk associated with changes in 
monthly FMMO Class I prices. They credit the ability to manage risk as 
a factor in the growth of ESL products. Before adoption of the average-
of mover, processors of ESL products took on a significant amount of 
price risk to meet the long-term, fixed price contracts required by 
customers because they had no way of knowing when they negotiated 
contracts whether the advanced Class III or Class IV price would become 
the base Class I skim milk price. The record contains no similar 
evidence that HTST processors face the same constraints. In fact, 
record evidence shows advanced Class I pricing with monthly sales 
negotiations was, and remains, standard practice for these products.
    Given all the record evidence, this decision must determine the 
best method for determining Class I skim milk prices that ensure 
adequate fluid milk supplies and orderly marketing conditions. The 
earlier discussion of record evidence clearly highlights the disorderly 
marketing conditions that occurred as a result of the average-of mover. 
However, when considering how to provide for more orderly marketing 
conditions, this decision cannot ignore how the Class I market has 
evolved since 2000.
    Prior to FMMO Reform, fluid milk products were almost exclusively 
HTST, which have a shorter shelf-life and move from farm to retail in a 
relatively short time. Advanced pricing ensures equity among fluid milk 
handlers, allowing them to know their regulated minimum raw milk cost 
at the time they negotiate prices with their buyers and ensure equal 
raw milk cost between similarly situated handlers.
    The record reflects significant development and growth of ESL 
products since Order Reform. The record also highlights marketing ESL 
products is significantly different than HTST products. Evidence shows 
the different distribution pattern (warehouse v. DSD) and longer shelf-
life (65-120 days) facilitates wider geographic, rather than local, 
marketing and distribution. In addition, it is common for competing ESL 
products being sold in the same month to have been processed during a 
range of previous months. As a result, processors of ESL products do 
not necessarily have the same regulated minimum raw milk prices for 
products sold during the same month. This undermines handler equity 
between processors of ESL products as they do not have equal raw milk 
costs for products competing for sales in the same month. This decision 
supports a hybrid solution that will ensure adequate supplies of milk 
for fluid use, while also accounting for the inequities between 
processors of ESL products.

[[Page 95521]]

    FMMOs are tasked with ensuring minimum prices reflect supply and 
demand conditions, which is accomplished, in part, through weekly 
surveys of wholesale bulk commodity products. Weekly survey prices 
provide signals to market participants on the changing value 
relationships between dairy product markets. FMMOs do not control those 
market-based relationships. As monthly average prices are determinants 
of Class III and IV prices, it is expected there will be periods when 
Class III values will be higher, and other times when Class IV values 
will be higher. Under a monthly pricing system that allows for 
voluntary pooling of manufactured milk and advanced Class I pricing, 
there will be occasions when these value differences are large enough 
to have price inversions and/or incentivize handlers to not pool milk 
during a particular month. The record clearly shows such situations 
occurred prior to May 2019. However, record data highlights the shift 
in duration and magnitude of these occurrences since the average-of 
mover was adopted. The record reveals large and prolonged value 
differences can cause significant differences in pay prices between 
producers and reduced willingness to supply the Class I market. The 
record of this proceeding supports returning to the higher-of Class I 
mover for HTST products. The higher-of would provide a better link 
between Class I and manufacturing prices and better ensure Class I 
prices remain the highest to bring forth an adequate supply of fluid 
milk. Therefore, this decision continues to recommend adoption of 
Proposal 13 for HTST fluid milk products.
    AMS received 29 comments that specifically supported a return to 
the higher-of mover. Comments in support of the higher-of mover were 
submitted by: NMPF; Select; AFBF; ADC; the state Farm Bureaus of 
Arizona, Michigan, New York, Michigan, Wisconsin, Minnesota, and 
Tennessee; Georgia Milk Producers, Inc.; Northeast Dairy Producers 
Association (NDPA); National Family Farm Coalition; Farm Women United; 
and 15 individual dairy farmers. Seven commenters, including NMPF, ADC, 
NDPA, and four individual dairy farmers, expressed the higher-of keeps 
dairy markets more orderly. NDPA noted the return to the higher-of 
would have an immediate positive impact on farmers. The Wisconsin and 
Minnesota Farm Bureaus commented the higher-of often provided better 
financial returns to farmers in the past. One dairy farmer praised a 
return to the higher-of, arguing its removal in 2019 decreased revenue.
    In its comment, AFBF reiterated arguments that the return to the 
higher-of is critical for ensuring dairy farmers receive fair and 
adequate compensation for their milk, especially in the face of 
volatile market conditions. AFBF continued to argue that most fluid 
milk processors have not increased or even begun the use of hedging, 
which was the intent of adoption of the average-of mover. The Michigan 
Farm Bureau commented that a return to the higher-of would better 
reflect current market conditions and improve overall pricing for 
farmers. Georgia Milk Producers, Inc., stated the return to the higher-
of is critical to the success of its producers, who were 
disproportionately impacted by the change to the average-of mover. A 
dairy farmer commenter advocated for a simple and stable price program 
that uses the higher-of.
    CDC and two dairy farmers specifically requested the higher-of 
mover alone, without the proposed ESL adjustment, apply to all Class I 
milk. AFBF; the state Farm Bureaus of Arizona, Florida, New York, and 
Tennessee; and the two dairy farmers requested a return to the higher-
of on an expedited basis.
    In their comments on the recommended decision, MIG and Crystal 
Creamery opposed a return to a higher-of Class I mover. MIG reiterated 
its hearing testimony that the return to the higher-of on HTST milk 
prohibits effective hedging.
    This decision continues to find that returning to the higher-of 
mover for ESL products would deepen the pricing inequity that naturally 
exists for those products, as described earlier. For example, under the 
higher-of mover, a handler processing and selling an ESL product in 
January 2023 would have faced a base Class I skim milk price of $11.62 
per cwt. However, handlers who processed ESL products two or four 
months before, which are also being sold in January 2023, would have 
faced a base Class I skim milk price of $12.61 and $13.82 per cwt, 
respectively. This results in a difference of base raw milk costs of up 
to $2.20 per cwt for ESL products competing for sales during January 
2023.
    Given the marketing characteristics of ESL products, short of 
providing for fixed minimum prices, price differences between these 
competing products will always exist. However, this decision strives to 
recognize the evolution of the ESL market since Order Reform with a 
pricing structure for ESL products that would narrow differences, make 
them more predictable, and provide for more orderly marketing 
conditions.
    This decision continues to find pricing differences would be 
reduced through adoption of a Class I ESL adjustment that would equate 
to a Class I price for all ESL products equal to the average-of mover 
contained in Proposal 15. The recommended Class I ESL adjustment would 
provide more long-run pricing equity for ESL product by better ensuring 
handlers whose ESL products compete for sales during the same month, 
but whose raw milk may have been purchased and processed during 
different time periods, have more similar costs.
    This decision continues to find adoption of the higher-of mover and 
Class I ESL adjustment appropriate to provide for more orderly 
marketing and better ensure price equity for handlers of similar Class 
I products. As set forth in the recommended decision, the higher-of 
Class I mover would be announced on or before the 23rd of the prior 
month. A Class I ESL adjustment would be announced at the same time and 
equal the difference between the higher-of mover and the average-of the 
advanced Class III and Class IV skim pricing factors plus a rolling 
monthly adjuster. The rolling monthly adjuster would be calculated as 
the average of the differences between the higher-of and the average-of 
calculations for the prior 13 to 36 months and could be positive or 
negative.
    The recommended decision described milk subject to the ESL 
adjustment as all milk used in ESL products with a shelf-life no less 
than 60 days, regardless of the type of Class I plant in which they are 
made.\4\ This decision continues to propose an ESL adjustment that 
would be added to or subtracted from the handler's pool obligation 
applicable to the amount of milk used in ESL products. The rolling 
adjuster would be computed in advance and announced on or before the 
23rd of the month 12 months in advance of its application (i.e., 
January 2023 rolling adjuster would have been announced on or before 
December 23, 2021).
---------------------------------------------------------------------------

    \4\ 1xxx.7(a) or 1xxx.7(b).
---------------------------------------------------------------------------

    For example, the advanced Class III and IV skim pricing factors for 
January 2023 were $9.54 per cwt and $11.62 per cwt, respectively.
     The average-of the two factors (applicable to ESL milk) 
would have been $10.58 plus the rolling adjuster reflecting the average 
of the differences between the higher-of and the average-of from 
January 2020 to December 2021 ($1.58 per cwt), for a total of $12.16 
per cwt.

[[Page 95522]]

     The higher-of mover (applicable to HTST milk) would have 
been $11.62 per cwt.
     The January 2023 Class I ESL adjustment would have been 
$0.54 ($12.16 - $11.62), calculated by subtracting the higher-of 
announced price from the average plus rolling average calculation.
    The effect of the adjustment would be a base Class I skim price for 
HTST milk of $11.62, and an effective base Class I skim milk price for 
ESL milk of $12.16. While this example computes a positive adjustment 
resulting in a higher effective price for ESL milk, it is to be 
expected in some months the adjustment will be negative, resulting in a 
lower effective price. The objective of the ESL adjustment is not to 
create a higher or lower effective Class I price, but rather to reduce 
the range of base Class I skim prices paid for milk used in ESL 
products being sold during a month. Evidence on the record indicates 
the Class I ESL adjustment would tend to moderate the price highs and 
lows, thus providing improved price equity between handlers of ESL 
products. The record indicates ESL products represent approximately 8 
to 10 percent of the Class I market and would be subject to the Class I 
ESL adjustment.
    Comments to the recommended decision submitted by Select, Edge, 
Nestle, IDFA, and MIG supported the inclusion of the ESL adjustment as 
part of the Class I mover. MIG and IDFA further advocated for 
implementation of a base Class I skim milk price that supports risk 
management for all Class I milk products, not only ESL products. Both 
groups expressed that all Class I processors should benefit from the 
new formula, which they maintained is revenue-neutral with the higher-
of formula over time.
    In its comment, MIG stated the ESL adjustment would allow 
processors of ultra-pasteurized or aseptically processed and packaged 
fluid milk to continue to hedge price risk. MIG credited use of an 
average-of formula with allowing ESL processors to offer stable 
pricing, which in turn allows ESL products to more effectively compete 
with non-dairy alternatives including plant-based beverages.
    Select stated the ESL adjustment would accommodate the expressed 
desire of handlers of ESL products to hedge their raw milk costs while 
providing dairy farmers the necessary stability of an overall higher-of 
Class I mover. Nestle opined the average-of formula utilized in the ESL 
adjuster provides holistic solutions for the industry and provides 
dairy farmers with assurances on the sale of their product before the 
milk is produced. These factors, Nestle wrote, create pricing stability 
for both retailers and end consumers.
    Many comments submitted expressed support for a return to the 
higher-of mover, but either opposed inclusion of the Class I ESL 
adjustment or expressed concern the provision could be abused. NMPF, 
AFBF, Michigan Farm Bureau, ADC, and seven individual dairy farmers 
stated the milk to which the ESL adjustment would apply was not well 
defined in the recommended decision, or that ESL itself was not clearly 
defined. Three commenters noted that the parameters of an ESL product 
are vague, including the recommended use of shelf-life to define 
qualifying products. NMPF, AFBF, Michigan Farm Bureau, Upstate Niagara, 
and an individual dairy farmer expressed concern that handlers could 
potentially abuse or manipulate the system, for example, by labeling a 
product with a shelf life of 59 days to benefit from a lower mover 
price when it is advantageous to do so. Such scenarios, AFBF noted, 
create a risk of inconsistent application and the potential for market 
distortions.
    AFBF, Michigan Farm Bureau, Upstate Niagara, and five individual 
dairy farmers expressed concern that the inclusion of the ESL 
adjustment creates a potential for handlers to take advantage of the 
ESL adjustment by opting in or out of an adjustment on a monthly basis 
when favorable. Some commenters expressed concern over handlers 
attempting to qualify milk for the more favorable mover in a month in 
order to reduce payments to producers, likening it to depooling. AFBF 
and other commenters noted the possible range of a 95-cent reduction to 
a $1.18 increase per cwt difference in base Class I price creates an 
incentive for handlers to take advantage of the system.
    Several commenters, including NMPF, requested a clear definition of 
ESL products based on processing characteristics, not product or 
marketing characteristics such as shelf life. While the recommended 
decision highlighted the marketing characteristics of ESL, including 
the significantly longer shelf-life, the record reflects it is the 
processing technique that enables ESL products to have these marketing 
characteristics which facilitate wider distribution, shipping to 
centralized retail warehouses before distribution to individual stores, 
and most often, long-term sales contracts. In recognition of the 
possibility the ESL adjustment may be abused by adjusting the shelf 
life of a product as highlighted in the comments received, this 
decision finds it appropriate to rely solely on the definition of the 
processing technique to define milk eligible to receive the ESL 
adjustment. While it is an industry term to refer to ESL products, the 
method of achieving ESL is accomplished through specific temperature 
and time thresholds which are contained in the ultra-pasteurized 
definition. As described in the Pasteurized Milk Ordinance, the process 
of ultra-pasteurization involves heating milk ``at or above 138 [deg]C 
(280 [deg]F) for at least 2 seconds . . . so as to produce a milk or 
milk product, which has an extended shelf-life under refrigerated 
conditions.'' This process of obtaining ESL products is to what 
witnesses testified. Accordingly, this decision finds it appropriate 
that ultra-pasteurized milk as defined in 21 CFR 131.3(c) would receive 
the ESL adjustment. The regulatory definition also encompasses 
aseptically packaged milk products, as the process of aseptic packaging 
requires milk to first be ultra pasteurized. As a provision defining a 
shelf-life threshold was not part of the original proposed order 
language, no changes to the proposed order language are necessary.
    AFBF, Michigan Farm Bureau, and Upstate Niagara expressed concern 
about the potential for the ESL adjustment to set precedent for other 
types of adjustments for marketing claims for various production 
practices at the farm level. The proposed ESL adjustment would apply to 
a specific processing technique at the plant which the record 
demonstrates results in market characteristics that differentiate ESL 
products from HTST products.
    NMPF requested clear guidance on how handlers report and account 
for Class I milk to ensure handlers cannot take advantage of the ESL 
adjustment by only applying it when advantageous. In its comment, ADC 
requested qualifying Class I fluid products remain with the ESL 
designation to avoid opportunistic use of the ESL adjustment that could 
reduce pool payment obligations. Several other commenters requested a 
review process be incorporated into the ESL adjustment provisions. 
Upstate Niagara commented many plants have the capacity to process both 
HTST and ESL products and expressed concern whether the Department 
would be able to prevent plants switching the type of processing for a 
pricing advantage.
    This decision clarifies that the ESL adjustment would apply to all 
ESL milk meeting the ultra-pasteurized definition. Current handler 
reporting provisions in the regulations require handlers that process 
skim milk classified under 7 CFR 1000.44, both ultra-pasteurized and

[[Page 95523]]

HTST, to report monthly utilization for Class I utilization as defined 
in Sec.  1xxx.30(a). Handlers report the type of product, how much 
product is sold or distributed within, and outside, the marketing area, 
as well as any other information pertaining to milk receipts and 
utilization the Market Administrator requires. If the ESL adjustment is 
adopted, handlers would report HTST and ESL products separately, 
ensuring accurate handler utilization is accounted for.
    The FMMO program has a robust component that audits all handler 
reports filed with the Market Administrator. As part of an ESL 
handler's audit plan, FMMO auditors would review and verify handler 
records currently maintained under 7 CFR 1000.27(a) to ensure the raw 
milk was processed using ultra-pasteurized equipment, in accordance 
with the reported utilization. FMMO auditors would use documents such 
as pasteurization reports and State health department inspection 
records identifying equipment used for processing as verification.
    Handlers producing ESL products would not determine when the Class 
I ESL adjustment would apply. The Class I ESL adjustment would apply 
automatically to milk used in ESL products. Handlers found misreporting 
ESL milk would be subject to an audit adjustment to the FMMO Producer 
Settlement Fund, as well as any other remedies authorized by current 
regulations.
    Upstate Niagara; AFBF; the state Farm Bureaus of Arizona, Georgia, 
and Michigan; the Kentucky Dairy Development Council; Pennsylvania 
Association of Milk Dealers (PAMD); CDC; and 10 individual dairy 
farmers claimed the recommended ESL adjustment was not discussed or 
evaluated at the hearing, and no justification was presented. The 
Michigan Farm Bureau commented no testimony specifically supporting 
this type of adjustment was offered during the hearing process, making 
it difficult to recognize the necessity of its inclusion.
    The commenters expressed concern that the impact of the package of 
proposed changes to the Class I mover provisions was not fully 
analyzed. Several expressed concern the proposed adjustment could have 
unintended consequences similar to those resulting from the 
Congressionally mandated change to the average-of mover in 2019. 
Upstate Niagara commented that as the percentage of ESL products in the 
market grows, the ESL adjustment would apply to an increasing volume of 
milk. As a result, Upstate Niagara claimed, while the adjuster could 
mute price volatility over the long term for processors, it could also 
impact FMMO pools and producer pay in real-time.
    Two commenters, PAMD and Upstate Niagara, claimed that because the 
combination of higher-of and ESL adjuster proposal was not specifically 
discussed at the hearing, the outcome was not properly noticed. The 
PAMD, a group representing fluid milk processors that own 14 processing 
plants located in and around Pennsylvania, opposed the return to the 
higher-of mover with the ESL adjustment. PAMD stated had the idea been 
noticed, it would have presented opposing evidence at the hearing. 
Additionally, PAMD argued the same advantages of less volatility and 
the opportunity to engage in risk management should apply to HTST 
processors as well as ESL processors in order to avoid competitive 
issues that would occur.
    As set forth in the hearing notice, the base Class I skim milk 
price was open for testimony and evidence to be offered on the record 
for amendments. All FMMO regulated handlers received notice that 
changes to how milk in Class I products was priced were being 
considered. The recommended Class I mover is a combination of two 
proposals noticed and examined through testimony at the hearing. While 
the mechanics of adding an ESL adjustment to a higher-of mover are 
slightly different than proposals presented, the record contains 
extensive testimony and evidence on the processing and marketing of 
HTST and ESL products. Based on this evidence, this decision continues 
to find the recommended mover best promotes orderly marketing.
    AFBF, Michigan Farm Bureau, ADC, and seven individual dairy farmers 
claimed the recommendation of a higher-of mover in combination with an 
ESL adjustment creates a ``fifth'' or ``new'' class of milk. Upstate 
Niagara, AFBF, the state Farm Bureaus of Arizona and Michigan, ADC, and 
four individual dairy farmers stated that the addition of an ESL 
adjustment introduces significant complications to an already complex 
Class I pricing system. AFBF and Michigan Farm Bureau commented the ESL 
adjuster creates a dual pricing system and adds an additional layer of 
complexity to an already intricate system. Some commenters asserted the 
proposed Class I mover provisions would likely create disparities 
between processors operating at the same location and undermine the 
FMMO principle of uniform prices.
    Edge maintained the adjustment does not create a new classification 
of milk but is an innovative approach to allow ESL handlers the ability 
to continue to use risk management in a changing industry.
    Fluid milk products are defined in the current regulations as ``. . 
. any milk products in fluid or frozen form that are intended to be 
used as beverages containing less than 9 percent butterfat and 6.5 
percent or more nonfat solids or 2.25 percent or more true milk protein 
. . .'' 7 CFR 1000.15(a). Milk used in both HTST and ESL products meets 
this definition of a fluid milk product and, therefore, a new or 
separate class of milk is not being proposed. Inclusion of the ESL 
adjustment to the Class I mover reflects the substantial record 
evidence demonstrating the unique ultra-pasteurization milk product 
characteristics warranting recognition in the pricing provisions. The 
ESL adjustment to a handler's pool obligation meets current needs of 
the industry seeking to update the price formula provisions to reflect 
current market conditions. While the adjustment adds a new component to 
the Class I mover, the Department calculates the Class I base price and 
an ESL handler's adjustment. Handlers already report to the Department 
the types of products they distribute and would not incur any new 
reporting as a result of the ESL adjustment.
    In its comment, NMPF noted that until 36 months after 
implementation, some or all of the look-back calculation for the ESL 
adjuster would be based on the announced Class III and Class IV skim 
milk pricing factors prior to the regulatory changes stemming from this 
proceeding. NMPF requested in its comment the prices used to compute 
the rolling adjuster prior to the implementation of the Final Rule be 
recalculated based on the regulatory changes proposed in this 
rulemaking. The record does not contain evidence explaining why 
historical prices should be recalculated. Therefore, this decision does 
not find is appropriate to recalculate the look-back portion of the ESL 
adjuster with updates for other amendments to the FMMOs.
    In its comment opposing a return to the higher-of, Crystal Creamery 
maintained the higher-of mover would provide no financial value to 
mandatorily pooled handlers and would not incentivize service to the 
Class I market. Further, Crystal Creamery argued, the higher-of would 
distort market signals and cause greater imbalances in manufacturing 
markets, leading to disorderly marketing and increased prices to 
consumers. Crystal Creamery reiterated a return to the higher-of would 
incentivize the lower-

[[Page 95524]]

value manufacturing class milk to remain pooled because of the payment 
it receives from the producer settlement fund as a result of marketwide 
pooling.
    Marketwide pooling is a cornerstone of the FMMO program. As the 
record reveals, dairy farmers sell milk to a wide variety of handlers 
whose products have distinctly different supply, demand, and market 
conditions. Marketwide pooling provides for more orderly marketing by 
ensuring a minimum uniform price is paid to producers whose milk is 
used in distinctively different products, thus preventing destructive 
competition among producers. While some commenters allege the higher-of 
will cause disorderly marketing, the evidentiary record shows the 
adoption of the higher-of would result in greater value differences 
between Class I and manufacturing prices for shorter time periods, 
leading to fewer and smaller price inversions, less depooling, and more 
orderly marketing conditions.
    An individual dairy farmer commented the ESL adjustment would 
incentivize a large spread between Class III and Class IV in the short 
term, resulting in increased price volatility between ESL and HTST 
milk, against the intended purpose of FMMOs. The farmer claimed pricing 
Class I milk using two formulas could result in periods where the price 
for one product is increasing month-to-month while the other is 
decreasing, depending on the direction the adjuster moved.
    This decision does not find use of an ESL adjustment would 
incentivize large Class III and Class IV price spreads. The record of 
this proceeding reveals that farm milk used to produce products in each 
of the four classifications have distinct supply and demand conditions. 
The record does not contain evidence to support the implication that 
manufacturers of dairy products, the majority of which do not 
manufacture ESL products, would make business decisions to gain an 
advantage in the fluid market where they do compete.
    In its comment, MIG requested two changes to the proposed order 
language. MIG first requested a reference be added to the proposed 
Class I ESL adjustment in section 1000.50(r) to refer to section 
1000.43(e) General classification rules, in order to link the pricing 
provision and eligible Class I milk. This decision does not find this 
change necessary because section 1000.43(e) is referenced in the 
section 10xx.60(i) Handler's value of milk. The reference in section 
10xx.60(i) provides the requested link between the eligible Class I 
milk and the pricing provision.
    MIG also requested clarifying language be added to section 
1xxx.60(i) that the ESL adjustment may be a positive or negative value. 
This decision finds such technical change warranted but finds the 
clarifying clause more appropriate in section 1000.50(r). The language 
is contained in the proposed regulations below.
    This decision also continues to propose maintaining advanced Class 
I pricing. Proponents of Proposals 16, 17, and 18 argued advanced 
pricing should be eliminated to prevent short term inversions between 
the monthly Class I price and Class III and/or IV prices, and 
subsequent incentives for depooling. In their comments, AFBF, and the 
state Farm Bureaus of Arizona, Michigan, and New York expressed 
disappointment this decision did not eliminate advanced pricing. 
Commenters reiterated arguments in testimony that advanced pricing has 
contributed to discrepancies in milk prices, has increased price 
volatility, and has caused price inversions and depooling, resulting in 
lower payments to pooled producers. Eliminating advanced pricing would 
mitigate these issues, commenters argued, by improving class alignment.
    Opponents, both independent and cooperative Class I processors 
along with a majority of producers, supported the continued use of 
advanced pricing. As discussed previously, advanced Class I pricing 
provides equity to regulated Class I processors by informing them of 
their regulated minimum raw milk cost in advance of the sale of their 
product. This ensures all dairy processors have an opportunity to align 
their raw milk costs with the sale prices of their products, which are 
generally negotiated before the start of the month. In the case of 
Class I products and the nonfat solids portion of Class II products, 
this alignment is facilitated by advanced pricing. Accordingly, 
Proposals 16, 17, and 18 are denied.

Class I and Class II Differentials

a. Class I Differentials
    The current Class I price structure was developed during the Order 
Reform process when Congress directed the Department to review the 
Class I price structure as part of larger FMMO consolidation efforts. 
Federal Agriculture Improvement and Reform Act of 1996, Public Law 104-
127, 110 Stat. 888. As stated in the recommended decision, the 
Department considered several objectives when determining an 
appropriate Class I price surface, including: being national in scope, 
while also accounting for local and regional conditions; recognizing 
the location value of milk; recognizing all uses of milk; and meeting 
AMAA requirements. The Department met AMAA requirements governing 
classified pricing by ensuring the price surface would ``reflect enough 
of the milk value to maintain sufficient revenue for producers to 
maintain an adequate supply of milk and provide equity to handlers with 
regards to raw product costs.'' 64 FR 16026, 16109 (Apr. 2, 1999).\5\ 
The Class I price surface adopted on January 1, 2000, met those 
objectives.
---------------------------------------------------------------------------

    \5\ Order Reform Final Decision.
---------------------------------------------------------------------------

    Class I milk pricing consists of two pieces: the base Class I mover 
applied uniformly to all Class I milk (as discussed previously) and a 
location specific differential which represents the value of milk at a 
specific plant location. The differentials provide producers a 
financial incentive to supply the Class I market, which tends to be 
closer to the population centers, rather than delivering milk to a 
manufacturing plant typically closer to the farm. The location specific 
differential consists of two parts: a base value (also referred to as 
the ``base differential'') applied uniformly to all Class I milk, and a 
location value.
    The base differential is currently $1.60 per cwt, representing 
three costs whose values were determined to reflect market conditions 
during the late 1990s. First, the cost of maintaining Grade A farm 
status ($0.40) which includes costs associated with the labor, 
resources and utility expenses for maintaining required equipment and 
facilities, and adherence to certain management practices. Second, 
marketing costs (also referred to as balancing costs) ($0.60) which 
include, among other things, the costs associated with seasonal and 
daily reserve balancing of milk supplies and transportation to more 
distant processing plants. Lastly, a competitive factor ($0.60) is 
included to represent a portion of the competitive costs incurred by 
fluid plants to compete with manufacturing plants for a milk supply.
    The location values were developed during the Order Reform process 
through an analysis conducted with the USDSS model, maintained at the 
time by Cornell University. The USDSS model was used to evaluate the 
geographic or ``spatial'' value of milk and milk components across the 
U.S. under the assumption of efficient markets. The model used 240 
supply locations, 334 consumption locations, 622 dairy processing plant 
locations, 5 product groups, 2 milk components, and transportation and 
distribution costs among all locations to determine

[[Page 95525]]

mathematically consistent location values for milk and components. 
Model results provided county-specific information regarding the 
relationship of prices between geographic locations based on May and 
October 1995 data.
    Since adoption on January 1, 2000, only differentials in the 
Appalachian, Florida, and Southeast FMMOs have been amended. The 
amendments, effective May 1, 2008, were the result of a region-specific 
rulemaking evaluating transportation costs in servicing those milk 
deficit orders 73 FR 14153 (Mar. 17, 2008).
    The record reflects consensus among hearing participants that the 
dairy marketplace has evolved significantly over the past 25 years. 
However, there remains strong disagreement on how the market changes 
should be interpreted and recognized in the Class I differentials. The 
producer community argued Class I differentials no longer reflect the 
cost of servicing fluid milk demand and should be updated to reflect 
the current structure and significantly higher transportation costs 
through adoption of Proposal 19. The processing and manufacturing 
community argued certain cost factors contained in the differentials 
are no longer relevant and should be eliminated through adoption of 
Proposal 20. They stressed that if the costs of servicing the Class I 
market exceed those of the proposed reduced Class I differential 
values, they can be negotiated between buyers and sellers through over-
order premiums.
    Proposal 19 would increase the Class I differentials based in part 
on updated USDSS model results reflecting the current dairy market 
structure and transportation costs. NMPF witnesses explained model 
result averages were the foundation of their deliberations, and 
deviations were made to account for a variety of factors they believed 
were not accounted for, including producer price impacts, competitive 
relationships, blend price alignment, private supply arrangements, and 
unique local market conditions such as traffic or geography. Although 
NMPF began with results from a mathematical model, the process 
thereafter was primarily subjective. They started by selecting a series 
of cities, which they called ``anchor cities,'' to represent areas 
which bordered multiple FMMO regions. Then, regional committees 
adjusted model-derived location values to better align location values 
and reflect local marketing and transportation conditions within their 
region, respecting the anchor cities as starting points. NMPF combined 
the independently derived regional results and made further refinements 
to ensure smooth pricing transitions between the regions. Ultimately, 
NMPF proposed the lowest differential increase from $1.60 per cwt to 
$2.20 per cwt. NMPF maintained the cost factors provided for in the 
base differential value remain relevant and presented testimony from 
member cooperatives that such costs have increased.
    Opposition to Proposal 19 centered on several areas. First, 
opponents argued there is more than an adequate supply of milk 
nationally to meet Class I needs, therefore, adoption of Proposal 19, 
or any increase to Class I differentials, is not warranted. Second, 
opponents contended raising Class I prices would be disorderly because 
it would further decrease already declining Class I consumption and, 
they argued, the FMMO objective of ensuring adequate milk supplies 
implies FMMOs should adopt provisions that encourage Class I 
consumption. One such opponent presented an econometric study which 
found fluid milk demand is elastic, concluding that increasing Class I 
prices would decrease consumption and violate FMMO objectives. Third, 
opponents took exception to NMPF's proposal development process and 
what they considered a lack of unifying principles used to adjust the 
USDSS model results, believing NMPF had failed to provide cost 
justification for maintaining a base differential. Independent fluid 
milk processors further argued the entire development process led to 
results with a favorable bias towards NMPF member-owned plants. Lastly, 
organic milk processors and some organic cooperatives argued organic 
milk should not be treated similarly to conventional milk in the FMMO 
program because it has different and unrelated market structures. In 
its post-hearing brief, MIG reiterated its position on organic milk and 
further argued that because NMPF did not demonstrate that current Class 
I differentials create disorderly marketing conditions the evidentiary 
threshold for increasing differentials had not been met.
    MIG offered Proposal 20, which would lower the base differential 
value to $0.00, contending FMMO Class I prices are too high and have 
resulted in an oversupply of milk that they believe is disorderly. 
According to MIG, there is more than an adequate supply of milk to meet 
fluid demand. Given 99 percent of U.S. milk production meets Grade A 
standards, MIG argued compensation for Grade A maintenance is already 
provided for in manufacturing milk prices and, therefore, the $0.40 
Grade A factor is no longer justified.
    Additionally, MIG member testimonies detailed efforts they have 
adopted to balance their own milk supply, including infrastructure 
investments, creating more uniform receiving and processing schedules, 
and paying over-order premiums. Organic and ESL MIG members testified 
their fluid milk products function as wholly distinct markets with 
their own balancing and supply challenges. Therefore, MIG concluded the 
balancing cost and Class I competitive factors should no longer be 
recognized in the Class I price. Lastly, MIG and its members, and 
Lamers Dairy, argued that if additional money is needed to compensate 
dairy farmers and cooperatives for balancing costs or to incentivize 
milk to serve Class I plants, those costs should be negotiated between 
the buyer and seller and paid through over-order premiums, not as part 
of the regulated price.
    A vast majority of producers and their cooperatives opposed 
Proposal 20. They maintained, both in witness testimony and post-
hearing briefs, there is relevancy of costs associated with the base 
differential. NMPF stressed the costs, while difficult to precisely 
quantify, are still relevant and have increased since adopted in 2000. 
NMPF described the disorder that would arise if the base differential 
was reduced to $0.00 and a greater portion of market-wide cost 
reimbursement was forced to be negotiated in the market. While some 
NMPF members testified to receiving over-order premiums, they stressed 
establishing and maintaining premiums is difficult because there 
remains a market imbalance of power between milk sellers and buyers.
    Opponents of any change to Class I prices, either through a change 
to Class I differentials or other FMMO amendments, raised several 
overarching objections. First, they alleged disorderly marketing must 
first be proven to justify any changes to FMMO provisions. They cited a 
lack of instances of fluid demand not being met as an indication 
disorder is not present in the fluid milk market.
    The declared policy of the AMAA is to ``. . . establish and 
maintain such orderly marketing conditions for agricultural commodities 
in interstate commerce . . .'' FMMOs accomplish this mandate through 
the classified pricing of milk products and marketwide pooling of those 
classified use values. Through these mechanisms, orderly marketing 
conditions are provided so handlers are assured of uniform minimum raw 
milk costs and producers receive minimum uniform payments for their raw 
milk, regardless of its use. While previous FMMO

[[Page 95526]]

amendatory proceedings may have found market disorder to warrant 
changes to provisions, the AMAA does not contain an express or implied 
declaration that a finding of disorderly marketing conditions is 
required before an order can be amended.
    Second, opponents argued Class I prices cannot be amended until the 
FMMO system is modified to recognize the organic milk sector. However, 
potential amendments that would adopt disparate treatment of organic 
milk were not within the scope of this proceeding, as defined in the 
hearing notice.
    Finally, opponents testified that milk is typically more valuable 
when used in Class III products, rather than Class I, and therefore the 
record lacks justification to increase Class I differentials. Testimony 
was given comparing USDSS model results (utilizing 2016 data) showing, 
outside of the southeastern region, higher marginal location values for 
milk used at Class III manufacturing locations than for milk used in 
Class I processing in the same locations. No evidence was presented as 
to how the Class III location values could or should be implemented to 
achieve the purposes of the AMAA. Unlike estimated Class I location 
values which have been historically relied upon to determine Class I 
differentials, this was the first time the USDSS model results were 
utilized to calculate location values for Class III milk, and the first 
time testimony was offered to suggest how the correlation between Class 
III and Class I location values should impact pricing decisions. The 
record lacks evidence to validate the interpretation of Class III 
location values, as further indicated by the differing views of the 
study authors as to whether this would be an appropriate interpretation 
of the various sets of USDSS model results.
    The Department received 33 comments from stakeholders concerning 
amendments to the Class I differentials in the recommended decision. 
This included general comments as well as specific requests to 
reevaluate the proposed Class I differentials in certain counties, as 
discussed in greater detail by region below. In sum, the Department 
received 20 comments in support of and 13 comments in opposition to the 
Class I differentials as proposed in the recommended decision.
    Seven individual dairy farmers; AFBF; NMPF; Georgia Milk Producers, 
Inc.; Maine Dairy Industry Association (MDIA); the Arizona, Michigan, 
Tennessee, Wisconsin, and Minnesota State Farm Bureau Federations; 
Upstate Niagara; Select; and Plains Dairy commented in support of the 
recommended decision with some location-specific changes requested. 
These groups largely expressed support for the decision's use of the 
USDSS model's May results as the baseline for Class I differential 
changes, as well as the decision to maintain the current base 
differential of $1.60. They also pointed to record evidence from 
producer organizations supporting the need to update the Class I 
differentials from the levels set nearly 25 years ago. Supporters 
stated that the increases in the proposed differentials accurately 
reflect current costs and would ensure an adequate supply of fluid milk 
nationwide and orderly marketing conditions.
    Crystal Creamery; United Dairy; Nestle USA; New Dairy; Lamers 
Dairy; IDFA; MIG; Pennsylvania Association of Milk Dealers (PAMD); West 
Virginia Department of Agriculture; and Family Farm Defenders submitted 
comments objecting to the proposed amendments to the location-specific 
Class I differentials in the recommended decision and some specifically 
objected to the continuation of the $1.60 base differential. DFA, the 
DFA Mountain Area Council (separately), and an individual DFA producer 
submitted comments specifically objecting to the Department's reliance 
on the USDSS model's May results as the basis for determining Class I 
differentials. They argued the USDSS model does not take into account 
the unique relationships between dairy farmers and Class I 
manufacturers in Colorado and the proposed Class I differential levels 
in Colorado should be raised.
    MIG made numerous assertions regarding what it believed were 
arbitrary and capricious changes proposed in the recommended decision, 
particularly concerning any deviations from the USDSS model. MIG also 
continued to express strong opposition to the costs accounted for in 
the $1.60 base differential, stating that the record lacks sufficient 
evidence to continue to account for the Grade A and Class I incentive 
costs, in particular. IDFA also commented that, in its view, there is 
no record evidence to support that Class I demand is not met and, thus, 
the decision to increase Class I differentials to incentivize supply to 
the Class I market is unsubstantiated.
    Comments by Crystal Creamery and Lamers Dairy also expressed 
additional concerns with the proposed Class I differentials. Crystal 
Creamery reiterated its support for MIG's proposal to eliminate the 
base differential, which they believed would allow over-order premiums 
to incentivize supply to fluid plants. However, Crystal Creamery stated 
that if the Department continued to propose Class I differential 
increases, it believed the use of the USDSS model results, with no 
additional adjustments, was the best tool available for determining 
location differentials. Lamers Dairy expressed its continued opposition 
to any increase in the Class I differentials and criticized the 
Department's determination not to account for over-order premiums in 
its recommended decision because they are, in its view, the real 
incentive to supplying fluid milk plants.
    Considering comments received on the recommended decision and all 
record evidence, this decision continues to find that the cost of 
servicing the Class I market is no longer sufficiently reflected by 
existing Class I differentials. This was evident in the USDSS model 
results and validated through firsthand testimony of cooperative milk 
suppliers who described increased servicing costs. Current Class I 
differentials were established based on 1995 data. In the nearly thirty 
years since, the record reflects the market has substantially changed 
in size and structure. While milk production by volume has increased 
approximately 45 percent from 1995 until 2022, during the same time 
period the number of dairy farms has decreased by approximately 74 
percent, and the average herd size has increased from 68 to 261 cows.
    Consolidation has also occurred on the processing and manufacturing 
side. The record describes plant closures, particularly on the fluid 
processing side, and plant investment, especially in large 
manufacturing plants. Considerable testimony and evidence were given 
describing increased distances milk must travel to find a market 
outlet. Because of the greater distances between supply locations and 
fluid processing plants, cooperative witnesses testified to increased 
costs to ensure fluid demand is met. The witnesses also described in 
detail how the increased costs are disproportionately borne by 
cooperative members who often see deductions on their milk checks to 
cover increased organizational and individual transportation costs, 
which some witnesses attested more than doubled in the past 20 years.
    There was little to no rebuttal to the claim the market has 
consolidated on both the producer and processor side, resulting in 
increased transportation costs. The USDSS study authors themselves 
attributed the observed differences in the 2022 results, when compared 
to the current differentials, to four primary factors: change in milk 
production locations, change in compositions of dairy product demand,

[[Page 95527]]

change in demand locations, and increased transportation costs per 
mile. What is at issue is the justification for increasing Class I 
differentials. While only one witness described a situation in which 
they were unable to procure enough milk to meet the demand of their 
fluid milk processor, the record is full of testimony on the difficulty 
cooperatives have faced to ensure fluid milk demand is met. Cooperative 
witnesses discussed needing to reach out to more distant supply 
locations to find available milk supplies willing to serve the Class I 
market instead of remaining at a manufacturing plant, and the inability 
to recoup a large portion of the additional transportation costs 
through over-order premiums.
    FMMOs were established in the 1930s when the market contained many 
sellers and few buyers of milk. The highly perishable nature of raw 
milk resulted in producers engaging in pricing behavior that lowered 
farm prices as producers undercut one another in order to find a market 
outlet, a condition generally described as destructive competition. 
This unavoidable competitive behavior was among the reasons producers 
petitioned Congress to authorize a marketing order program to provide 
orderly marketing through known terms of trade and the pooling of 
market returns, which in turn provided a more equitable balance of 
power between buyers and sellers.
    While the record of this proceeding reveals continued consolidation 
on both the producer and processing sides of the market, it also 
contains evidence the fundamental elements that were the genesis of the 
FMMO program still exist. Raw milk remains a highly perishable product, 
produced every day, that cannot be stored for any significant length of 
time and incurs high costs when transported over long distances. No 
substantive evidence was presented to indicate there is no longer an 
imbalance of market power between buyers and sellers. Processors spoke 
of the abundance of milk produced as a reason Class I prices should not 
be increased. However, that reality also highlights how the dairy 
marketplace continues to place processors in a price setting role. As a 
price taker, the record reflects considerable testimony attesting to 
the difficulty dairy farmers have had and continue to have in obtaining 
and maintaining over-order premiums at levels sufficient to cover 
actual and/or opportunity costs.
    It is natural for buyers of milk to want to pay less and for 
sellers of milk to want to be paid more. The role of FMMOs is to 
determine minimum prices that provide for orderly marketing conditions 
that balance these natural competitive desires. The AMAA expressly 
authorizes marketwide pooling of classified prices as a tool for 
accomplishing orderly marketing. In determining appropriate classified 
prices, the Department cannot place an undue reliance on over-order 
premiums which diminish the role of marketwide revenue pooling and can 
lead to disorderly marketing conditions. Accordingly, this decision 
recommends changes to the Class I differentials to better reflect the 
various aspects of the current marketplace.
    The first step in evaluating appropriate Class I differential 
levels is the base differential. While the USDSS model is appropriate 
to show the value differences of milk between two fluid plant 
locations, as will be discussed later, it is not designed to inform the 
level of the minimum value needed to service Class I plants. Proposal 
20 seeks to reduce the base differential to $0.00 on the premise the 
costs represented either are no longer relevant (Grade A maintenance) 
or should be left up to negotiation with the fluid milk processor and 
their supplier (balancing and Class I incentive cost). This decision 
continues to find that while the record does not precisely describe how 
much the cost components of the base differential have increased, it 
lacks evidence to demonstrate those costs have decreased. In fact, 
discussion of various costs throughout the proceeding indicates that 
costs have instead increased. Given the lack of clear record evidence 
specific to costs accounted for in the base differential, this decision 
continues to recommend that the $1.60 per cwt base differential remain.
    Despite arguments Grade A maintenance costs should no longer be 
covered because 99 percent of U.S. milk production is Grade A, this 
decision continues to find it appropriate to recognize the additional 
costs for maintaining Grade A status in a regulatory pricing system 
requiring Grade A standards be met for participation. When the Grade A 
factor was incorporated into the base differential, it was specifically 
for Grade A maintenance costs, not costs associated with conversion to 
Grade A status. Proponents argue that because almost all milk meets 
Grade A standards, it is no longer necessary to provide a recognition 
of that cost in the base differential. Whether 99 percent of milk 
production today is Grade A, or 96 percent as it was at the time of 
Order Reform, is irrelevant. The record demonstrates dairy producers 
incur costs to maintain Grade A standards which are a requirement for 
participating in the FMMO system. As only Class I milk is required to 
participate and raw milk used in fluid milk products is required to 
meet Grade A standards, it is appropriate for the Class I price to 
continue to recognize those costs.
    The record does not demonstrate the remaining two base differential 
factors, balancing costs and additional monies needed to compete for a 
milk supply, are no longer relevant. All parties testified to their 
continued existence. Proposal 20 would require those costs to be 
negotiated in the market.
    Proponents of Proposal 20 argued they have made capital investments 
to balance their supply and/or pay over-order premiums to their 
suppliers to meet their milk needs, and/or provide balancing services. 
While their testimony acknowledges these costs exist, proponents argued 
the FMMO is making them pay twice for such services--once through the 
regulated price and again through their negotiated over-order premium. 
They further argued that if cost reimbursement is needed for such 
services, they should be able to pay that value to their suppliers 
directly through over-order premiums, not into the marketwide pool.
    Cooperative witnesses testified at length on the costs associated 
with ensuring daily, weekly, monthly, and seasonal fluctuating needs of 
the fluid market are met. While their balancing costs were considered 
confidential information, cooperative witnesses testified to the 
overall increase in costs associated with providing those services. In 
particular, cooperative witnesses spoke to the higher costs incurred to 
operate regional balancing plants. These plants often do not run at 
full capacity year-round in order to ensure capacity to balance excess 
supply during flush periods or provide additional milk to fluid 
processing plants during months of increased demand. The record 
reflects these marketing costs are incurred for the benefit of 
balancing the entire market's milk supplies, thus, providing for the 
orderly marketing of milk for fluid use. It has always been the case 
that an individual processor may find it necessary and/or advantageous 
to pay premiums above the minimum value to suit their individual and 
fluctuating needs. FMMO pricing balances the value needed to be 
reflected in the minimum regulated prices, without an over-reliance on 
over-order premiums that can undermine marketwide revenue pooling and 
lead to unequal raw product costs between similarly situated handlers 
and non-uniform payments to producers.

[[Page 95528]]

    An additional function of the base differential, as described in 
the Order Reform Recommended Decision, is to generate the additional 
monies necessary for the FMMO pools to balance the reliance on over-
order premiums. This was of particular concern in marketing orders with 
low Class I differentials and low Class I utilization, for which the 
decision noted ``there is a risk that handlers may not face equal raw 
product costs for various reasons. Thus, having a larger proportion of 
the actual value of Class I milk in the market order pool in these 
areas, than is now the case, should promote pricing equity among market 
participants.'' 63 FR 4802, 4909 (Jan. 30, 1998). As this decision 
seeks to update Class I differentials, maintaining the balance of what 
proportion of the value of Class I should be reflected in the 
marketwide pool remains a consideration. Negotiations for over-order 
premiums are not conducted in a vacuum but are done with the benefit of 
both parties knowing minimum FMMO values and the costs represented in 
the minimum values the plant is responsible for paying. If Class I 
processors believe they are being double charged, they can use that 
information in their over-order premium negotiations.
    Maintaining the $1.60 per cwt base differential would ensure Class 
I prices typically remain the highest, which is of particular 
importance in locations where the base differential is the effective 
differential. Without a base differential value in these locations, 
there would be little difference between the Class I price and the 
manufacturing price, and, thus, no financial incentive to supply the 
fluid market would exist to ensure the FMMO policy objective is met. 
Accordingly, this decision finds a $1.60 per cwt base differential 
remains an appropriate minimum value to ensure Class I demand is met.
    While the Department appreciates the effort put forth to submit a 
comprehensive option in Proposal 19, the record of this proceeding does 
not support its adoption. Proposal 19 contains a base differential of 
$2.20, which is an increase of $0.60 from the current level. However, 
the record lacks data to quantify costs in excess of the $1.60 base 
value.
    Proponents described using the average of the USDSS model's May and 
October results as a starting point for consideration but did not 
provide evidence as to why, under a minimum pricing system, the average 
rather than the minimum values observed in the May results was 
appropriate or preferable. Furthermore, the record does not contain 
evidence to support how the deviations made from the model's averages 
are appropriate. Proponents described their own marketing expertise but 
presented insufficient evidence to determine if the proposed 
differentials would result in Class I prices in excess of what is 
appropriate for a minimum pricing system. Accordingly, this decision 
does not recommend adoption of Proposal 19.
    However, this decision continues to find there is record evidence 
to support raising the Class I differentials from current levels. The 
record of this proceeding demonstrates the cost of servicing the Class 
I market has increased since the Class I differentials were adopted in 
2000 and amended in the southeastern FMMOs in 2008. Evidence reflects 
the market structure of Class I plants and the milk supply have changed 
considerably in the last 25 years. That was supported in witness 
testimony, as well as USDSS model results, which clearly show the 
location value of milk has changed. The Department continues to find 
the USDSS model to be the best available tool for determining the 
location value of milk given the vast array of factors that contribute 
to how milk is produced, transported, processed, and distributed in the 
U.S.
    When the differentials were adopted during Order Reform, testimony 
reflects the Department used USDSS model results as a starting point 
and made adjustments for various reasons. The Order Reform Recommended 
Decision described several options the Department considered. Of the 
differential surface ultimately adopted, AMS wrote, ``. . . [n]ine 
differential zones provide the basis for establishing the price 
structure. These zones were established based on results of the USDSS 
model, knowledge of current supply and demand conditions, and 
recognition of other marketing conditions such as fluid versus 
manufacturing markets, urban versus rural areas, and surplus versus 
deficit markets.'' 63 FR 4802, 4905 (Jan. 30, 1998). The decision went 
on to outline additional reasons for adjustments including ensuring 
price alignment with neighboring zones and adequate marketwide pool 
draws.
    The USDSS model estimates results for an efficient milk supply and 
distribution network, provided at its lowest cost. The USDSS study 
authors acknowledged when using the model results to determine Class I 
differentials, adjustments would be appropriate as there are factors 
unaccounted for in the model, such as FMMO provisions, abnormal traffic 
patterns, and competitive relationships.
    Accordingly, this decision continues to recommend that Class I 
differentials be amended, as appropriate, to better reflect the current 
cost of serving the Class I market. When determining appropriate 
levels, the Department began with the USDSS model's May results, 
referred to hereinafter as ``May results.'' The May results are the 
lower of the two months provided in evidence, which is an appropriate 
starting point for determining minimum prices. The Department then 
evaluated the results on a regional basis and made adjustments based on 
three principles and two additional considerations.
    First, adjustments were made where necessary to better align Class 
I handler equity. This means the proposed Class I differentials should 
not give one handler an uneconomic cost advantage relative to an actual 
or potential competing handler. Second, adjustments were made to 
maintain producer equity and prevent uneconomic rewards or penalties to 
producers who deliver or could deliver milk to the same plant or 
market. Third, adjustments were made to ensure the marketwide pools 
continue to provide orderly marketing conditions. The combination of 
handler and producer equity goals is further achieved through the size 
and shape of pricing zones. The model results are determined at 
specific locations, or ``nodes,'' in the model. Model results can be 
displayed on a map or in a list of counties to convey the price 
surface, but the methodology for doing so, as explained by the study 
authors, was a mathematical tool which interpolated values between 
distances. Additional information about markets can be added to the 
model results through knowledge about the economic or geographic 
(roads, natural barriers, etc.) conditions in specific locations. This 
may lead to a decision to change the shape or contours of the pricing 
surface that is estimated from the model results. Lastly, adjustments 
were made to reflect unique challenges associated with servicing dense 
urban environments. The changes by regions and any changes from the 
recommended decision for specific locations--made in this final 
decision are described below.
    The general process began with roughly $0.20 differential bands 
generated from the May results. The May and October results formed a 
soft boundary for differential adjustments. The current differentials 
formed a hard lower boundary, which were rounded to the nearest dime to 
eliminate $0.05 differences between zones, consistent

[[Page 95529]]

with the USDSS model results which were in $0.10 increments.
Northeast
    The recommended Class I differentials in the Northeast region 
continue to largely follow the May results with minimal changes. The 
differential for Portland, Maine, continues to be raised to $4.50 to 
match the results in Concord, New Hampshire, and ensure handler equity. 
Albany County, New York, and Rensselaer County, New York, were moved to 
the same differential by increasing the Albany differential $0.10 to 
meet the Rensselaer differential, as plants in those counties are 
located just across a bridge from one another but were assigned 
different prices by the model.
    Comments on the recommended decision from NMPF and Upstate Niagara 
expressed concern with inconsistent Class I differentials across the 
area of western New York. NMPF and Upstate Niagara commented that the 
proposed differentials in the recommended decision would require milk 
supplying Class I destinations in that region to move from higher to 
lower differential zones, largely due to the geography of the Great 
Lakes. They requested the Department consider a flatter differential 
area by raising some counties from $3.80 to $3.90 and decreasing others 
from $4.00 to $3.90 to facilitate the movement of milk in different 
directions. Without an adjustment, they argue, producers will not have 
the necessary incentive to supply Class I handlers in the region.
    After closer review of the record, this decision recommends 
increasing the Class I differentials in the following counties from 
$3.80 to $3.90: Niagara, Erie, Orleans, Genesee, Wyoming, Livingston, 
Yates, Ontario, Monroe, and Wayne. This decision also recommends 
decreasing the currently proposed Class I differentials from $4.00 to 
$3.90 in the counties of Lewis, Jefferson, and St. Lawrence. These 
changes will create a consistent $3.90 zone that addresses milk 
movements in the region. This decision is consistent with record 
testimony concerning the market in western New York and expected 
increases in capacity and demand in the region which may potentially 
require milk to be sourced from outside of the immediate local area.
    MDIA, NMPF, and MIG commented on the recommended decision's 
proposed Class I differentials in Maine and New Hampshire. MDIA 
requested that the proposed Class I differential for Cumberland County, 
Maine, be increased from $4.50 to $4.85 to restore the previous $0.25 
variance between the Portland and Boston areas and ensure handler 
equity in the region. The current spread, MDIA argued, will incentivize 
Maine producers to ship to handlers in Boston, rather than those 
located in Cumberland County, Maine (Portland). Similarly, NMPF 
requested an increase from $4.50 to $4.70 for 6 counties in Maine and 
New Hampshire to maintain producer and handler equity. Lastly, MIG 
commented in opposition to the Department's proposal to align certain 
counties in Maine and New Hampshire, at levels $0.20 above the model 
results.
    The Department considered MDIA, NMPF, and MIG's comments in the 
context of the overall marketing dynamic in the northeast marketing 
areas and concluded that the Class I differential for Cumberland 
County, Maine should remain at $4.50, as indicated in the recommended 
decision. This will align the Portland area with nearby Merrimack 
County, New Hampshire (Concord) to ensure handler equity in the region. 
The larger increase in Suffolk County, Massachusetts (Boston) reflects 
the increase in costs to service that market and fluid milk demand. 
Accordingly, no changes were made to the Class I differentials assigned 
in this region from the recommended decision to the final decision.
    Differentials in most New Jersey counties are proposed to be $0.10 
to $0.20 above the May results, but within the May and October range, 
to reflect testimony on the cost of servicing urban areas and 
transportation concerns. NMPF requested the differentials be aligned 
across southern New Jersey to ensure handlers competing in the same 
market face the same raw milk costs. The recommended decision proposed 
changes to the current Class I differentials at varied levels for 
certain counties in southern New Jersey. More specifically, the 
proposal for Cumberland County, New Jersey was $4.70, while the 
proposal for neighboring Burlington, Atlantic and Cape May counties was 
$4.80. However, a review of the record reveals these fluid milk plants 
compete for sales in the same market and should face similar raw milk 
costs. Therefore, this decision decreases the Class I differentials for 
Burlington, Atlantic, and Cape May counties from $4.80 to $4.70. This 
change will also align the differentials with the May results and 
maintain uniform Class I differentials across the region, as has been 
the case historically.
    The differential for Washington, DC, continues to be $0.10 above 
the May result to reflect testimony on servicing an urban area.
    In eastern Pennsylvania and northern Maryland, NMPF's comments to 
the recommended decision requested a $0.10 increase for 7 counties to 
maintain a historical $0.10 price difference with Berks County, 
Pennsylvania, and to promote handler equity. Similarly, in the 
Philadelphia and Baltimore corridor, which includes areas in Maryland, 
Delaware, and southern Pennsylvania, NMPF requested $0.10 to $0.20 
increases in 15 counties due to milk movements in the region and 
handler equity concerns. The Department considered NMPF's requests to 
increase the differentials in Pennsylvania, Maryland, and Delaware. 
However, the proposed differentials are aligned with the USDSS model 
results and record evidence does not support the requested increases. 
Accordingly, no additional changes were made to the Class I 
differentials proposed in Pennsylvania, Maryland, and Delaware from the 
recommended decision to the final decision.
Appalachian
    The variation between the model results in May and October are more 
significant in the three southeastern orders. As discussed by several 
witnesses, this region experiences unique marketing conditions with 
high Class I utilization and deficit local milk supply. Due to the 
substantial seasonality of the local milk supply, it requires 
significant but variable volumes of supplemental milk supplies from 
outside the region as well as changes in milk movements of regular 
suppliers to the market throughout the year. The Transportation Credit 
Balancing Fund (TCBF) and the recently implemented Distributing Plant 
Delivery Credit (DPDC) are programs to compensate handlers for some of 
the additional and variable transportation costs associated with 
supplying the Class I markets in these orders during different periods 
of the year. The reimbursement rates for these programs include 
adjustments for any gain in Class I differentials from supply point to 
receiving plant. Therefore, any changes in the difference between Class 
I differentials would be reflected in the calculated rate for eligible 
payments in both the TCBF and DPDC in all three southeastern orders.
    The Class I differentials in the Appalachian region are largely 
formed in $0.20 and $0.30 bands based on the May results starting with 
$3.70 in southern Indiana and, moving southeast, increasing to $6.00 
along the North and South Carolina coasts. In most areas, the proposed 
differentials are within $0.10 (+/-) of the May

[[Page 95530]]

results. There are a few exceptions where the proposed differentials 
are $0.20 less than the May results to better align handler equity. For 
example, in Spartanburg County, South Carolina, the proposed 
differential is $5.60, $0.20 less than the May results. This maintains 
the current competitive relationship between this area and the Atlanta, 
Georgia area, and with the competing handlers in North Carolina.
    The Department received comments on the Class I differentials 
proposed in the recommended decision in the Appalachian region from 
NMPF, IDFA, MIG, and New Dairy. NMPF requested a $0.20 increase in 9 
Virginia counties to align with the differential proposed for nearby 
Kanawha County, West Virginia. NMPF explained that the handlers in 
these areas all compete for the same market and receive milk from the 
same milkshed. NMPF also requested a $0.20 increase to 40 additional 
Virginia counties to reduce the spread in the proposed differentials in 
Virginia and northern North Carolina, as well as a series of changes to 
the proposed differentials in other Virginia, West Virginia, and North 
Carolina counties considering logistical and geographical challenges. 
Conversely, IDFA, MIG, and New Dairy commented in strong opposition to 
the proposed increases and requested general downward adjustments.
    The Department considered all comments on the Class I differentials 
proposed for the Appalachian region. First, rather than increasing the 
differentials for certain Virginia counties by $0.20 to align with 
Kanawha County, West Virginia, this final decision decreases the 
proposed differentials for Kanawha County, West Virginia by $0.20 to 
$4.30. As discussed later in this decision with regard to the Mideast 
region, this change effectively aligns the region and addresses handler 
equity concerns described on the record in both West Virginia and 
neighboring Ohio counties that compete in the same market. Second, with 
regard to all other requested adjustments in this region, this decision 
finds that the Class I differentials proposed in the recommended 
decision are aligned with the model results and record evidence does 
not support additional changes. As such, no additional changes were 
made to the Class I differentials assigned in this region from the 
recommended decision to the final decision.
Southeast
    The proposed Class I differentials in the Southeast FMMO start at 
$3.20 in southwest Missouri and increase moving southeast to $6.00 in 
southeast Georgia. The proposed differentials continue to follow the 
May results closely, within $0.10 (+/-), with a few modifications. The 
East Baton Rouge Parish differential was reduced by $0.20 from the May 
results to be consistent with the May result of $5.20 for competing 
areas such as Lafayette Parish. Tangipahoa Parish was placed in the 
$5.40 zone, or $0.30 below the May result. These decreases are meant to 
ensure handler equity while still acknowledging the thinner and steeper 
surface reflected in the May results in the southeastern U.S.
    Rutherford County, Tennessee, is also proposed to be modified to be 
consistent with neighboring Davidson County, Tennessee, at $4.60 ($0.20 
below the May result) to provide for handler equity. In Missouri, 
Webster County was placed in the $3.20 zone to match the Greene, 
Hickory, and Polk County differentials. This addresses handler equity 
concerns and results in a $0.10 proposed decrease for Webster County 
from the May result.
    NMPF provided specific comments on the Class I differentials 
proposed in the recommended decision for the southeast region and 
requested a series of increases in 12 counties located in Tennessee and 
Kentucky. NMPF's rationale for these requests was based on historical 
and expected milk movements and known producer equity concerns among 
those delivering milk from the same milkshed to the same plant 
locations. The Department considered NMPF's request to increase the 
Class I differentials in this region. However, the differentials 
proposed in the recommended decision are aligned with the model results 
and record evidence does not support the requested increases. 
Accordingly, no changes were made to the Class I differentials assigned 
in this region from the recommended decision to the final decision.
Florida
    The proposed Class I differentials for Florida largely follow the 
May results with modification to address handler equity concerns. The 
differentials start at $6.00 in the Florida panhandle region and 
increase going south with mostly $0.40 bands ending at $7.40 in south 
Florida. Processing plants in central Florida were placed in the same 
$6.80 band to match the May result in Volusia County due to handler 
equity concerns. This necessitated decreases from the May results of 
$0.10 in Orange County, $0.10 in Hillsborough County, and $0.20 in Polk 
County. For similar handler equity concerns, Broward County is proposed 
to match the May result in Dade County of $7.40 in the southernmost 
part of Florida.
    In its comments on the recommended decision, NMPF requested a 
series of increases of $0.20 to $0.40 to the Class I differentials 
proposed for 14 Florida counties. NMPF cited producer equity concerns 
and their ability to ensure a sufficient supply of fluid milk to meet 
consumer demand in high-population areas such as Miami. The Department 
considered NMPF's requests to increase the differentials in Florida. 
However, the proposed differentials are generally aligned with the 
model results and record evidence does not support additional 
increases. Accordingly, no changes were made to the Class I 
differentials proposed in this region from the recommended decision to 
the final decision.
Upper Midwest
    In the Upper Midwest region, this decision continues to propose 
deviations from the May results to ensure producer equity and ensure 
the marketwide pool provides for orderly marketing. The Upper Midwest 
FMMO is unique in its low Class I utilization, which creates challenges 
in setting a differential surface that sends the proper signals to 
producers supplying the Class I market, while also ensuring producer 
equity and orderly marketing among producers supplying the region's 
plants. Record evidence indicates a large differential range in the 
region would not result in equity between producers and could result in 
disorderly marketing. Therefore, the differential surface was flattened 
from the May results, in general, by raising the Class I differentials 
in the western part of the region--in the eastern Dakotas and much of 
Minnesota--and lowering the differentials in the eastern part--in 
northern Illinois, southeastern Minnesota, and Wisconsin.
    Differentials in five counties, Dakota, Hennepin, Ramsey, Scott, 
and Washington, in the Minneapolis/St. Paul metropolitan area of 
Minnesota, are raised $0.10 higher than neighboring counties to reflect 
higher costs of serving an urban area and incentivize Class I service 
relative to surrounding manufacturing plants. In addition, they are set 
at the same differential of $2.90 to promote handler equity among fluid 
processing plants in the metropolitan area. The new differential for 
these counties, except for Hennepin, are $0.10 to $0.20 above the May 
results. The differential for Hennepin, $0.30 above the May results, is 
set the same as its peer counties to ensure that handlers in this 
county are able to compete for

[[Page 95531]]

available milk supplies on an equitable basis.
    Differentials in the regions supplying the Chicago, Illinois, area 
are adjusted to ensure handler equity. Generally, the differentials in 
this area are set at $3.10 to $3.20. The record reflects bottling 
plants in eastern Iowa, northern Illinois, southeastern Wisconsin, 
northern Indiana, and southwest Michigan all compete for Class I sales 
into the Chicago area. Thus, Class I differentials in northern Illinois 
are lowered $0.20 and $0.10 in Kane and Winnebago counties, 
respectively, from the May results. Similarly, comparisons and 
adjustments were made to the May results to align with northern Indiana 
and southwest Michigan counties supplying the Chicago area.
    The Department received a comment from NMPF concerning the Class I 
differentials assigned to eastern North Dakota and western Minnesota. 
NMPF stated the Department's recommended decision changed the 
historical relationship in the Class I differentials assigned to Cass 
County, North Dakota, and four, adjacent western Minnesota counties 
compared to the rest of western Minnesota. More specifically, these 
counties were proposed at $2.70, while the surrounding counties were 
proposed at $2.80. Without a change, NMPF commented, dairy farmers 
would be disincentivized to supply Class I handlers in the recommended 
$2.70 zone. Considering these comments, this decision increases the 
Class I differentials for Cass County, North Dakota, and Clay, Becker, 
Hubbard, and Wilkin counties in Minnesota from $2.70 to $2.80. These 
changes will help to align these counties with the neighboring counties 
in Minnesota where the record reveals the reserve supply is located. 
The increase will also incentivize the supply of milk to Class I plants 
in the area to ensure fluid milk availability to populations throughout 
North Dakota and northwestern Minnesota.
Central
    The proposed Class I differentials in the Central FMMO start at 
$2.30 in western Colorado and increase moving east to $4.00 in southern 
Illinois. This decision continues to align the production area of 
northern Colorado with the large production areas of New Mexico, the 
Texas Panhandle, and southwest Kansas at $2.50. This required 
increasing the differential in Weld, Boulder, and Morgan counties of 
Colorado by $0.10 to $0.20 from the May model results. In order to 
encourage milk to service Class I demand, some counties in the greater 
Denver area, including Colorado Springs, are proposed to remain aligned 
with the May results of $2.70, while others are proposed to increase as 
much as $0.20 above the May results to provide for handler equity.
    In southern Illinois, testimony reflects plants compete for sales 
within a similar distribution area. Therefore, counties were grouped 
into a $3.60 zone. This represents an increase of $0.10 for some 
plants, while others remained at the May result of $3.60. In Iowa, all 
counties with distributing plants remain aligned with the May result of 
$2.70.
    Douglas County, Nebraska, and Minnehaha County, South Dakota, 
proposed Class I differentials are $2.70 and $2.60, an increase of 
$0.20 and $0.10, respectively, from the May results. These increases 
continue to recognize handler equity both to the east with Polk County, 
Iowa, and to the north with Cass County, North Dakota.
    In Kansas, the two counties with distributing plants, Reno and 
Sedgwick, are proposed to be aligned at $2.90; as they are neighboring 
counties, the same differential levels would provide for handler 
equity. This increase also provides handler equity and price alignment 
with Oklahoma plants to the south.
    In Oklahoma, Lincoln, Cleveland, and Grady counties continue to be 
proposed at the same differential of $3.30. Lincoln and Cleveland 
counties continue to be proposed in alignment with the May results, 
which represents a $0.20 increase for Grady County. The $3.30 
differential for these three counties provides for handler equity and 
price alignment both to the north in Kansas and the south in Texas.
    The Department received specific comments on the Class I 
differentials proposed in the recommended decision for the Central FMMO 
region from NMPF, DFA, and DFA's Mountain Area Council in collaboration 
with Colorado dairy farmers. NMPF's comments focused on producer and 
handler equity concerns in the region and included a request for a 
$0.20 increase in the proposed Class I differentials for 23 Colorado 
counties. DFA and its Mountain Area Council provided similar comments 
and argued further that the USDSS model is inappropriate for the 
Colorado market because of the unique circumstances in that market 
where a single Class III handler absorbs nearly all the milk produced 
in Colorado. The DFA Mountain Area Council also reiterated hearing 
testimony on Colorado milk production costs.
    The Department considered all comments received on the Class I 
differentials in the State of Colorado. Record evidence, however, does 
not justify a change in the proposed differentials. While the record 
reflects the USDSS model did not account for a variety of milk cost of 
production factors and plant supply relationships, this decision has 
consistently articulated consideration of producer costs is not 
appropriate when determining Class I differential levels. As such, no 
changes were made to the Class I differentials proposed in Colorado 
from the recommended decision to the final decision.
    NMPF also commented on the Class I differentials proposed for 35 
counties across Oklahoma, Missouri, and Arkansas, covered by both the 
Central and Southeast FMMOs. NMPF requested that the Department align 
these counties at $3.40 because handlers in the tri-state area all 
compete for the same markets and are supplied by the same milkshed. 
This decision finds, however, that record evidence does not justify an 
additional increase or a reason to align the tri-state area at $3.40, 
as the proposed differentials generally follow the model results. As 
such, no changes were made to the Class I differentials proposed in 
this region from the recommended decision to the final decision.
Mideast
    Differentials in the Mideast region were evaluated on a state-by-
state basis. Michigan differentials are set at the May results, $3.00 
in the upper peninsula and $3.30 in the lower peninsula, because there 
were no additional producer or handler equity issues to address. 
Indiana is divided into three differential zones moving north to south 
($3.30, $3.60, and $3.70) which align with the May results. This 
decision continues to propose Class I differentials for Lake and 
Huntington counties $0.40 and $0.10 lower, respectively, from the May 
results to provide handler equity in the northern Indiana zone. This 
decision continues to propose an increase to the Class I differentials 
in Madison and Wayne counties by $0.10 and $0.20, respectively, from 
the May results to provide handler equity in the central Indiana zone 
of $3.60. Southern Indiana counties are proposed at the May result of 
$3.70.
    Proposed differentials in Ohio generally follow the May results 
within $0.10 (+/-) and zones were determined based on handler equity 
concerns. Moving northwest to southeast, proposed differential zones 
are $3.30, $3.60, $3.80, $4.00, and $4.30. The five differential zones 
align within a $0.10

[[Page 95532]]

(+/-) range of the May results. The exception is Cuyahoga County with a 
proposed $0.20 decrease from the May result to provide for hander 
equity with Wayne and Stark counties.
    Considering additional handler equity concerns in southern Ohio, as 
expressed in comments received from United Dairy, and competition among 
plants in the region as revealed in hearing testimony, this decision 
decreases the Class I differentials from $4.00 to $3.80 in the counties 
of Noble, Belmont, Morgan, Jefferson, and Perry, Ohio. United Dairy 
noted in its comments that current Class I differentials in the region 
are aligned, yet the recommended decision amended the differentials at 
higher levels for some counties. United Dairy added that the proposed 
Class I differentials in the recommended decision set the minimum raw 
milk price for some Class I handlers located in southern Ohio $0.20 
higher than those in neighboring central Ohio counties. United Dairy 
asserted that with such a large price difference, it would be at a 
competitive disadvantage relative to its current price relationships 
with competitors. Upon further review, this decision finds the Class I 
differentials proposed in the recommended decision would create 
competitive disadvantages for plants located in southern Ohio and, 
thus, a decrease in these counties was appropriate.
    West Virgina differentials range from $4.00 to $4.80, moving 
northwest to southeast, and are largely consistent with the May 
results. However, considering handler equity concerns in West Virginia, 
as expressed in comments received from NMPF, United Dairy, and the West 
Virginia Department of Agriculture, this decision decreases the Class I 
differentials in Cabell, Putnam, Clay, and Kanawha Counties in West 
Virginia from $4.50 to $4.30. NMPF, United Dairy, and the West Virginia 
Department of Agriculture all highlighted handler equity concerns in 
their comments because of significantly higher differentials in Kanawha 
County, West Virginia compared to neighboring West Virginia, Virginia, 
and southern Ohio counties. To address these concerns, this decision 
will align the Class I differentials in Cabell, Putnam, Clay, and 
Kanawha Counties in West Virginia with nearby counties that compete in 
the same market.
    MIG provided specific comments regarding Pennsylvania, urging the 
Department to lower additional Class I differentials to ensure handler 
equity with unregulated areas of the State. The Department reviewed 
relevant record evidence and found no justification to modify the 
proposed Class I differentials from the recommended decision to the 
final decision. While the proposed differentials in western 
Pennsylvania are higher than the May results, they generally follow the 
model results that showed multiple differential zones through the state 
moving west to east. As such, this decision continues to propose a 
Class I differential for Butler, Fayette, Lawrence, and Mercer counties 
of $4.00, $0.10 lower than the May results, to encourage service to the 
demand areas of Western Pennsylvania.
Southwest
    The proposed Class I differentials in the Southwest FMMO start at 
$2.30 in northwest New Mexico and increase moving southeast to $4.80 in 
southeast Texas. Testimony reflects the Texas Panhandle and 
southeastern New Mexico regions contain mostly manufacturing plants and 
draw milk from the same supply region in the Panhandle. For producer 
equity concerns, these regions are proposed to be in a $2.50 zone. This 
aligns with the May results for the eastern New Mexico plant locations, 
necessitating a proposed increase of $0.10 to $0.30 in counties within 
the Panhandle region to reach a uniform $2.50 zone. In Lubbock County, 
Texas, the differential is proposed at $2.60, a decrease of $0.20 from 
the May result, recognizing handler equity in the Panhandle region and 
producer equity considerations with manufacturing plants competing for 
milk supplies. Dallas County, Texas, continues to be proposed in 
alignment with the May result of $3.70 and a $0.10 increase is proposed 
for Tarrant County to maintain handler equity. Bexar County, Texas is 
proposed at $4.30, a $0.10 increase from the May result, and Harris and 
Montgomery counties are proposed at $4.80, a $0.20 increase from the 
May result to reflect difficulties in servicing congested urban areas.
    Upon review of comments received from NMPF and Plains Dairy 
regarding Class I differentials in New Mexico, this decision proposes 
to increase the Class I differentials for Bernalillo, Los Alamos, 
Sandoval, Santa Fe, Socorro, Torrance, and Valencia counties from $2.40 
to $2.50. NMPF commented specifically that, as proposed in the 
recommended decision, there would be a $0.10 disincentive to supply the 
Class I market in Bernalillo County, New Mexico (Albuquerque). NMPF 
argued an increase is needed in these counties to ensure there remains 
an incentive to supply the Class I market in Albuquerque from the 
reserve supply available in New Mexico, as reflected in hearing 
testimony. This change aligns the differentials for the fluid market of 
Albuquerque with nearby manufacturing markets that compete for the same 
milk supply and would not disincentivize service to the Class I market 
in Albuquerque.
    Plains Dairy was the only Class I handler to comment in support of 
the recommended Class I differentials and for use of the USDSS model 
results. Plains Dairy requested a series of decreases in the southwest 
region to align with the May results. While this decision increases 
some of the Class I differentials included in Plains Dairy's comments, 
it creates a consistent $2.50 zone in New Mexico so as to not 
disincentivize milk movements to the milk demand location in Bernalillo 
County, New Mexico. This change is supported by record testimony 
concerning the location of the milk supply and demand locations in New 
Mexico.
    This decision also recognizes the competitive relationship between 
plants located in the Texas panhandle that draw from a common local 
milk supply, as also discussed by Plains Dairy in its comments. While 
Plains Dairy requests decreases in some locations, NMPF requests 
increases in other locations in Texas and neighboring Oklahoma 
counties. Because processors and manufacturing plants located in the 
panhandle compete for a shared milk supply, as revealed in the hearing 
record, this decision finds lowering the differentials in the region to 
the May results would both disrupt this competitive relationship and 
disincentivize service to the Class I market. Considering resulting 
producer and handler equity concerns, deviations from the model results 
are appropriate for the Southwest region.
    MIG also provided specific comments questioning the Department's 
proposed Class I differentials in certain Texas and New Mexico counties 
where the model suggested a Class I differential lower than current 
levels, but the Department proposed an increase. The record of this 
proceeding reflects the model estimates for some supply locations in 
Texas and New Mexico were higher than the demand areas where the 
bottling plants are located. The record does not indicate why such a 
price relationship is suggested given that economic theory would assume 
the opposite--the demand areas should have higher differential levels 
to incentivize milk to supply bottling plants in those locations. 
During the national hearing, the model authors testified that while the 
model results entered into evidence give estimates for the 3,108 
counties in

[[Page 95533]]

the contiguous United States, the model only produces estimates for 663 
demand locations. The model then uses a Kriging process which 
interpolates estimates for the counties between the demand locations. 
As such, when determining the proposed differentials, adjustments from 
the model were made to some demand locations in the Texas and New 
Mexico areas to not disincentivize milk movements from supply to demand 
locations.
Arizona
    In Arizona, the metropolitan area of Phoenix encompasses both 
Maricopa and Pinal counties. This decision continues to propose an 
increase to the Class I differentials for these counties by $0.30 and 
$0.20, respectively, above the May results to reflect the higher cost 
of servicing an urban area, in addition to providing handler equity 
with Clark County, Nevada. The differential for Yuma County is proposed 
at $2.50, an increase of $0.40 from the May result to maintain handler 
equity between Maricopa County, Arizona, and Los Angeles, California.
    In its comments on the recommended decision, MIG indicated its 
opposition to the proposed increase in Kern County, California to align 
with Yuma County, Arizona. The record reflects there are additional 
costs to service the Los Angeles market that are not accounted for in 
the USDSS model and, thus, the differentials as proposed in the 
recommended decision would incentivize milk to service the Los Angeles 
market, MIG argued the proposed differentials will incentivize dairy 
farmers in Arizona to supply the California market rather than the 
Phoenix area, where demand is high. However, the record does not 
indicate the proposed differentials would cause a milk shortage for the 
Phoenix market as hearing evidence demonstrates the supply for Phoenix 
comes from its surrounding area.
    Considering the same urban area, NMPF requested an increase from 
$2.60 to $2.80 in Maricopa County, Arizona due to a number of 
logistical, geographical and climate-related challenges when servicing 
Phoenix. The Department considered NMPF's comments, however, this 
decision finds that record evidence does not justify a change in the 
proposed differentials. Additional costs of servicing the urban area 
were already considered in determining the proposed differentials, and 
as already articulated in the decision, producer costs are not an 
appropriate consideration when determining Class I differential levels. 
As such, no changes were made to the Class I differentials assigned in 
this region from the recommended decision to the final decision.
California
    For California, testimony was given regarding additional 
transportation costs from excessive traffic congestion and geographic 
obstacles in southern California that were not accounted for in the 
model. Accordingly, this decision continues to propose an increase to 
the Class I differential in San Diego by $0.20 from the May result to 
$2.80. To maintain handler equity within the southern California 
region, the differentials for Orange, Riverside, and Los Angeles 
counties are proposed to be $2.80. This is $0.40, $0.50 and $0.60 above 
the May results in Orange, Riverside, and Los Angeles counties, 
respectively. Ventura County is proposed to increase $0.40 from the May 
result, to $2.60, to address producer equity concerns and ensure price 
alignment with the surrounding counties. For Kern County, the primary 
milk supply area for much of this region, the differential is proposed 
to be $2.50. This also serves to encourage Kern County milk to move 
south to distributing plants, rather than north to manufacturing plants 
where the proposed differential is $2.20.
    The differentials in the remaining San Joaquin Valley counties, 
Tulare, Kings, Fresno, Madera, Merced, Stanislaus, and San Joaquin, are 
proposed to be $2.20 based on testimony indicating these counties are 
considered one supply area. Of these counties, Madera County has the 
highest increase from the May result, $0.40, to maintain handler equity 
as well as maintain producer equity for the producer milk in this area.
    The proposed $2.20 differential zone is then carried into the 
Sacramento Valley counties of Sacramento, Yolo, Colusa, and Glenn, an 
increase of $0.20 to $0.30 from the May results. These counties, along 
with those in the San Joaquin Valley, supply milk for distributing 
plants in the San Francisco Bay area. The proposed Class I 
differentials for Alameda, Contra Costa, Solano, Napa, Marin, and 
Sonoma counties continue to be proposed at $2.40 to encourage milk to 
service the San Francisco Bay area. This represents an increase of 
$0.40 to $0.50 from the May model results for these supply counties to 
maintain handler equity.
    San Francisco and counties south along the central California coast 
are further from a milk supply. The differentials in that area are 
proposed at $2.50 and include San Francisco, San Mateo, Santa Cruz, 
Santa Clara, San Benito, Monterey, San Luis Obispo, and Santa Barbara 
counties, representing increases from the May results of $0.20 to 
$0.50.
    Similar to the Sacramento Valley, the differentials for the 
counties of Mendocino, Lake, and Humboldt, which are located along the 
northeast California coast and supply the San Francisco Bay area, are 
proposed to be $2.20 to provide for producer equity.
    The Department received specific comments from MIG, NMPF, and 
Crystal Creamery regarding the Class I differentials proposed in 
California. MIG and Crystal Creamery commented in opposition to the 
Department's deviations from the USDSS model results in the region and 
emphasized specific concerns with the Class I differentials proposed 
for the Fresno area. NMPF requested an increase from $2.60 to $2.80 to 
the Class I differentials for San Bernardino County to align with 
neighboring counties where handlers compete for the same milk supply.
    The Department reviewed and considered these comments and 
reexamined relevant record evidence. The proposed differentials reflect 
consideration of the cost to supply the multiple California 
metropolitan demand centers given its unique geography and significant 
logistical supply challenges. Witnesses testified and the model authors 
indicated the USDSS model was not capable of taking these factors into 
consideration. Therefore, the record supported differential levels 
higher than the model results. The differentials in the metropolitan 
areas were raised with consideration for record evidence pertaining to 
handler equity, geography and traffic congestion. These increases then 
necessitated changes to the supply regions. A review of the record 
evidence regarding milk movements in southern California similarly 
finds no justification for change. Given the large size of San 
Bernadino County, the largest county in the state, this decision does 
not find justification to increase the differential applicable to the 
entire county, given only a small portion is located next to Los 
Angeles County. Considering this analysis, no changes were made to the 
Class I differentials assigned in this region from the recommended 
decision to the final decision.
Western Unregulated States
    Differentials in Nevada generally follow the May results, except 
for a few modifications. In northern Nevada, to provide for handler 
equity, Washoe County is proposed to increase $0.10 from the May result 
to align with the neighboring $2.00 California zone.

[[Page 95534]]

Eureka, Nye, and Esmerelda counties are proposed at $2.20, resulting in 
changes from the May results of plus or minus $0.10.
    The proposed Class I differentials in Utah start at $2.00 in the 
north and increase moving south up to $2.50 in the southwest part of 
the State. While most of the proposed differentials are aligned with 
the May results, the counties of Davis, Morgan, Salt Lake, Tooele, 
Utah, and Weber are recommended at $2.20, an increase of $0.10. This 
aligns those counties with counties to the north and west, ensuring 
both producer and handler equity.
    The proposed Class I differentials in the state of Montana start at 
$1.70 and increase to $2.40 in the southeast part of the state. Most of 
the proposed differentials are aligned with the May results. The only 
county with a proposed differential that is more than $0.10 different 
from the May result is Golden Valley which is lowered $0.20 to ensure 
handler equity with the counties to its north and south.
    The proposed differentials in the unregulated portions of the state 
of Idaho start at $1.70 and increase to $2.20. While most of the 
proposed differentials are within $0.10 of the May results, the county 
of Cassia is decreased $0.20 for handler equity with plants to the 
south into Utah. This brings the unregulated Idaho counties in 
alignment with counties to the north and south, ensuring both producer 
and handler equity with those areas.
    Lastly, the proposed differentials in Wyoming generally follow the 
May results as there were no producer or handler equity concerns to 
address. Except for Laramie, Wyoming, which is proposed at $2.50 to 
align with neighboring Northeast Colorado. This represents a $0.20 
increase compared to the May results.
    The Department received specific requests from NMPF, DFA, and an 
individual dairy farmer for changes to the Class I differentials 
proposed for certain counties in northwestern Nevada to address alleged 
producer equity concerns. NMPF and DFA suggested a flat pricing surface 
of $2.20 for 6 Nevada counties, while the dairy farmer requested a 
$0.30 increase for Churchill County, Nevada, specifically. The 
Department reviewed record evidence relevant to the requested changes 
in Nevada and found no justification for change. The proposed 
differentials generally follow the May results with a slight increase 
in Washoe county to encourage milk movements to service the demand in 
Reno, NV. As such, no changes were made to the Class I differentials 
assigned in this region from the recommended decision to the final 
decision.
Pacific Northwest
    In the Pacific Northwest, the proposed Class I differential in 
Seattle increased $0.30 above the May result to reflect unique 
geography and the cost of serving an urban market. Likewise, the 
proposed differential in Portland, Oregon, was increased from the May 
result to align with Seattle to provide for producer and handler 
equity. Testimony reflected both cities are equidistant to milk 
supplies in south central Washington, and both have similar supply 
issues. The remaining proposed differentials reflect a $0.20 banding 
around the May results.
    MIG commented that the Department deviated from the model results 
in the Pacific Northwest without justification. It also stated that the 
$0.20 banding of the Class I differentials is inconsistent with the 
Department's proposals for other regions and highlighted several 
specific differentials of concern. The Department reviewed the record 
regarding the differentials in the Pacific Northwest FMMO. While MIG 
contends Portland and Seattle are not comparable demand areas, the 
record shows similar population areas facing similar geographic and 
traffic congestion issues that cause milk supply logistical issues 
necessitating an increase over the model results. The differential for 
Spokane, Washington was proposed at the model result as it does not 
face some of the same logistical challenges. The model-recommended 
$2.40 differential for Spokane, which is higher than the surrounding 
areas, will encourage milk to move to the demand location. As for the 
banding of differentials in the middle of the Pacific Northwest-
marketing area, as referenced in MIGs comment, the model suggested a 
more gradual differential gradient between the milk supply and demand 
centers. However, the record does not demonstrate that there are plants 
located in many of those areas to justify the numerous differential 
areas. The decision does not find such additional differential values 
necessary to move milk from supply and demand areas. As such, no 
changes were made to the Class I differentials assigned in this region 
from the recommended decision to the final decision.
Summary
    In total, the Class I differentials proposed in this decision 
reflect a simple average of $0.01 higher than the May results ($3.81 
versus $3.80) for the 3,108 counties in the contiguous U.S.
    The following is a general description of the changes from the May 
results:

------------------------------------------------------------------------
      Number of counties        Range of difference    Number of plants
------------------------------------------------------------------------
5............................  -$0.40 to -$0.60.....                   1
227..........................  -$0.20 to -$0.30.....                  13
2,648........................  -$0.10 to +$0.10.....                 171
187..........................  +$0.20 to +$0.30.....                  34
41...........................  +$0.40 to $0.60......                  23
------------------------------------------------------------------------

    An analysis shows the proposed differentials, on a weighted average 
basis for FMMO Class I milk (2019-2023), increased $1.24 per cwt. Based 
on pooled Class I milk during 2019-2023, the current weighted Class I 
differential was $2.63 per cwt. The differentials proposed in this 
decision would have increased the weighted average to $3.87 per cwt.
    This final decision details all requested changes to the proposed 
Class I differentials from the recommended decision to the final 
decision. The Department reviewed and considered all 33 comments 
received on the Class I differentials but found, as detailed by region 
above, that any additional changes not made in this final decision were 
either already considered or were not supported by record evidence.
Other Issues
    In post-hearing briefs, some stakeholders objected to NMPF's use of 
producer costs of production for proposing updated Class I differential 
levels. As described above, such costs were not considered in the 
development of the Class I differentials recommended in this decision.
    As discussed above, with regard to the Appalachian region, another 
argument made in post-hearing briefs and in

[[Page 95535]]

comments centered on the amended TCBF provisions in the Appalachian and 
Southeast FMMOs and newly established DPDC provisions in the 
Appalachian, Florida, and Southeast FMMOs. These provisions became 
effective March 1, 2024, and were a result of a regional rulemaking 
proceeding to address the chronic milk supply issues of those regions 
89 FR 6401 (Feb.1, 2024). As the proceeding resulted in increased 
transportation cost related assessments on Class I handlers, some 
stakeholders argue no changes should be made to the Class I 
differentials until the impact of these regional changes can be 
observed. MIG, New Dairy, NMPF, and IDFA reiterated these concerns in 
their comments on the recommended decision and requested the Class I 
differentials in these orders be reduced by the amount of the TCBF and 
DPDC payments.
    The Appalachian, Florida, and Southeast FMMOs adopted marketwide 
service payment provisions that authorize year-round assessments on 
Class I milk, paid by handlers, for payment to handlers for Class I 
deliveries made to their plants according to the TCBF and DPDC 
provisions. Under the marketwide service provisions of the AMAA, 
marketwide service programs are only authorized to pay monies to 
handlers 7 U.S.C. 608c(5)(J). Therefore, it would not be appropriate to 
delay consideration of Class I differential levels, monies which are 
paid to producers (both cooperative and independent), for TCBF and DPDC 
payments which are made only to handlers. As was stated in the 
recommended decision, if Class I differential levels are changed as a 
result of this proceeding, thus, impacting the market conditions which 
led to the creation of the marketwide service programs, stakeholders 
could petition USDA to make changes to the TCBF and DPDC provisions.

Demand Elasticity

    IDFA, and Nestle USA, commented that Class I differentials should 
not be increased until a thorough econometric study is conducted to 
inform decision-making. This study, they argued, should center around 
the relationship between fluid milk prices and retail consumer demand, 
otherwise referred to by these and other commentors as changes in 
demand elasticity. Several Class I processors such as United Dairy, 
Crystal Creamery, New Dairy, and Lamers Dairy, as well as the trade 
association Pennsylvania Association of Milk Dealers, provided similar 
comments that described, in their view, changes in consumer demand 
because of higher prices and competition from alternative beverages in 
the marketplace. MIG, IDFA, and PAMD go further in their comments, 
repeating arguments made at the hearing and in post-hearing briefs 
centered around the notion that USDA is not authorized to raise 
differentials because it would decrease demand, which they believe is a 
violation of the AMAA. More specifically, IDFA and MIG commented that 
the AMAA requires that FMMOs: (1) consider economic conditions which 
affect market supply and consumer demand, and (2) be in the public 
interest. IDFA acknowledged the Department's explanation in the 
recommended decision that the AMAA does not explicitly state that FMMO 
provisions should encourage Class I sales. However, IDFA opined that 
the AMAA does so implicitly. In its view, per the AMAA, FMMOs should 
never reduce quantity demanded by consumers.
    During the hearing and in post-hearing briefs, Class I processors 
and manufacturers similarly argued that the Department should consider 
the impact to Class I sales when evaluating changes as they allege the 
AMAA objective of ensuring adequate milk supplies implies the FMMO 
should encourage fluid consumption. They further argued that consumer 
demand for fluid milk is elastic and, therefore, raising Class I 
differentials would be disorderly as it would result in a decline in 
Class I sales.
    As to whether fluid milk has an inelastic or elastic demand, four 
studies were entered onto the record, some drawing opposite 
conclusions. One study found the consumer demand for regular milk to be 
inelastic, while specialty milk (i.e., lactose free) to be price 
elastic. A second study concluded consumer demand was elastic, but less 
so than was determined in the fourth study on the record. Another 
witness reviewed time series data published within the last 20 years, 
concluding that consumer demand for fluid milk remains inelastic with 
respect to milk prices.
    The recommended decision highlighted the fourth study which looked 
at cross-sectional data over relatively short periods of time as an 
example. This econometric study, entered on behalf of IDFA and 
emphasized by IDFA and MIG in their comments on the recommended 
decision, found the retail level demand for fluid milk to be elastic. 
An analysis of the IDFA study indicates that other than product prices 
and quantities, no other variables were considered that could explain 
changes in demand. Some variables that are generally recognized to be 
determinants of demand outside of price include, but are not limited 
to, household income, demographics, and measures of preferences. While 
the IDFA study found retail price affects retail milk demand, it did 
not demonstrate price was the only factor that impacts demand. By 
design, the study estimated that only prices for milk and competing 
products could account for changes in quantities sold. Certainly, more 
studies may be warranted given the evolution of the dairy industry in 
the last 25 years. However, a conclusion of the long-term consumer 
demand elasticity of fluid milk cannot be drawn from the varying 
results of the four studies contained in the record.
    MIG and IDFA arguments around elasticity rely on the premise that 
fluid milk product demand at the retail level is elastic and thus, any 
increase in Class I prices would lower consumer demand, which they 
assert would not be in the public interest and violate the AMAA policy 
objective. The AMAA authorizes marketing orders to provide for more 
orderly marketing conditions. In the context of milk prices, the AMAA 
states FMMOs shall ``. . . insure a sufficient quantity of pure and 
wholesome milk, and be in the public interest . . .'' 7 U.S.C. 
608c(18). This decision emphasizes that one objective of FMMOs is to 
ensure minimum milk prices reflect supply and demand conditions. In so 
doing, FMMOs satisfy the AMAA's public interest requirement by ensuring 
buyers are purchasing raw milk at minimum prices that reflect current 
market conditions.
    Upon review of comments received and all record evidence, the 
Department maintains the changes proposed in this decision would ensure 
the FMMO pricing provisions reflect current supply and demand 
conditions. This decision does not find that the AMAA explicitly states 
or implies FMMO provisions should encourage Class I sales and thus, a 
determination of fluid milk consumer demand elasticity is not required. 
As described in detail throughout this decision, the record of this 
proceeding reveals the cost of supplying the Class I market has 
increased. This was demonstrated through the USDSS model, which was an 
academic exercise to quantify the location-specific cost of servicing 
Class I plants, and corroborated through witness testimony concerning 
increasing transportation costs and distances traveled for milk to 
supply Class I plants.
b. Class II Differential
    The FMMO system currently prices milk used in Class II products

[[Page 95536]]

uniformly. The Class II skim milk price is computed as the advanced 
Class IV skim price plus $0.70 per cwt. The Class II butterfat price is 
the Class III butterfat price for the month, plus the same amount 
expressed as $0.007 per pound. The $0.70 differential between the Class 
IV and Class II skim milk prices, adopted in the Order Reform Final 
Decision, was based on an estimate of the cost of drying condensed milk 
and re-wetting the solids for use in Class II products, which was seen 
as an economic, upper-bound constraint on the use of fresh milk in 
Class II processing.
    Proposal 21, submitted by AFBF, seeks to update the Class II 
differential to $1.56 per cwt. AFBF derived the proposed level by 
updating the factors originally used to determine drying cost. Those 
include the NFDM make allowance and the nonfat solids yield factor used 
in the FMMO formulas, and butterfat and nonfat solids levels in FMMO 
pooled milk. As rewetting solids, the practice of first reconstituting 
powdered milk with water, is no longer a common practice, AFBF argued 
such cost no longer needs to be considered. AFBF opined a $1.56 Class 
II differential would not be high enough to incentivize the 
substitution of Class IV products for fresh milk. AFBF claimed the 
additional Class II value added to the marketwide pool because of the 
higher differential would reduce the occurrence of negative PPDs and 
depooling.
    Opponents of Proposal 21 argued such a large Class II differential 
increase would incentivize the substitution of Class IV products in the 
manufacture of Class II products. Class I processors, who also have 
Class II production, argued such an increase would put them at a 
competitive disadvantage with standalone Class II manufacturers. They 
indicated processors who produce both products are required to pool all 
milk received at the plant but processors who only produce Class II 
products can opt to pool milk.
    As indicated in the recommended decision, record evidence does not 
support adoption of Proposal 21. Mathematically, the formula used by 
AFBF to compute an updated Class II differential mimics the calculation 
from Order Reform. However, it is clear from record testimony that more 
than doubling the current Class II differential, as proposed by AFBF, 
would result in handler equity issues and increased substitution of 
Class IV products in lieu of fresh fluid milk in Class II products. 
Class II production is unusual, if not unique, among dairy processing 
facilities as some products are produced at Class I plants, and others 
at standalone Class II plants. Because all milk received at Class I 
plants is required to be pooled, regardless of use, this can result in 
the same products having different regulatory burdens depending on the 
type of plant where it was produced. That phenomenon has existed since 
2000. However, the record shows that instances of milk in Class II 
products produced from Class II plants not being pooled could 
dramatically increase with adoption of Proposal 21. The result would be 
a competitive disadvantage for Class I plants by creating a pricing 
inequity that would produce disorderly marketing conditions.
    AMS received four comments specific to the Class II differential. 
NMPF and the Arizona Farm Bureau Federation commented in support of the 
decision to maintain the current Class II differential. Comments filed 
in opposition to the recommended decision, from AFBF and the Tennessee 
Farm Bureau, requested that USDA reconsider increasing the Class II 
differential for the final decision for reasons previously communicated 
on the record, which were specifically addressed and rejected in the 
recommended decision. Therefore, this final decision continues to find 
it appropriate to maintain the current Class II differential. 
Accordingly, Proposal 21 is denied.

Conforming Changes

    Proposal 22, authored by AMS, would authorize changes, where 
necessary, in the respective marketing orders to conform with any 
amendments resulting from this proceeding. The record contains no 
opposition to the proposal. Accordingly, this decision recommends a 
series of conforming changes to ensure the proposed amendments to the 
uniform pricing formulas applicable to the respective marketing orders 
can be effectuated. The proposed changes are as follows:
    1. Amending 7 CFR 1000.43 to remove references to 1135.11, as the 
order is no longer in effect. Also adding 7 CFR 1000.43(e) which would 
define skim milk used in ultra-pasteurized or aseptically processed and 
packaged fluid milk products eligible for the Class I ESL adjustment be 
limited to available Class I producer milk classified pursuant to the 
allocation process contained in Section1000.44(a);
    2. Amending 7 CFR 1000.50 to remove all references to NASS and 
replace them with AMS;
    3. Amending the following counties (and FIPS code) in 7 CFR 
1000.52, to be consistent with the Federal Information Procession 
Series maintained by the Federal Communication Commission: Yellowstone, 
MT (30113) has been merged into Gallatin and Park Counties, MT (30031) 
(30067), Shannon, SD (46113) has been renamed Oglala Lakota, SD 
(46102), Bedford City, VA (51515) has been merged into Bedford County, 
VA (51019), and Clifton Forge City, VA (51560) has been merged into 
Alleghany County, VA (51005). Additionally, amending the FIPS code for 
Pierce, WA (53053) as it was original printed incorrectly. The 
differentials are also listed in order of FIPS code, not state 
abbreviation, in order to be listed alphabetically by state;
    4. Amending 7 CFR 1000.76, provisions governing partially regulated 
distributing plants to add ``applicable'' to references to the Class I 
price throughout the section to indicate application of a Class I ESL 
adjustment, when applicable, and remove the reference in 7 CFR 
1000.76(b)(1)(i) to 7 CFR 1135.11 as the latter is no longer in effect;
    5. Amend the introductory paragraphs of 7 CFR 1001.60, 1005.60, 
1006.60, 1007.60, 1030.60, 1032.60, 1033.60, 1051.60, 1124.60, 1126.60, 
and 1131.60, sections which calculate the handler's value of milk in 
each FMMO. Section .60 of each order would be revised with the addition 
of an instruction to compute an adjustment to a handler's producer milk 
obligation for Class I producer milk eligible for the Class I ESL 
adjustment. The adjustment would be calculated by multiplying the 
monthly Class I ESL adjustment by the monthly pounds of eligible Class 
I skim milk. The instruction would be inserted prior to the instruction 
regarding reconstituted milk for each order. Other paragraphs are 
proposed to be redesignated to reflect the insertion;
    6. Further amending 7 CFR 1005.60(g), 1006.60(g)-(i), and 
1007.60(g) to remove language pertaining to transportation cost 
reimbursement during the months of January 2005 through March 2005 and 
September 2017, which is no longer in effect;
    7. Amending 7 CFR 1005.51, 1006.51, and 1007.51 to remove Class I 
price adjustments in the Appalachian, Florida, and Southeast FMMOs. The 
order language would no longer be necessary with the proposed 
amendments to the Class I differentials; and
    8. Amending 7 CFR 1170.8 to remove the collection of 500-pound 
barrel price information. The order language would no longer be 
necessary with the proposed amendments to cheese survey.

[[Page 95537]]

Rulings on Proposed Findings and Conclusions

    AMS has also considered proposed findings submitted in post-hearing 
briefs, officially noticed documents, and comments and exceptions filed 
in response to the recommended decision to formulate this proposed 
FMMO. These briefs, proposed findings and conclusions, comments and 
exceptions, and the evidence in the record were considered in making 
the findings and conclusions set forth above. To the extent that the 
suggested findings and conclusions filed by interested parties are 
inconsistent with the findings and conclusions set forth herein, the 
claims to make such findings or reach such conclusions are denied for 
the reasons previously stated in this decision.

General Findings

    The findings and determinations hereinafter set forth supplement 
those that were made when the Northeast, Southeast, Appalachian, 
Florida, Upper Midwest, Central, Mideast, California, Southwest, 
Pacific Northwest, and Arizona FMMOs were first issued and when they 
were amended. The previous findings and determinations are hereby 
ratified and confirmed, except where they may conflict with those set 
forth herein.
    The following findings are hereby made with respect to the 
aforenamed marketing agreements and orders:
    a. The tentative marketing agreements and the orders, as hereby 
proposed to be amended, and all of the terms and conditions thereof, 
will tend to effectuate the declared policy of the Act;
    b. The parity prices of milk as determined pursuant to section 2 of 
the Act are not reasonable with respect to the price of feeds, 
available supplies of feeds, and other economic conditions that affect 
market supply and demand for milk in the marketing area, and the 
minimum prices specified in the proposed marketing agreements and the 
orders are such prices as will reflect the aforesaid factors, ensure a 
sufficient quantity of pure and wholesome milk, and be in the public 
interest; and
    c. The proposed marketing agreements and the orders will regulate 
the handling of milk in the same manner as and will be applicable only 
to persons in the respective classes of industrial and commercial 
activity specified in, the marketing agreements upon which a hearing 
have been held.
    d. All milk and milk products handled by handlers, as defined in 
the marketing agreements and the orders as hereby proposed to be 
amended, are in the current of interstate commerce or directly burden, 
obstruct, or affect interstate commerce in milk or its products.

Recommended Marketing Agreements and Orders

    The recommended marketing agreements are not included in this 
decision because the regulatory provisions thereof would be the same as 
those contained in the orders, as hereby proposed to be amended. The 
following orders regulating the handling of milk in the Northeast, 
Appalachian, Florida, Southeast, Upper Midwest, Central, Mideast, 
California, Pacific Northwest, Southwest, and Arizona marketing areas 
are recommended as the detailed and appropriate means by which the 
foregoing conclusions may be carried out.
    January 2024 is hereby determined to be the representative period 
for the purpose of ascertaining whether the issuance of the orders, as 
amended and as hereby proposed to be amended the uniform pricing 
provisions in the Northeast, Appalachian, Florida, Southeast, Upper 
Midwest, Central, Mideast, California, Pacific Northwest, Southwest, 
and Arizona FMMOs, are approved or favored by producers, as defined 
under the terms of the orders (as amended and as hereby proposed to be 
amended), who during such representative period were engaged in the 
production of milk for sale within the aforesaid marketing areas.

Referendum Order To Determine Producer Approval; Determination of 
Representative Period; and Designation of Referendum Agent

    It is hereby directed that a referendum be conducted and completed 
on December 31, 2024, in accordance with the procedures for the conduct 
of referenda (7 CFR 900.300-311), to determine whether the issuance of 
the order regulating the handling of milk in the Northeast, 
Appalachian, Florida, Southeast, Upper Midwest, Central, Mideast, 
California, Pacific Northwest, Southwest, and Arizona marketing areas 
is approved or favored by producers, as defined under the terms of the 
order, who during such representative period were engaged in the 
production of milk for sale within the aforesaid marketing area. The 
representative period for the conduct of such referenda is hereby 
determined to be January 2024. The agent of the Secretary of 
Agriculture to conduct such referenda is hereby designated to be the 
Director of Operations and Accountability, Dairy Program, AMS, USDA.

List of Subjects in 7 CFR Parts 1000, 1001, 1005, 1006, 1007, 1030, 
1032, 1033, 1051, 1124, 1126, 1131, and 1170

    Milk marketing orders.

Order Amending the Orders Regulating the Handling of Milk in the 
Northeast, Appalachian, Florida, Southeast, Upper Midwest, Central, 
Mideast, California, Pacific Northwest, Southwest, and Arizona 
Marketing Areas

    (This order shall not become effective unless and until the 
requirements of Sec.  900.14 of the rules of practice and procedure 
governing proceedings to formulate marketing agreements and marketing 
orders have been met.)

Findings and Determinations

    The findings and determinations hereinafter set forth supplement 
those that were made when the orders were first issued and when they 
were amended. The previous findings and determinations are hereby 
ratified and confirmed, except where they may conflict with those set 
forth herein.
    (a) Findings. A public hearing was held upon certain proposed 
amendments to the marketing agreement and to the orders regulating the 
handling of milk in the Northeast, Southeast, Appalachian, Florida, 
Upper Midwest, Central, Mideast, California, Southwest, Pacific 
Northwest, and Arizona marketing areas. The hearing was held pursuant 
to the provisions of the AMAA, as amended (7 U.S.C. 601-674), and the 
applicable rules of practice and procedure governing the formulation of 
marketing agreements and marketing orders (7 CFR part 900).
    Upon the basis of the evidence introduced at such hearing and the 
record thereof, it is determined that:
    (1) The said orders as hereby amended, and all of the terms and 
conditions thereof, will tend to effectuate the declared policy of the 
AMAA;
    (2) The parity prices of milk, as determined pursuant to section 2 
of the AMAA, are not reasonable in view of the price of feeds, 
available supplies of feeds, and other economic conditions which affect 
market supply and demand for milk in the aforesaid marketing area. The 
minimum prices specified in the orders as hereby amended are such 
prices as will reflect the aforesaid factors, ensure a sufficient 
quantity of pure and wholesome milk, and be in the public interest; and
    (3) The said orders, as hereby amended, regulate the handling of 
milk in the same manner as and are applicable only to persons in the 
respective classes of industrial or

[[Page 95538]]

commercial activity specified in, marketing agreements upon which a 
hearing has been held.

Order Relative to Handling

    It is therefore ordered, that on and after the effective date 
hereof, the handling of milk in the Northeast, Southeast, Appalachian, 
Florida, Upper Midwest, Central, Mideast, California, Southwest, 
Pacific Northwest, and Arizona marketing areas shall be in conformity 
to and in compliance with the terms and conditions of the orders, as 
amended, and as hereby amended, as follows:
    For the reasons set forth in the preamble, AMS proposes to amend 7 
CFR chapter X as follows:

PART 1000--GENERAL PROVISIONS OF FEDERAL MILK MARKETING ORDERS

0
1. The authority citation for 7 CFR part 1000 continues to read as 
follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
2. Amend Sec.  1000.43 by:
0
a. In paragraph (a) and paragraph (b) introductory text, removing the 
words ``and Sec.  1135.11 of this chapter'';
0
b. In paragraph (b)(2) removing the words ``or Sec.  1135.11 of this 
chapter''; and
0
c. Adding paragraph (e).
    The addition reads as follows:


Sec.  1000.43  General classification rules.

* * * * *
    (e) Any skim milk used in ultra-pasteurized or aseptically 
processed and packaged fluid milk products shall be allocated in 
combination with Class I milk and the quantity of producer milk 
eligible to be priced shall be limited to available Class I producer 
milk classified pursuant to Sec.  1000.44(a).
0
3. Revise and republish Sec.  1000.50 to read as follows:


Sec.  1000.50  Class prices, component prices, and advanced pricing 
factors.

    Class prices per hundredweight of milk containing 3.5 percent 
butterfat, component prices, and advanced pricing factors shall be as 
follows. The prices and pricing factors described in paragraphs (a), 
(b), (c), (e), (f), and (q) of this section shall be based on a 
weighted average of the most recent 2 weekly prices announced by the 
Agricultural Marketing Service (AMS) before the 24th day of the month. 
These prices shall be announced on or before the 23rd day of the month 
and shall apply to milk received during the following month. The prices 
described in paragraphs (g) through (p) of this section shall be based 
on a weighted average for the preceding month of weekly prices 
announced by AMS on or before the 5th day of the month and shall apply 
to milk received during the preceding month. The price described in 
paragraph (d) of this section shall be derived from the Class II skim 
milk price announced on or before the 23rd day of the month preceding 
the month to which it applies and the butterfat price announced on or 
before the 5th day of the month following the month to which it 
applies.
    (a) Class I price. The Class I price per hundredweight, rounded to 
the nearest cent, shall be 0.965 times the Class I skim milk price plus 
3.5 times the Class I butterfat price.
    (b) Class I skim milk price. The Class I skim milk price per 
hundredweight shall be the adjusted Class I differential specified in 
Sec.  1000.52, plus the higher of the advanced pricing factors computed 
in paragraph (q)(1) or (2) of this section rounded to the nearest cent.
    (c) Class I butterfat price. The Class I butterfat price per pound 
shall be the adjusted Class I differential specified in Sec.  1000.52 
divided by 100, plus the advanced butterfat price computed in paragraph 
(q)(3) of this section.
    (d) Class II price. The Class II price per hundredweight, rounded 
to the nearest cent, shall be .965 times the Class II skim milk price 
plus 3.5 times the Class II butterfat price.
    (e) Class II skim milk price. The Class II skim milk price per 
hundredweight shall be the advanced Class IV skim milk price computed 
in paragraph (q)(2) of this section plus 70 cents.
    (f) Class II nonfat solids price. The Class II nonfat solids price 
per pound, rounded to the nearest one-hundredth cent, shall be the 
Class II skim milk price divided by 9.3.
    (g) Class II butterfat price. The Class II butterfat price per 
pound shall be the butterfat price plus $0.007.
    (h) Class III price. The Class III price per hundredweight, rounded 
to the nearest cent, shall be 0.965 times the Class III skim milk price 
plus 3.5 times the butterfat price.
    (i) Class III skim milk price. The Class III skim milk price per 
hundredweight, rounded to the nearest cent, shall be the protein price 
per pound times 3.30 plus the other solids price per pound times 6.00.
    (j) Class IV price. The Class IV price per hundredweight, rounded 
to the nearest cent, shall be 0.965 times the Class IV skim milk price 
plus 3.5 times the butterfat price.
    (k) Class IV skim milk price. The Class IV skim milk price per 
hundredweight, rounded to the nearest cent, shall be the nonfat solids 
price per pound times 9.30.
    (l) Butterfat price. The butterfat price per pound, rounded to the 
nearest one-hundredth cent, shall be the U.S. average AMS AA Butter 
survey price reported by the Department for the month, less 22.72 
cents, with the result multiplied by 1.211.
    (m) Nonfat solids price. The nonfat solids price per pound, rounded 
to the nearest one-hundredth cent, shall be the U.S. average AMS nonfat 
dry milk survey price reported by the Department for the month, less 
23.93 cents and multiplying the result by 0.99.
    (n) Protein price. The protein price per pound, rounded to the 
nearest one-hundredth cent, shall be computed as follows:
    (1) The U.S. average AMS survey price for 40-lb. block cheese 
reported by the Department for the month;
    (2) Subtract 25.19 cents from the price computed pursuant to 
paragraph (n)(1) of this section and multiply the result by 1.383;
    (3) Add to the amount computed pursuant to paragraph (n)(2) of this 
section an amount computed as follows:
    (i) Subtract 25.19 cents from the price computed pursuant to 
paragraph (n)(1) of this section and multiply the result by 1.589; and
    (ii) Subtract 0.91 times the butterfat price computed pursuant to 
paragraph (l) of this section from the amount computed pursuant to 
paragraph (n)(3)(i) of this section; and
    (iii) Multiply the amount computed pursuant to paragraph (n)(3)(ii) 
of this section by 1.17.
    (o) Other solids price. The other solids price per pound, rounded 
to the nearest one-hundredth cent, shall be the U.S. average AMS dry 
whey survey price reported by the Department for the month minus 26.68 
cents, with the result multiplied by 1.03.
    (p) Somatic cell adjustment. The somatic cell adjustment per 
hundredweight of milk shall be determined as follows:
    (1) Multiply 0.0005 by the weighted average price computed pursuant 
to paragraph (n)(1) of this section and round to the 5th decimal place;
    (2) Subtract the somatic cell count of the milk (reported in 
thousands) from 350; and
    (3) Multiply the amount computed in paragraph (p)(1) of this 
section by the amount computed in paragraph (p)(2) of this section and 
round to the nearest full cent.
    (q) Advanced pricing factors. For the purpose of computing the 
Class I skim milk price, the Class II skim milk price, the Class II 
nonfat solids price, and the

[[Page 95539]]

Class I butterfat price for the following month, the following pricing 
factors shall be computed using the weighted average of the 2 most 
recent AMS U.S. average weekly survey prices announced before the 24th 
day of the month:
    (1) An advanced Class III skim milk price per hundredweight, 
rounded to the nearest cent, shall be computed as follows:
    (i) Following the procedure set forth in paragraphs (n) and (o) of 
this section, but using the weighted average of the 2 most recent AMS 
U.S. average weekly survey prices announced before the 24th day of the 
month, compute a protein price and an other solids price;
    (ii) Multiply the protein price computed in paragraph (q)(1)(i) of 
this section by 3.30;
    (iii) Multiply the other solids price per pound computed in 
paragraph (q)(1)(i) of this section by 6.0; and
    (iv) Add the amounts computed in paragraphs (q)(1)(ii) and (iii) of 
this section.
    (2) An advanced Class IV skim milk price per hundredweight, rounded 
to the nearest cent, shall be computed as follows:
    (i) Following the procedure set forth in paragraph (m) of this 
section, but using the weighted average of the 2 most recent AMS U.S. 
average weekly survey prices announced before the 24th day of the 
month, compute a nonfat solids price; and
    (ii) Multiply the nonfat solids price computed in paragraph 
(q)(2)(i) of this section by 9.30.
    (3) An advanced butterfat price per pound rounded to the nearest 
one-hundredth cent, shall be calculated by computing a weighted average 
of the 2 most recent U.S. average AMS AA Butter survey prices announced 
before the 24th day of the month, subtracting 22.72 cents from this 
average, and multiplying the result by 1.211.
    (r) Class I Extended Shelf Life (ESL) adjustment. The Class I ESL 
adjustment, whether positive or negative, rounded to the nearest cent, 
shall be computed as follows:
    (1) Compute the simple average of the advanced pricing factors 
computed in paragraphs (q)(1) and (2) of this section;
    (2) Add the following:
    (i) Determine the higher of the advanced pricing factors computed 
in paragraphs (q)(1) and (2) of this section, for each of the preceding 
13 to 36 months;
    (ii) Calculate the average of the advanced pricing factors computed 
in paragraphs (q)(1) and (2) of this section, for each of the preceding 
13 to 36 months;
    (iii) For each of the preceding 13 to 36 months, subtract the 
amount computed in paragraph (r)(2)(ii) of this section from the amount 
computed in paragraph (r)(2)(i) of this section; and
    (iv) Compute the average of the differences computed in paragraph 
(r)(2)(iii) of this section.
    (3) Subtract the higher of the advanced pricing factors computed in 
paragraphs (q)(1) and (2) of this section.
0
4. Revise and republish Sec.  1000.52 to read as follows:


Sec.  1000.52  Adjusted Class I differentials.

    The Class I differential adjusted for location to be used in Sec.  
1000.50(b) and (c) shall be as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                                      Class I
                                                                                                   differential
               County/parish/city                             State                  FIPS code     adjusted for
                                                                                                     location
----------------------------------------------------------------------------------------------------------------
AUTAUGA........................................  AL                                        01001            5.80
BALDWIN........................................  AL                                        01003            5.80
BARBOUR........................................  AL                                        01005            5.80
BIBB...........................................  AL                                        01007            5.60
BLOUNT.........................................  AL                                        01009            5.40
BULLOCK........................................  AL                                        01011            5.80
BUTLER.........................................  AL                                        01013            5.80
CALHOUN........................................  AL                                        01015            5.60
CHAMBERS.......................................  AL                                        01017            5.60
CHEROKEE.......................................  AL                                        01019            5.40
CHILTON........................................  AL                                        01021            5.60
CHOCTAW........................................  AL                                        01023            5.80
CLARKE.........................................  AL                                        01025            5.80
CLAY...........................................  AL                                        01027            5.60
CLEBURNE.......................................  AL                                        01029            5.60
COFFEE.........................................  AL                                        01031            5.80
COLBERT........................................  AL                                        01033            4.90
CONECUH........................................  AL                                        01035            5.80
COOSA..........................................  AL                                        01037            5.60
COVINGTON......................................  AL                                        01039            5.80
CRENSHAW.......................................  AL                                        01041            5.80
CULLMAN........................................  AL                                        01043            5.40
DALE...........................................  AL                                        01045            5.80
DALLAS.........................................  AL                                        01047            5.80
DE KALB........................................  AL                                        01049            5.40
ELMORE.........................................  AL                                        01051            5.80
ESCAMBIA.......................................  AL                                        01053            5.80
ETOWAH.........................................  AL                                        01055            5.40
FAYETTE........................................  AL                                        01057            5.40
FRANKLIN.......................................  AL                                        01059            5.20
GENEVA.........................................  AL                                        01061            5.80
GREENE.........................................  AL                                        01063            5.60
HALE...........................................  AL                                        01065            5.60
HENRY..........................................  AL                                        01067            5.80
HOUSTON........................................  AL                                        01069            5.80
JACKSON........................................  AL                                        01071            5.20
JEFFERSON......................................  AL                                        01073            5.60
LAMAR..........................................  AL                                        01075            5.40

[[Page 95540]]

 
LAUDERDALE.....................................  AL                                        01077            4.90
LAWRENCE.......................................  AL                                        01079            5.20
LEE............................................  AL                                        01081            5.80
LIMESTONE......................................  AL                                        01083            5.20
LOWNDES........................................  AL                                        01085            5.80
MACON..........................................  AL                                        01087            5.80
MADISON........................................  AL                                        01089            5.20
MARENGO........................................  AL                                        01091            5.80
MARION.........................................  AL                                        01093            5.20
MARSHALL.......................................  AL                                        01095            5.40
MOBILE.........................................  AL                                        01097            5.80
MONROE.........................................  AL                                        01099            5.80
MONTGOMERY.....................................  AL                                        01101            5.80
MORGAN.........................................  AL                                        01103            5.40
PERRY..........................................  AL                                        01105            5.60
PICKENS........................................  AL                                        01107            5.40
PIKE...........................................  AL                                        01109            5.80
RANDOLPH.......................................  AL                                        01111            5.60
RUSSELL........................................  AL                                        01113            5.80
ST. CLAIR......................................  AL                                        01115            5.60
SHELBY.........................................  AL                                        01117            5.60
SUMTER.........................................  AL                                        01119            5.60
TALLADEGA......................................  AL                                        01121            5.60
TALLAPOOSA.....................................  AL                                        01123            5.60
TUSCALOOSA.....................................  AL                                        01125            5.60
WALKER.........................................  AL                                        01127            5.40
WASHINGTON.....................................  AL                                        01129            5.80
WILCOX.........................................  AL                                        01131            5.80
WINSTON........................................  AL                                        01133            5.40
APACHE.........................................  AZ                                        04001            2.30
COCHISE........................................  AZ                                        04003            2.40
COCONINO.......................................  AZ                                        04005            2.40
GILA...........................................  AZ                                        04007            2.40
GRAHAM.........................................  AZ                                        04009            2.40
GREENLEE.......................................  AZ                                        04011            2.40
LA PAZ.........................................  AZ                                        04012            2.50
MARICOPA.......................................  AZ                                        04013            2.60
MOHAVE.........................................  AZ                                        04015            2.50
NAVAJO.........................................  AZ                                        04017            2.30
PIMA...........................................  AZ                                        04019            2.40
PINAL..........................................  AZ                                        04021            2.60
SANTA CRUZ.....................................  AZ                                        04023            2.40
YAVAPAI........................................  AZ                                        04025            2.40
YUMA...........................................  AZ                                        04027            2.50
ARKANSAS.......................................  AR                                        05001            4.60
ASHLEY.........................................  AR                                        05003            4.90
BAXTER.........................................  AR                                        05005            3.60
BENTON.........................................  AR                                        05007            3.20
BOONE..........................................  AR                                        05009            3.30
BRADLEY........................................  AR                                        05011            4.60
CALHOUN........................................  AR                                        05013            4.60
CARROLL........................................  AR                                        05015            3.30
CHICOT.........................................  AR                                        05017            4.90
CLARK..........................................  AR                                        05019            4.00
CLAY...........................................  AR                                        05021            4.30
CLEBURNE.......................................  AR                                        05023            4.00
CLEVELAND......................................  AR                                        05025            4.60
COLUMBIA.......................................  AR                                        05027            4.30
CONWAY.........................................  AR                                        05029            4.00
CRAIGHEAD......................................  AR                                        05031            4.30
CRAWFORD.......................................  AR                                        05033            3.30
CRITTENDEN.....................................  AR                                        05035            4.60
CROSS..........................................  AR                                        05037            4.30
DALLAS.........................................  AR                                        05039            4.30
DESHA..........................................  AR                                        05041            4.90
DREW...........................................  AR                                        05043            4.60
FAULKNER.......................................  AR                                        05045            4.00
FRANKLIN.......................................  AR                                        05047            3.60
FULTON.........................................  AR                                        05049            4.00
GARLAND........................................  AR                                        05051            4.00
GRANT..........................................  AR                                        05053            4.30

[[Page 95541]]

 
GREENE.........................................  AR                                        05055            4.30
HEMPSTEAD......................................  AR                                        05057            4.00
HOT SPRING.....................................  AR                                        05059            4.30
HOWARD.........................................  AR                                        05061            4.00
INDEPENDENCE...................................  AR                                        05063            4.00
IZARD..........................................  AR                                        05065            4.00
JACKSON........................................  AR                                        05067            4.30
JEFFERSON......................................  AR                                        05069            4.60
JOHNSON........................................  AR                                        05071            3.60
LAFAYETTE......................................  AR                                        05073            4.30
LAWRENCE.......................................  AR                                        05075            4.30
LEE............................................  AR                                        05077            4.60
LINCOLN........................................  AR                                        05079            4.60
LITTLE RIVER...................................  AR                                        05081            3.60
LOGAN..........................................  AR                                        05083            3.60
LONOKE.........................................  AR                                        05085            4.30
MADISON........................................  AR                                        05087            3.30
MARION.........................................  AR                                        05089            3.60
MILLER.........................................  AR                                        05091            4.00
MISSISSIPPI....................................  AR                                        05093            4.30
MONROE.........................................  AR                                        05095            4.60
MONTGOMERY.....................................  AR                                        05097            4.00
NEVADA.........................................  AR                                        05099            4.30
NEWTON.........................................  AR                                        05101            3.60
OUACHITA.......................................  AR                                        05103            4.30
PERRY..........................................  AR                                        05105            4.00
PHILLIPS.......................................  AR                                        05107            4.60
PIKE...........................................  AR                                        05109            4.00
POINSETT.......................................  AR                                        05111            4.30
POLK...........................................  AR                                        05113            3.60
POPE...........................................  AR                                        05115            3.60
PRAIRIE........................................  AR                                        05117            4.30
PULASKI........................................  AR                                        05119            4.30
RANDOLPH.......................................  AR                                        05121            4.00
ST. FRANCIS....................................  AR                                        05123            4.60
SALINE.........................................  AR                                        05125            4.30
SCOTT..........................................  AR                                        05127            3.60
SEARCY.........................................  AR                                        05129            3.60
SEBASTIAN......................................  AR                                        05131            3.60
SEVIER.........................................  AR                                        05133            3.60
SHARP..........................................  AR                                        05135            4.00
STONE..........................................  AR                                        05137            4.00
UNION..........................................  AR                                        05139            4.60
VAN BUREN......................................  AR                                        05141            4.00
WASHINGTON.....................................  AR                                        05143            3.30
WHITE..........................................  AR                                        05145            4.30
WOODRUFF.......................................  AR                                        05147            4.30
YELL...........................................  AR                                        05149            3.60
ALAMEDA........................................  CA                                        06001            2.40
ALPINE.........................................  CA                                        06003            1.80
AMADOR.........................................  CA                                        06005            1.80
BUTTE..........................................  CA                                        06007            2.00
CALAVERAS......................................  CA                                        06009            1.80
COLUSA.........................................  CA                                        06011            2.20
CONTRA COSTA...................................  CA                                        06013            2.40
DEL NORTE......................................  CA                                        06015            2.20
EL DORADO......................................  CA                                        06017            1.80
FRESNO.........................................  CA                                        06019            2.20
GLENN..........................................  CA                                        06021            2.20
HUMBOLDT.......................................  CA                                        06023            2.20
IMPERIAL.......................................  CA                                        06025            2.50
INYO...........................................  CA                                        06027            2.20
KERN...........................................  CA                                        06029            2.50
KINGS..........................................  CA                                        06031            2.20
LAKE...........................................  CA                                        06033            2.20
LASSEN.........................................  CA                                        06035            2.00
LOS ANGELES....................................  CA                                        06037            2.80
MADERA.........................................  CA                                        06039            2.20
MARIN..........................................  CA                                        06041            2.40
MARIPOSA.......................................  CA                                        06043            1.80
MENDOCINO......................................  CA                                        06045            2.20

[[Page 95542]]

 
MERCED.........................................  CA                                        06047            2.20
MODOC..........................................  CA                                        06049            2.00
MONO...........................................  CA                                        06051            2.00
MONTEREY.......................................  CA                                        06053            2.50
NAPA...........................................  CA                                        06055            2.40
NEVADA.........................................  CA                                        06057            2.00
ORANGE.........................................  CA                                        06059            2.80
PLACER.........................................  CA                                        06061            2.00
PLUMAS.........................................  CA                                        06063            2.00
RIVERSIDE......................................  CA                                        06065            2.80
SACRAMENTO.....................................  CA                                        06067            2.20
SAN BENITO.....................................  CA                                        06069            2.50
SAN BERNARDINO.................................  CA                                        06071            2.60
SAN DIEGO......................................  CA                                        06073            2.80
SAN FRANCISCO..................................  CA                                        06075            2.50
SAN JOAQUIN....................................  CA                                        06077            2.20
SAN LUIS OBISPO................................  CA                                        06079            2.50
SAN MATEO......................................  CA                                        06081            2.50
SANTA BARBARA..................................  CA                                        06083            2.50
SANTA CLARA....................................  CA                                        06085            2.50
SANTA CRUZ.....................................  CA                                        06087            2.50
SHASTA.........................................  CA                                        06089            2.00
SIERRA.........................................  CA                                        06091            2.00
SISKIYOU.......................................  CA                                        06093            2.00
SOLANO.........................................  CA                                        06095            2.40
SONOMA.........................................  CA                                        06097            2.40
STANISLAUS.....................................  CA                                        06099            2.20
SUTTER.........................................  CA                                        06101            2.20
TEHAMA.........................................  CA                                        06103            2.20
TRINITY........................................  CA                                        06105            2.00
TULARE.........................................  CA                                        06107            2.20
TUOLUMNE.......................................  CA                                        06109            1.80
VENTURA........................................  CA                                        06111            2.60
YOLO...........................................  CA                                        06113            2.20
YUBA...........................................  CA                                        06115            2.00
ADAMS..........................................  CO                                        08001            2.70
ALAMOSA........................................  CO                                        08003            2.50
ARAPAHOE.......................................  CO                                        08005            2.70
ARCHULETA......................................  CO                                        08007            2.30
BACA...........................................  CO                                        08009            2.50
BENT...........................................  CO                                        08011            2.50
BOULDER........................................  CO                                        08013            2.50
BROOMFIELD.....................................  CO                                        08014            2.50
CHAFFEE........................................  CO                                        08015            2.50
CHEYENNE.......................................  CO                                        08017            2.50
CLEAR CREEK....................................  CO                                        08019            2.50
CONEJOS........................................  CO                                        08021            2.50
COSTILLA.......................................  CO                                        08023            2.50
CROWLEY........................................  CO                                        08025            2.70
CUSTER.........................................  CO                                        08027            2.70
DELTA..........................................  CO                                        08029            2.30
DENVER.........................................  CO                                        08031            2.70
DOLORES........................................  CO                                        08033            2.30
DOUGLAS........................................  CO                                        08035            2.70
EAGLE..........................................  CO                                        08037            2.50
ELBERT.........................................  CO                                        08039            2.70
EL PASO........................................  CO                                        08041            2.70
FREMONT........................................  CO                                        08043            2.70
GARFIELD.......................................  CO                                        08045            2.30
GILPIN.........................................  CO                                        08047            2.50
GRAND..........................................  CO                                        08049            2.50
GUNNISON.......................................  CO                                        08051            2.50
HINSDALE.......................................  CO                                        08053            2.30
HUERFANO.......................................  CO                                        08055            2.70
JACKSON........................................  CO                                        08057            2.50
JEFFERSON......................................  CO                                        08059            2.70
KIOWA..........................................  CO                                        08061            2.50
KIT CARSON.....................................  CO                                        08063            2.50
LAKE...........................................  CO                                        08065            2.50
LA PLATA.......................................  CO                                        08067            2.30
LARIMER........................................  CO                                        08069            2.50

[[Page 95543]]

 
LAS ANIMAS.....................................  CO                                        08071            2.50
LINCOLN........................................  CO                                        08073            2.70
LOGAN..........................................  CO                                        08075            2.50
MESA...........................................  CO                                        08077            2.30
MINERAL........................................  CO                                        08079            2.50
MOFFAT.........................................  CO                                        08081            2.30
MONTEZUMA......................................  CO                                        08083            2.30
MONTROSE.......................................  CO                                        08085            2.30
MORGAN.........................................  CO                                        08087            2.50
OTERO..........................................  CO                                        08089            2.70
OURAY..........................................  CO                                        08091            2.30
PARK...........................................  CO                                        08093            2.70
PHILLIPS.......................................  CO                                        08095            2.50
PITKIN.........................................  CO                                        08097            2.50
PROWERS........................................  CO                                        08099            2.50
PUEBLO.........................................  CO                                        08101            2.70
RIO BLANCO.....................................  CO                                        08103            2.30
RIO GRANDE.....................................  CO                                        08105            2.50
ROUTT..........................................  CO                                        08107            2.50
SAGUACHE.......................................  CO                                        08109            2.50
SAN JUAN.......................................  CO                                        08111            2.30
SAN MIGUEL.....................................  CO                                        08113            2.30
SEDGWICK.......................................  CO                                        08115            2.50
SUMMIT.........................................  CO                                        08117            2.50
TELLER.........................................  CO                                        08119            2.70
WASHINGTON.....................................  CO                                        08121            2.50
WELD...........................................  CO                                        08123            2.50
YUMA...........................................  CO                                        08125            2.50
FAIRFIELD......................................  CT                                        09001            5.00
HARTFORD.......................................  CT                                        09003            4.80
LITCHFIELD.....................................  CT                                        09005            4.80
MIDDLESEX......................................  CT                                        09007            4.80
NEW HAVEN......................................  CT                                        09009            4.80
NEW LONDON.....................................  CT                                        09011            4.80
TOLLAND........................................  CT                                        09013            4.80
WINDHAM........................................  CT                                        09015            4.80
KENT...........................................  DE                                        10001            4.60
NEW CASTLE.....................................  DE                                        10003            4.40
SUSSEX.........................................  DE                                        10005            4.80
DISTRICT OF COLUMBIA...........................  DC                                        11001            4.70
ALACHUA........................................  FL                                        12001            6.40
BAKER..........................................  FL                                        12003            6.40
BAY............................................  FL                                        12005            6.00
BRADFORD.......................................  FL                                        12007            6.40
BREVARD........................................  FL                                        12009            6.80
BROWARD........................................  FL                                        12011            7.40
CALHOUN........................................  FL                                        12013            6.00
CHARLOTTE......................................  FL                                        12015            7.00
CITRUS.........................................  FL                                        12017            6.80
CLAY...........................................  FL                                        12019            6.40
COLLIER........................................  FL                                        12021            7.40
COLUMBIA.......................................  FL                                        12023            6.40
DE SOTO........................................  FL                                        12027            7.00
DIXIE..........................................  FL                                        12029            6.40
DUVAL..........................................  FL                                        12031            6.40
ESCAMBIA.......................................  FL                                        12033            5.80
FLAGLER........................................  FL                                        12035            6.80
FRANKLIN.......................................  FL                                        12037            6.00
GADSDEN........................................  FL                                        12039            6.00
GILCHRIST......................................  FL                                        12041            6.40
GLADES.........................................  FL                                        12043            7.00
GULF...........................................  FL                                        12045            6.00
HAMILTON.......................................  FL                                        12047            6.40
HARDEE.........................................  FL                                        12049            7.00
HENDRY.........................................  FL                                        12051            7.40
HERNANDO.......................................  FL                                        12053            6.80
HIGHLANDS......................................  FL                                        12055            7.00
HILLSBOROUGH...................................  FL                                        12057            6.80
HOLMES.........................................  FL                                        12059            6.00
INDIAN RIVER...................................  FL                                        12061            7.00
JACKSON........................................  FL                                        12063            6.00

[[Page 95544]]

 
JEFFERSON......................................  FL                                        12065            6.00
LAFAYETTE......................................  FL                                        12067            6.40
LAKE...........................................  FL                                        12069            6.80
LEE............................................  FL                                        12071            7.00
LEON...........................................  FL                                        12073            6.00
LEVY...........................................  FL                                        12075            6.40
LIBERTY........................................  FL                                        12077            6.00
MADISON........................................  FL                                        12079            6.00
MANATEE........................................  FL                                        12081            7.00
MARION.........................................  FL                                        12083            6.80
MARTIN.........................................  FL                                        12085            7.00
MIAMI-DADE.....................................  FL                                        12086            7.40
MONROE.........................................  FL                                        12087            7.40
NASSAU.........................................  FL                                        12089            6.40
OKALOOSA.......................................  FL                                        12091            5.80
OKEECHOBEE.....................................  FL                                        12093            7.00
ORANGE.........................................  FL                                        12095            6.80
OSCEOLA........................................  FL                                        12097            6.80
PALM BEACH.....................................  FL                                        12099            7.40
PASCO..........................................  FL                                        12101            6.80
PINELLAS.......................................  FL                                        12103            6.80
POLK...........................................  FL                                        12105            6.80
PUTNAM.........................................  FL                                        12107            6.40
ST. JOHNS......................................  FL                                        12109            6.40
ST. LUCIE......................................  FL                                        12111            7.00
SANTA ROSA.....................................  FL                                        12113            5.80
SARASOTA.......................................  FL                                        12115            7.00
SEMINOLE.......................................  FL                                        12117            6.80
SUMTER.........................................  FL                                        12119            6.80
SUWANNEE.......................................  FL                                        12121            6.40
TAYLOR.........................................  FL                                        12123            6.40
UNION..........................................  FL                                        12125            6.40
VOLUSIA........................................  FL                                        12127            6.80
WAKULLA........................................  FL                                        12129            6.00
WALTON.........................................  FL                                        12131            6.00
WASHINGTON.....................................  FL                                        12133            6.00
APPLING........................................  GA                                        13001            6.00
ATKINSON.......................................  GA                                        13003            6.00
BACON..........................................  GA                                        13005            6.00
BAKER..........................................  GA                                        13007            5.80
BALDWIN........................................  GA                                        13009            5.80
BANKS..........................................  GA                                        13011            5.60
BARROW.........................................  GA                                        13013            5.80
BARTOW.........................................  GA                                        13015            5.60
BEN HILL.......................................  GA                                        13017            6.00
BERRIEN........................................  GA                                        13019            6.00
BIBB...........................................  GA                                        13021            5.80
BLECKLEY.......................................  GA                                        13023            5.80
BRANTLEY.......................................  GA                                        13025            6.00
BROOKS.........................................  GA                                        13027            6.00
BRYAN..........................................  GA                                        13029            6.00
BULLOCH........................................  GA                                        13031            6.00
BURKE..........................................  GA                                        13033            6.00
BUTTS..........................................  GA                                        13035            5.80
CALHOUN........................................  GA                                        13037            5.80
CAMDEN.........................................  GA                                        13039            6.00
CANDLER........................................  GA                                        13043            6.00
CARROLL........................................  GA                                        13045            5.60
CATOOSA........................................  GA                                        13047            5.40
CHARLTON.......................................  GA                                        13049            6.00
CHATHAM........................................  GA                                        13051            6.00
CHATTAHOOCHEE..................................  GA                                        13053            5.80
CHATTOOGA......................................  GA                                        13055            5.40
CHEROKEE.......................................  GA                                        13057            5.60
CLARKE.........................................  GA                                        13059            5.80
CLAY...........................................  GA                                        13061            5.80
CLAYTON........................................  GA                                        13063            5.80
CLINCH.........................................  GA                                        13065            6.00
COBB...........................................  GA                                        13067            5.60
COFFEE.........................................  GA                                        13069            6.00
COLQUITT.......................................  GA                                        13071            6.00

[[Page 95545]]

 
COLUMBIA.......................................  GA                                        13073            5.80
COOK...........................................  GA                                        13075            6.00
COWETA.........................................  GA                                        13077            5.80
CRAWFORD.......................................  GA                                        13079            5.80
CRISP..........................................  GA                                        13081            5.80
DADE...........................................  GA                                        13083            5.40
DAWSON.........................................  GA                                        13085            5.60
DECATUR........................................  GA                                        13087            6.00
DE KALB........................................  GA                                        13089            5.80
DODGE..........................................  GA                                        13091            5.80
DOOLY..........................................  GA                                        13093            5.80
DOUGHERTY......................................  GA                                        13095            5.80
DOUGLAS........................................  GA                                        13097            5.60
EARLY..........................................  GA                                        13099            5.80
ECHOLS.........................................  GA                                        13101            6.00
EFFINGHAM......................................  GA                                        13103            6.00
ELBERT.........................................  GA                                        13105            5.80
EMANUEL........................................  GA                                        13107            6.00
EVANS..........................................  GA                                        13109            6.00
FANNIN.........................................  GA                                        13111            5.60
FAYETTE........................................  GA                                        13113            5.80
FLOYD..........................................  GA                                        13115            5.60
FORSYTH........................................  GA                                        13117            5.60
FRANKLIN.......................................  GA                                        13119            5.60
FULTON.........................................  GA                                        13121            5.80
GILMER.........................................  GA                                        13123            5.60
GLASCOCK.......................................  GA                                        13125            5.80
GLYNN..........................................  GA                                        13127            6.00
GORDON.........................................  GA                                        13129            5.60
GRADY..........................................  GA                                        13131            6.00
GREENE.........................................  GA                                        13133            5.80
GWINNETT.......................................  GA                                        13135            5.80
HABERSHAM......................................  GA                                        13137            5.60
HALL...........................................  GA                                        13139            5.60
HANCOCK........................................  GA                                        13141            5.80
HARALSON.......................................  GA                                        13143            5.60
HARRIS.........................................  GA                                        13145            5.80
HART...........................................  GA                                        13147            5.60
HEARD..........................................  GA                                        13149            5.60
HENRY..........................................  GA                                        13151            5.80
HOUSTON........................................  GA                                        13153            5.80
IRWIN..........................................  GA                                        13155            6.00
JACKSON........................................  GA                                        13157            5.80
JASPER.........................................  GA                                        13159            5.80
JEFF DAVIS.....................................  GA                                        13161            6.00
JEFFERSON......................................  GA                                        13163            5.80
JENKINS........................................  GA                                        13165            6.00
JOHNSON........................................  GA                                        13167            5.80
JONES..........................................  GA                                        13169            5.80
LAMAR..........................................  GA                                        13171            5.80
LANIER.........................................  GA                                        13173            6.00
LAURENS........................................  GA                                        13175            5.80
LEE............................................  GA                                        13177            5.80
LIBERTY........................................  GA                                        13179            6.00
LINCOLN........................................  GA                                        13181            5.80
LONG...........................................  GA                                        13183            6.00
LOWNDES........................................  GA                                        13185            6.00
LUMPKIN........................................  GA                                        13187            5.60
MCDUFFIE.......................................  GA                                        13189            5.80
MCINTOSH.......................................  GA                                        13191            6.00
MACON..........................................  GA                                        13193            5.80
MADISON........................................  GA                                        13195            5.80
MARION.........................................  GA                                        13197            5.80
MERIWETHER.....................................  GA                                        13199            5.80
MILLER.........................................  GA                                        13201            5.80
MITCHELL.......................................  GA                                        13205            5.80
MONROE.........................................  GA                                        13207            5.80
MONTGOMERY.....................................  GA                                        13209            6.00
MORGAN.........................................  GA                                        13211            5.80
MURRAY.........................................  GA                                        13213            5.40
MUSCOGEE.......................................  GA                                        13215            5.80

[[Page 95546]]

 
NEWTON.........................................  GA                                        13217            5.80
OCONEE.........................................  GA                                        13219            5.80
OGLETHORPE.....................................  GA                                        13221            5.80
PAULDING.......................................  GA                                        13223            5.60
PEACH..........................................  GA                                        13225            5.80
PICKENS........................................  GA                                        13227            5.60
PIERCE.........................................  GA                                        13229            6.00
PIKE...........................................  GA                                        13231            5.80
POLK...........................................  GA                                        13233            5.60
PULASKI........................................  GA                                        13235            5.80
PUTNAM.........................................  GA                                        13237            5.80
QUITMAN........................................  GA                                        13239            5.80
RABUN..........................................  GA                                        13241            5.60
RANDOLPH.......................................  GA                                        13243            5.80
RICHMOND.......................................  GA                                        13245            6.00
ROCKDALE.......................................  GA                                        13247            5.80
SCHLEY.........................................  GA                                        13249            5.80
SCREVEN........................................  GA                                        13251            6.00
SEMINOLE.......................................  GA                                        13253            6.00
SPALDING.......................................  GA                                        13255            5.80
STEPHENS.......................................  GA                                        13257            5.60
STEWART........................................  GA                                        13259            5.80
SUMTER.........................................  GA                                        13261            5.80
TALBOT.........................................  GA                                        13263            5.80
TALIAFERRO.....................................  GA                                        13265            5.80
TATTNALL.......................................  GA                                        13267            6.00
TAYLOR.........................................  GA                                        13269            5.80
TELFAIR........................................  GA                                        13271            6.00
TERRELL........................................  GA                                        13273            5.80
THOMAS.........................................  GA                                        13275            6.00
TIFT...........................................  GA                                        13277            5.80
TOOMBS.........................................  GA                                        13279            6.00
TOWNS..........................................  GA                                        13281            5.60
TREUTLEN.......................................  GA                                        13283            6.00
TROUP..........................................  GA                                        13285            5.60
TURNER.........................................  GA                                        13287            5.80
TWIGGS.........................................  GA                                        13289            5.80
UNION..........................................  GA                                        13291            5.60
UPSON..........................................  GA                                        13293            5.80
WALKER.........................................  GA                                        13295            5.40
WALTON.........................................  GA                                        13297            5.80
WARE...........................................  GA                                        13299            6.00
WARREN.........................................  GA                                        13301            5.80
WASHINGTON.....................................  GA                                        13303            5.80
WAYNE..........................................  GA                                        13305            6.00
WEBSTER........................................  GA                                        13307            5.80
WHEELER........................................  GA                                        13309            6.00
WHITE..........................................  GA                                        13311            5.60
WHITFIELD......................................  GA                                        13313            5.40
WILCOX.........................................  GA                                        13315            5.80
WILKES.........................................  GA                                        13317            5.80
WILKINSON......................................  GA                                        13319            5.80
WORTH..........................................  GA                                        13321            5.80
ADA............................................  ID                                        16001            1.70
ADAMS..........................................  ID                                        16003            2.00
BANNOCK........................................  ID                                        16005            2.00
BEAR LAKE......................................  ID                                        16007            2.20
BENEWAH........................................  ID                                        16009            2.40
BINGHAM........................................  ID                                        16011            2.00
BLAINE.........................................  ID                                        16013            1.80
BOISE..........................................  ID                                        16015            1.70
BONNER.........................................  ID                                        16017            2.40
BONNEVILLE.....................................  ID                                        16019            2.00
BOUNDARY.......................................  ID                                        16021            2.40
BUTTE..........................................  ID                                        16023            2.00
CAMAS..........................................  ID                                        16025            1.80
CANYON.........................................  ID                                        16027            1.70
CARIBOU........................................  ID                                        16029            2.00
CASSIA.........................................  ID                                        16031            1.70
CLARK..........................................  ID                                        16033            2.00
CLEARWATER.....................................  ID                                        16035            2.00

[[Page 95547]]

 
CUSTER.........................................  ID                                        16037            1.80
ELMORE.........................................  ID                                        16039            1.70
FRANKLIN.......................................  ID                                        16041            2.00
FREMONT........................................  ID                                        16043            2.00
GEM............................................  ID                                        16045            1.70
GOODING........................................  ID                                        16047            1.70
IDAHO..........................................  ID                                        16049            2.00
JEFFERSON......................................  ID                                        16051            2.00
JEROME.........................................  ID                                        16053            1.70
KOOTENAI.......................................  ID                                        16055            2.40
LATAH..........................................  ID                                        16057            2.20
LEMHI..........................................  ID                                        16059            1.80
LEWIS..........................................  ID                                        16061            2.00
LINCOLN........................................  ID                                        16063            1.70
MADISON........................................  ID                                        16065            2.00
MINIDOKA.......................................  ID                                        16067            1.70
NEZ PERCE......................................  ID                                        16069            2.00
ONEIDA.........................................  ID                                        16071            2.00
OWYHEE.........................................  ID                                        16073            1.80
PAYETTE........................................  ID                                        16075            1.70
POWER..........................................  ID                                        16077            2.00
SHOSHONE.......................................  ID                                        16079            2.20
TETON..........................................  ID                                        16081            2.00
TWIN FALLS.....................................  ID                                        16083            1.70
VALLEY.........................................  ID                                        16085            1.80
WASHINGTON.....................................  ID                                        16087            1.70
ADAMS..........................................  IL                                        17001            3.20
ALEXANDER......................................  IL                                        17003            4.00
BOND...........................................  IL                                        17005            3.60
BOONE..........................................  IL                                        17007            3.10
BROWN..........................................  IL                                        17009            3.40
BUREAU.........................................  IL                                        17011            3.40
CALHOUN........................................  IL                                        17013            3.60
CARROLL........................................  IL                                        17015            3.20
CASS...........................................  IL                                        17017            3.40
CHAMPAIGN......................................  IL                                        17019            3.60
CHRISTIAN......................................  IL                                        17021            3.60
CLARK..........................................  IL                                        17023            3.60
CLAY...........................................  IL                                        17025            3.60
CLINTON........................................  IL                                        17027            3.60
COLES..........................................  IL                                        17029            3.60
COOK...........................................  IL                                        17031            3.20
CRAWFORD.......................................  IL                                        17033            3.60
CUMBERLAND.....................................  IL                                        17035            3.60
DE KALB........................................  IL                                        17037            3.20
DE WITT........................................  IL                                        17039            3.40
DOUGLAS........................................  IL                                        17041            3.60
DU PAGE........................................  IL                                        17043            3.20
EDGAR..........................................  IL                                        17045            3.60
EDWARDS........................................  IL                                        17047            3.60
EFFINGHAM......................................  IL                                        17049            3.60
FAYETTE........................................  IL                                        17051            3.60
FORD...........................................  IL                                        17053            3.60
FRANKLIN.......................................  IL                                        17055            3.60
FULTON.........................................  IL                                        17057            3.40
GALLATIN.......................................  IL                                        17059            4.00
GREENE.........................................  IL                                        17061            3.60
GRUNDY.........................................  IL                                        17063            3.40
HAMILTON.......................................  IL                                        17065            3.60
HANCOCK........................................  IL                                        17067            3.20
HARDIN.........................................  IL                                        17069            4.00
HENDERSON......................................  IL                                        17071            3.20
HENRY..........................................  IL                                        17073            3.20
IROQUOIS.......................................  IL                                        17075            3.60
JACKSON........................................  IL                                        17077            3.60
JASPER.........................................  IL                                        17079            3.60
JEFFERSON......................................  IL                                        17081            3.60
JERSEY.........................................  IL                                        17083            3.60
JO DAVIESS.....................................  IL                                        17085            3.10
JOHNSON........................................  IL                                        17087            4.00
KANE...........................................  IL                                        17089            3.20

[[Page 95548]]

 
KANKAKEE.......................................  IL                                        17091            3.40
KENDALL........................................  IL                                        17093            3.20
KNOX...........................................  IL                                        17095            3.40
LAKE...........................................  IL                                        17097            3.10
LA SALLE.......................................  IL                                        17099            3.40
LAWRENCE.......................................  IL                                        17101            3.60
LEE............................................  IL                                        17103            3.20
LIVINGSTON.....................................  IL                                        17105            3.40
LOGAN..........................................  IL                                        17107            3.40
MCDONOUGH......................................  IL                                        17109            3.40
MCHENRY........................................  IL                                        17111            3.10
MCLEAN.........................................  IL                                        17113            3.40
MACON..........................................  IL                                        17115            3.40
MACOUPIN.......................................  IL                                        17117            3.60
MADISON........................................  IL                                        17119            3.60
MARION.........................................  IL                                        17121            3.60
MARSHALL.......................................  IL                                        17123            3.40
MASON..........................................  IL                                        17125            3.40
MASSAC.........................................  IL                                        17127            4.00
MENARD.........................................  IL                                        17129            3.40
MERCER.........................................  IL                                        17131            3.20
MONROE.........................................  IL                                        17133            3.60
MONTGOMERY.....................................  IL                                        17135            3.60
MORGAN.........................................  IL                                        17137            3.40
MOULTRIE.......................................  IL                                        17139            3.60
OGLE...........................................  IL                                        17141            3.20
PEORIA.........................................  IL                                        17143            3.40
PERRY..........................................  IL                                        17145            3.60
PIATT..........................................  IL                                        17147            3.40
PIKE...........................................  IL                                        17149            3.40
POPE...........................................  IL                                        17151            4.00
PULASKI........................................  IL                                        17153            4.00
PUTNAM.........................................  IL                                        17155            3.40
RANDOLPH.......................................  IL                                        17157            3.60
RICHLAND.......................................  IL                                        17159            3.60
ROCK ISLAND....................................  IL                                        17161            3.20
ST. CLAIR......................................  IL                                        17163            3.60
SALINE.........................................  IL                                        17165            4.00
SANGAMON.......................................  IL                                        17167            3.40
SCHUYLER.......................................  IL                                        17169            3.40
SCOTT..........................................  IL                                        17171            3.40
SHELBY.........................................  IL                                        17173            3.60
STARK..........................................  IL                                        17175            3.40
STEPHENSON.....................................  IL                                        17177            3.10
TAZEWELL.......................................  IL                                        17179            3.40
UNION..........................................  IL                                        17181            4.00
VERMILION......................................  IL                                        17183            3.60
WABASH.........................................  IL                                        17185            3.60
WARREN.........................................  IL                                        17187            3.20
WASHINGTON.....................................  IL                                        17189            3.60
WAYNE..........................................  IL                                        17191            3.60
WHITE..........................................  IL                                        17193            3.60
WHITESIDE......................................  IL                                        17195            3.20
WILL...........................................  IL                                        17197            3.20
WILLIAMSON.....................................  IL                                        17199            4.00
WINNEBAGO......................................  IL                                        17201            3.10
WOODFORD.......................................  IL                                        17203            3.40
ADAMS..........................................  IN                                        18001            3.30
ALLEN..........................................  IN                                        18003            3.30
BARTHOLOMEW....................................  IN                                        18005            3.70
BENTON.........................................  IN                                        18007            3.60
BLACKFORD......................................  IN                                        18009            3.30
BOONE..........................................  IN                                        18011            3.60
BROWN..........................................  IN                                        18013            3.70
CARROLL........................................  IN                                        18015            3.60
CASS...........................................  IN                                        18017            3.30
CLARK..........................................  IN                                        18019            4.00
CLAY...........................................  IN                                        18021            3.60
CLINTON........................................  IN                                        18023            3.60
CRAWFORD.......................................  IN                                        18025            4.00
DAVIESS........................................  IN                                        18027            3.70

[[Page 95549]]

 
DEARBORN.......................................  IN                                        18029            3.70
DECATUR........................................  IN                                        18031            3.70
DEKALB.........................................  IN                                        18033            3.30
DELAWARE.......................................  IN                                        18035            3.60
DUBOIS.........................................  IN                                        18037            3.70
ELKHART........................................  IN                                        18039            3.30
FAYETTE........................................  IN                                        18041            3.60
FLOYD..........................................  IN                                        18043            4.00
FOUNTAIN.......................................  IN                                        18045            3.60
FRANKLIN.......................................  IN                                        18047            3.70
FULTON.........................................  IN                                        18049            3.30
GIBSON.........................................  IN                                        18051            3.70
GRANT..........................................  IN                                        18053            3.30
GREENE.........................................  IN                                        18055            3.70
HAMILTON.......................................  IN                                        18057            3.60
HANCOCK........................................  IN                                        18059            3.60
HARRISON.......................................  IN                                        18061            4.00
HENDRICKS......................................  IN                                        18063            3.60
HENRY..........................................  IN                                        18065            3.60
HOWARD.........................................  IN                                        18067            3.60
HUNTINGTON.....................................  IN                                        18069            3.30
JACKSON........................................  IN                                        18071            3.70
JASPER.........................................  IN                                        18073            3.60
JAY............................................  IN                                        18075            3.30
JEFFERSON......................................  IN                                        18077            4.00
JENNINGS.......................................  IN                                        18079            3.70
JOHNSON........................................  IN                                        18081            3.60
KNOX...........................................  IN                                        18083            3.70
KOSCIUSKO......................................  IN                                        18085            3.30
LAGRANGE.......................................  IN                                        18087            3.30
LAKE...........................................  IN                                        18089            3.30
LA PORTE.......................................  IN                                        18091            3.30
LAWRENCE.......................................  IN                                        18093            3.70
MADISON........................................  IN                                        18095            3.60
MARION.........................................  IN                                        18097            3.60
MARSHALL.......................................  IN                                        18099            3.30
MARTIN.........................................  IN                                        18101            3.70
MIAMI..........................................  IN                                        18103            3.30
MONROE.........................................  IN                                        18105            3.70
MONTGOMERY.....................................  IN                                        18107            3.60
MORGAN.........................................  IN                                        18109            3.60
NEWTON.........................................  IN                                        18111            3.60
NOBLE..........................................  IN                                        18113            3.30
OHIO...........................................  IN                                        18115            3.70
ORANGE.........................................  IN                                        18117            3.70
OWEN...........................................  IN                                        18119            3.60
PARKE..........................................  IN                                        18121            3.60
PERRY..........................................  IN                                        18123            4.00
PIKE...........................................  IN                                        18125            3.70
PORTER.........................................  IN                                        18127            3.30
POSEY..........................................  IN                                        18129            3.70
PULASKI........................................  IN                                        18131            3.30
PUTNAM.........................................  IN                                        18133            3.60
RANDOLPH.......................................  IN                                        18135            3.60
RIPLEY.........................................  IN                                        18137            3.70
RUSH...........................................  IN                                        18139            3.60
ST. JOSEPH.....................................  IN                                        18141            3.30
SCOTT..........................................  IN                                        18143            4.00
SHELBY.........................................  IN                                        18145            3.60
SPENCER........................................  IN                                        18147            4.00
STARKE.........................................  IN                                        18149            3.30
STEUBEN........................................  IN                                        18151            3.30
SULLIVAN.......................................  IN                                        18153            3.70
SWITZERLAND....................................  IN                                        18155            4.00
TIPPECANOE.....................................  IN                                        18157            3.60
TIPTON.........................................  IN                                        18159            3.60
UNION..........................................  IN                                        18161            3.60
VANDERBURGH....................................  IN                                        18163            3.70
VERMILLION.....................................  IN                                        18165            3.60
VIGO...........................................  IN                                        18167            3.60
WABASH.........................................  IN                                        18169            3.30

[[Page 95550]]

 
WARREN.........................................  IN                                        18171            3.60
WARRICK........................................  IN                                        18173            3.70
WASHINGTON.....................................  IN                                        18175            4.00
WAYNE..........................................  IN                                        18177            3.60
WELLS..........................................  IN                                        18179            3.30
WHITE..........................................  IN                                        18181            3.60
WHITLEY........................................  IN                                        18183            3.30
ADAIR..........................................  IA                                        19001            2.70
ADAMS..........................................  IA                                        19003            2.90
ALLAMAKEE......................................  IA                                        19005            2.90
APPANOOSE......................................  IA                                        19007            2.90
AUDUBON........................................  IA                                        19009            2.70
BENTON.........................................  IA                                        19011            2.90
BLACK HAWK.....................................  IA                                        19013            2.90
BOONE..........................................  IA                                        19015            2.70
BREMER.........................................  IA                                        19017            2.90
BUCHANAN.......................................  IA                                        19019            2.90
BUENA VISTA....................................  IA                                        19021            2.60
BUTLER.........................................  IA                                        19023            2.90
CALHOUN........................................  IA                                        19025            2.70
CARROLL........................................  IA                                        19027            2.70
CASS...........................................  IA                                        19029            2.70
CEDAR..........................................  IA                                        19031            3.10
CERRO GORDO....................................  IA                                        19033            2.90
CHEROKEE.......................................  IA                                        19035            2.60
CHICKASAW......................................  IA                                        19037            2.90
CLARKE.........................................  IA                                        19039            2.90
CLAY...........................................  IA                                        19041            2.60
CLAYTON........................................  IA                                        19043            2.90
CLINTON........................................  IA                                        19045            3.10
CRAWFORD.......................................  IA                                        19047            2.60
DALLAS.........................................  IA                                        19049            2.70
DAVIS..........................................  IA                                        19051            2.90
DECATUR........................................  IA                                        19053            2.90
DELAWARE.......................................  IA                                        19055            2.90
DES MOINES.....................................  IA                                        19057            3.10
DICKINSON......................................  IA                                        19059            2.70
DUBUQUE........................................  IA                                        19061            3.10
EMMET..........................................  IA                                        19063            2.70
FAYETTE........................................  IA                                        19065            2.90
FLOYD..........................................  IA                                        19067            2.90
FRANKLIN.......................................  IA                                        19069            2.70
FREMONT........................................  IA                                        19071            2.70
GREENE.........................................  IA                                        19073            2.70
GRUNDY.........................................  IA                                        19075            2.90
GUTHRIE........................................  IA                                        19077            2.70
HAMILTON.......................................  IA                                        19079            2.70
HANCOCK........................................  IA                                        19081            2.70
HARDIN.........................................  IA                                        19083            2.70
HARRISON.......................................  IA                                        19085            2.60
HENRY..........................................  IA                                        19087            2.90
HOWARD.........................................  IA                                        19089            2.80
HUMBOLDT.......................................  IA                                        19091            2.70
IDA............................................  IA                                        19093            2.60
IOWA...........................................  IA                                        19095            2.90
JACKSON........................................  IA                                        19097            3.10
JASPER.........................................  IA                                        19099            2.90
JEFFERSON......................................  IA                                        19101            2.90
JOHNSON........................................  IA                                        19103            2.90
JONES..........................................  IA                                        19105            3.10
KEOKUK.........................................  IA                                        19107            2.90
KOSSUTH........................................  IA                                        19109            2.70
LEE............................................  IA                                        19111            3.10
LINN...........................................  IA                                        19113            2.90
LOUISA.........................................  IA                                        19115            3.10
LUCAS..........................................  IA                                        19117            2.90
LYON...........................................  IA                                        19119            2.60
MADISON........................................  IA                                        19121            2.70
MAHASKA........................................  IA                                        19123            2.90
MARION.........................................  IA                                        19125            2.90
MARSHALL.......................................  IA                                        19127            2.90

[[Page 95551]]

 
MILLS..........................................  IA                                        19129            2.70
MITCHELL.......................................  IA                                        19131            2.80
MONONA.........................................  IA                                        19133            2.60
MONROE.........................................  IA                                        19135            2.90
MONTGOMERY.....................................  IA                                        19137            2.70
MUSCATINE......................................  IA                                        19139            3.10
O'BRIEN........................................  IA                                        19141            2.60
OSCEOLA........................................  IA                                        19143            2.70
PAGE...........................................  IA                                        19145            2.90
PALO ALTO......................................  IA                                        19147            2.70
PLYMOUTH.......................................  IA                                        19149            2.60
POCAHONTAS.....................................  IA                                        19151            2.70
POLK...........................................  IA                                        19153            2.70
POTTAWATTAMIE..................................  IA                                        19155            2.70
POWESHIEK......................................  IA                                        19157            2.90
RINGGOLD.......................................  IA                                        19159            2.90
SAC............................................  IA                                        19161            2.60
SCOTT..........................................  IA                                        19163            3.10
SHELBY.........................................  IA                                        19165            2.60
SIOUX..........................................  IA                                        19167            2.60
STORY..........................................  IA                                        19169            2.70
TAMA...........................................  IA                                        19171            2.90
TAYLOR.........................................  IA                                        19173            2.90
UNION..........................................  IA                                        19175            2.90
VAN BUREN......................................  IA                                        19177            2.90
WAPELLO........................................  IA                                        19179            2.90
WARREN.........................................  IA                                        19181            2.70
WASHINGTON.....................................  IA                                        19183            2.90
WAYNE..........................................  IA                                        19185            2.90
WEBSTER........................................  IA                                        19187            2.70
WINNEBAGO......................................  IA                                        19189            2.70
WINNESHIEK.....................................  IA                                        19191            2.80
WOODBURY.......................................  IA                                        19193            2.60
WORTH..........................................  IA                                        19195            2.80
WRIGHT.........................................  IA                                        19197            2.70
ALLEN..........................................  KS                                        20001            2.90
ANDERSON.......................................  KS                                        20003            2.90
ATCHISON.......................................  KS                                        20005            2.90
BARBER.........................................  KS                                        20007            2.60
BARTON.........................................  KS                                        20009            2.60
BOURBON........................................  KS                                        20011            3.20
BROWN..........................................  KS                                        20013            2.90
BUTLER.........................................  KS                                        20015            2.90
CHASE..........................................  KS                                        20017            2.70
CHAUTAUQUA.....................................  KS                                        20019            2.90
CHEROKEE.......................................  KS                                        20021            3.20
CHEYENNE.......................................  KS                                        20023            2.50
CLARK..........................................  KS                                        20025            2.60
CLAY...........................................  KS                                        20027            2.70
CLOUD..........................................  KS                                        20029            2.70
COFFEY.........................................  KS                                        20031            2.90
COMANCHE.......................................  KS                                        20033            2.60
COWLEY.........................................  KS                                        20035            2.90
CRAWFORD.......................................  KS                                        20037            3.20
DECATUR........................................  KS                                        20039            2.50
DICKINSON......................................  KS                                        20041            2.70
DONIPHAN.......................................  KS                                        20043            2.90
DOUGLAS........................................  KS                                        20045            2.90
EDWARDS........................................  KS                                        20047            2.60
ELK............................................  KS                                        20049            2.90
ELLIS..........................................  KS                                        20051            2.50
ELLSWORTH......................................  KS                                        20053            2.60
FINNEY.........................................  KS                                        20055            2.50
FORD...........................................  KS                                        20057            2.50
FRANKLIN.......................................  KS                                        20059            2.90
GEARY..........................................  KS                                        20061            2.70
GOVE...........................................  KS                                        20063            2.50
GRAHAM.........................................  KS                                        20065            2.50
GRANT..........................................  KS                                        20067            2.50
GRAY...........................................  KS                                        20069            2.50
GREELEY........................................  KS                                        20071            2.50

[[Page 95552]]

 
GREENWOOD......................................  KS                                        20073            2.90
HAMILTON.......................................  KS                                        20075            2.50
HARPER.........................................  KS                                        20077            2.90
HARVEY.........................................  KS                                        20079            2.90
HASKELL........................................  KS                                        20081            2.50
HODGEMAN.......................................  KS                                        20083            2.50
JACKSON........................................  KS                                        20085            2.90
JEFFERSON......................................  KS                                        20087            2.90
JEWELL.........................................  KS                                        20089            2.60
JOHNSON........................................  KS                                        20091            3.20
KEARNY.........................................  KS                                        20093            2.50
KINGMAN........................................  KS                                        20095            2.90
KIOWA..........................................  KS                                        20097            2.60
LABETTE........................................  KS                                        20099            3.20
LANE...........................................  KS                                        20101            2.50
LEAVENWORTH....................................  KS                                        20103            2.90
LINCOLN........................................  KS                                        20105            2.60
LINN...........................................  KS                                        20107            3.20
LOGAN..........................................  KS                                        20109            2.50
LYON...........................................  KS                                        20111            2.90
MCPHERSON......................................  KS                                        20113            2.70
MARION.........................................  KS                                        20115            2.70
MARSHALL.......................................  KS                                        20117            2.70
MEADE..........................................  KS                                        20119            2.50
MIAMI..........................................  KS                                        20121            3.20
MITCHELL.......................................  KS                                        20123            2.60
MONTGOMERY.....................................  KS                                        20125            3.20
MORRIS.........................................  KS                                        20127            2.70
MORTON.........................................  KS                                        20129            2.50
NEMAHA.........................................  KS                                        20131            2.70
NEOSHO.........................................  KS                                        20133            2.90
NESS...........................................  KS                                        20135            2.50
NORTON.........................................  KS                                        20137            2.50
OSAGE..........................................  KS                                        20139            2.90
OSBORNE........................................  KS                                        20141            2.50
OTTAWA.........................................  KS                                        20143            2.70
PAWNEE.........................................  KS                                        20145            2.50
PHILLIPS.......................................  KS                                        20147            2.50
POTTAWATOMIE...................................  KS                                        20149            2.70
PRATT..........................................  KS                                        20151            2.60
RAWLINS........................................  KS                                        20153            2.50
RENO...........................................  KS                                        20155            2.90
REPUBLIC.......................................  KS                                        20157            2.60
RICE...........................................  KS                                        20159            2.60
RILEY..........................................  KS                                        20161            2.70
ROOKS..........................................  KS                                        20163            2.50
RUSH...........................................  KS                                        20165            2.50
RUSSELL........................................  KS                                        20167            2.50
SALINE.........................................  KS                                        20169            2.70
SCOTT..........................................  KS                                        20171            2.50
SEDGWICK.......................................  KS                                        20173            2.90
SEWARD.........................................  KS                                        20175            2.50
SHAWNEE........................................  KS                                        20177            2.90
SHERIDAN.......................................  KS                                        20179            2.50
SHERMAN........................................  KS                                        20181            2.50
SMITH..........................................  KS                                        20183            2.50
STAFFORD.......................................  KS                                        20185            2.60
STANTON........................................  KS                                        20187            2.50
STEVENS........................................  KS                                        20189            2.50
SUMNER.........................................  KS                                        20191            2.90
THOMAS.........................................  KS                                        20193            2.50
TREGO..........................................  KS                                        20195            2.50
WABAUNSEE......................................  KS                                        20197            2.90
WALLACE........................................  KS                                        20199            2.50
WASHINGTON.....................................  KS                                        20201            2.70
WICHITA........................................  KS                                        20203            2.50
WILSON.........................................  KS                                        20205            2.90
WOODSON........................................  KS                                        20207            2.90
WYANDOTTE......................................  KS                                        20209            3.20
ADAIR..........................................  KY                                        21001            4.20
ALLEN..........................................  KY                                        21003            4.20

[[Page 95553]]

 
ANDERSON.......................................  KY                                        21005            4.20
BALLARD........................................  KY                                        21007            4.00
BARREN.........................................  KY                                        21009            4.20
BATH...........................................  KY                                        21011            4.20
BELL...........................................  KY                                        21013            4.80
BOONE..........................................  KY                                        21015            4.00
BOURBON........................................  KY                                        21017            4.20
BOYD...........................................  KY                                        21019            4.20
BOYLE..........................................  KY                                        21021            4.20
BRACKEN........................................  KY                                        21023            4.00
BREATHITT......................................  KY                                        21025            4.50
BRECKINRIDGE...................................  KY                                        21027            4.00
BULLITT........................................  KY                                        21029            4.00
BUTLER.........................................  KY                                        21031            4.20
CALDWELL.......................................  KY                                        21033            4.00
CALLOWAY.......................................  KY                                        21035            4.20
CAMPBELL.......................................  KY                                        21037            4.00
CARLISLE.......................................  KY                                        21039            4.00
CARROLL........................................  KY                                        21041            4.00
CARTER.........................................  KY                                        21043            4.20
CASEY..........................................  KY                                        21045            4.20
CHRISTIAN......................................  KY                                        21047            4.20
CLARK..........................................  KY                                        21049            4.20
CLAY...........................................  KY                                        21051            4.50
CLINTON........................................  KY                                        21053            4.50
CRITTENDEN.....................................  KY                                        21055            4.00
CUMBERLAND.....................................  KY                                        21057            4.50
DAVIESS........................................  KY                                        21059            4.00
EDMONSON.......................................  KY                                        21061            4.20
ELLIOTT........................................  KY                                        21063            4.20
ESTILL.........................................  KY                                        21065            4.20
FAYETTE........................................  KY                                        21067            4.20
FLEMING........................................  KY                                        21069            4.20
FLOYD..........................................  KY                                        21071            4.50
FRANKLIN.......................................  KY                                        21073            4.00
FULTON.........................................  KY                                        21075            4.00
GALLATIN.......................................  KY                                        21077            4.00
GARRARD........................................  KY                                        21079            4.20
GRANT..........................................  KY                                        21081            4.00
GRAVES.........................................  KY                                        21083            4.20
GRAYSON........................................  KY                                        21085            4.00
GREEN..........................................  KY                                        21087            4.20
GREENUP........................................  KY                                        21089            4.20
HANCOCK........................................  KY                                        21091            4.00
HARDIN.........................................  KY                                        21093            4.20
HARLAN.........................................  KY                                        21095            4.80
HARRISON.......................................  KY                                        21097            4.20
HART...........................................  KY                                        21099            4.20
HENDERSON......................................  KY                                        21101            4.00
HENRY..........................................  KY                                        21103            4.00
HICKMAN........................................  KY                                        21105            4.00
HOPKINS........................................  KY                                        21107            4.00
JACKSON........................................  KY                                        21109            4.20
JEFFERSON......................................  KY                                        21111            4.00
JESSAMINE......................................  KY                                        21113            4.20
JOHNSON........................................  KY                                        21115            4.50
KENTON.........................................  KY                                        21117            4.00
KNOTT..........................................  KY                                        21119            4.50
KNOX...........................................  KY                                        21121            4.50
LARUE..........................................  KY                                        21123            4.20
LAUREL.........................................  KY                                        21125            4.50
LAWRENCE.......................................  KY                                        21127            4.20
LEE............................................  KY                                        21129            4.20
LESLIE.........................................  KY                                        21131            4.50
LETCHER........................................  KY                                        21133            4.80
LEWIS..........................................  KY                                        21135            4.20
LINCOLN........................................  KY                                        21137            4.20
LIVINGSTON.....................................  KY                                        21139            4.00
LOGAN..........................................  KY                                        21141            4.20
LYON...........................................  KY                                        21143            4.00
MCCRACKEN......................................  KY                                        21145            4.00

[[Page 95554]]

 
MCCREARY.......................................  KY                                        21147            4.50
MCLEAN.........................................  KY                                        21149            4.00
MADISON........................................  KY                                        21151            4.20
MAGOFFIN.......................................  KY                                        21153            4.50
MARION.........................................  KY                                        21155            4.20
MARSHALL.......................................  KY                                        21157            4.00
MARTIN.........................................  KY                                        21159            4.50
MASON..........................................  KY                                        21161            4.20
MEADE..........................................  KY                                        21163            4.00
MENIFEE........................................  KY                                        21165            4.20
MERCER.........................................  KY                                        21167            4.20
METCALFE.......................................  KY                                        21169            4.20
MONROE.........................................  KY                                        21171            4.50
MONTGOMERY.....................................  KY                                        21173            4.20
MORGAN.........................................  KY                                        21175            4.20
MUHLENBERG.....................................  KY                                        21177            4.00
NELSON.........................................  KY                                        21179            4.20
NICHOLAS.......................................  KY                                        21181            4.20
OHIO...........................................  KY                                        21183            4.00
OLDHAM.........................................  KY                                        21185            4.00
OWEN...........................................  KY                                        21187            4.00
OWSLEY.........................................  KY                                        21189            4.50
PENDLETON......................................  KY                                        21191            4.00
PERRY..........................................  KY                                        21193            4.50
PIKE...........................................  KY                                        21195            4.50
POWELL.........................................  KY                                        21197            4.20
PULASKI........................................  KY                                        21199            4.50
ROBERTSON......................................  KY                                        21201            4.20
ROCKCASTLE.....................................  KY                                        21203            4.20
ROWAN..........................................  KY                                        21205            4.20
RUSSELL........................................  KY                                        21207            4.50
SCOTT..........................................  KY                                        21209            4.00
SHELBY.........................................  KY                                        21211            4.00
SIMPSON........................................  KY                                        21213            4.20
SPENCER........................................  KY                                        21215            4.00
TAYLOR.........................................  KY                                        21217            4.20
TODD...........................................  KY                                        21219            4.20
TRIGG..........................................  KY                                        21221            4.20
TRIMBLE........................................  KY                                        21223            4.00
UNION..........................................  KY                                        21225            4.00
WARREN.........................................  KY                                        21227            4.20
WASHINGTON.....................................  KY                                        21229            4.20
WAYNE..........................................  KY                                        21231            4.50
WEBSTER........................................  KY                                        21233            4.00
WHITLEY........................................  KY                                        21235            4.50
WOLFE..........................................  KY                                        21237            4.20
WOODFORD.......................................  KY                                        21239            4.20
ACADIA.........................................  LA                                        22001            5.20
ALLEN..........................................  LA                                        22003            4.90
ASCENSION......................................  LA                                        22005            5.20
ASSUMPTION.....................................  LA                                        22007            5.20
AVOYELLES......................................  LA                                        22009            5.20
BEAUREGARD.....................................  LA                                        22011            4.90
BIENVILLE......................................  LA                                        22013            4.60
BOSSIER........................................  LA                                        22015            4.30
CADDO..........................................  LA                                        22017            4.30
CALCASIEU......................................  LA                                        22019            4.90
CALDWELL.......................................  LA                                        22021            4.90
CAMERON........................................  LA                                        22023            4.90
CATAHOULA......................................  LA                                        22025            5.20
CLAIBORNE......................................  LA                                        22027            4.30
CONCORDIA......................................  LA                                        22029            5.20
DE SOTO........................................  LA                                        22031            4.30
EAST BATON ROUGE...............................  LA                                        22033            5.20
EAST CARROLL...................................  LA                                        22035            5.20
EAST FELICIANA.................................  LA                                        22037            5.20
EVANGELINE.....................................  LA                                        22039            4.90
FRANKLIN.......................................  LA                                        22041            4.90
GRANT..........................................  LA                                        22043            4.90
IBERIA.........................................  LA                                        22045            5.20
IBERVILLE......................................  LA                                        22047            5.20

[[Page 95555]]

 
JACKSON........................................  LA                                        22049            4.60
JEFFERSON......................................  LA                                        22051            5.60
JEFFERSON DAVIS................................  LA                                        22053            4.90
LAFAYETTE......................................  LA                                        22055            5.20
LAFOURCHE......................................  LA                                        22057            5.60
LA SALLE.......................................  LA                                        22059            4.90
LINCOLN........................................  LA                                        22061            4.60
LIVINGSTON.....................................  LA                                        22063            5.40
MADISON........................................  LA                                        22065            5.20
MOREHOUSE......................................  LA                                        22067            4.90
NATCHITOCHES...................................  LA                                        22069            4.60
ORLEANS........................................  LA                                        22071            5.60
OUACHITA.......................................  LA                                        22073            4.90
PLAQUEMINES....................................  LA                                        22075            5.60
POINTE COUPEE..................................  LA                                        22077            5.20
RAPIDES........................................  LA                                        22079            4.90
RED RIVER......................................  LA                                        22081            4.60
RICHLAND.......................................  LA                                        22083            4.90
SABINE.........................................  LA                                        22085            4.60
ST. BERNARD....................................  LA                                        22087            5.60
ST. CHARLES....................................  LA                                        22089            5.60
ST. HELENA.....................................  LA                                        22091            5.40
ST. JAMES......................................  LA                                        22093            5.20
ST. JOHN THE BAPTIST...........................  LA                                        22095            5.60
ST. LANDRY.....................................  LA                                        22097            5.20
ST. MARTIN.....................................  LA                                        22099            5.20
ST. MARY.......................................  LA                                        22101            5.20
ST. TAMMANY....................................  LA                                        22103            5.60
TANGIPAHOA.....................................  LA                                        22105            5.40
TENSAS.........................................  LA                                        22107            5.20
TERREBONNE.....................................  LA                                        22109            5.60
UNION..........................................  LA                                        22111            4.60
VERMILION......................................  LA                                        22113            5.20
VERNON.........................................  LA                                        22115            4.60
WASHINGTON.....................................  LA                                        22117            5.60
WEBSTER........................................  LA                                        22119            4.30
WEST BATON ROUGE...............................  LA                                        22121            5.20
WEST CARROLL...................................  LA                                        22123            4.90
WEST FELICIANA.................................  LA                                        22125            5.20
WINN...........................................  LA                                        22127            4.60
ANDROSCOGGIN...................................  ME                                        23001            4.20
AROOSTOOK......................................  ME                                        23003            3.90
CUMBERLAND.....................................  ME                                        23005            4.50
FRANKLIN.......................................  ME                                        23007            4.20
HANCOCK........................................  ME                                        23009            3.90
KENNEBEC.......................................  ME                                        23011            4.20
KNOX...........................................  ME                                        23013            4.20
LINCOLN........................................  ME                                        23015            4.20
OXFORD.........................................  ME                                        23017            4.20
PENOBSCOT......................................  ME                                        23019            3.90
PISCATAQUIS....................................  ME                                        23021            3.90
SAGADAHOC......................................  ME                                        23023            4.20
SOMERSET.......................................  ME                                        23025            3.90
WALDO..........................................  ME                                        23027            3.90
WASHINGTON.....................................  ME                                        23029            3.90
YORK...........................................  ME                                        23031            4.50
ALLEGANY.......................................  MD                                        24001            4.10
ANNE ARUNDEL...................................  MD                                        24003            4.60
BALTIMORE......................................  MD                                        24005            4.40
CALVERT........................................  MD                                        24009            4.80
CAROLINE.......................................  MD                                        24011            4.60
CARROLL........................................  MD                                        24013            4.40
CECIL..........................................  MD                                        24015            4.40
CHARLES........................................  MD                                        24017            4.80
DORCHESTER.....................................  MD                                        24019            4.80
FREDERICK......................................  MD                                        24021            4.40
GARRETT........................................  MD                                        24023            4.10
HARFORD........................................  MD                                        24025            4.40
HOWARD.........................................  MD                                        24027            4.60
KENT...........................................  MD                                        24029            4.60
MONTGOMERY.....................................  MD                                        24031            4.60

[[Page 95556]]

 
PRINCE GEORGE'S................................  MD                                        24033            4.60
QUEEN ANNE'S...................................  MD                                        24035            4.60
ST. MARY'S.....................................  MD                                        24037            4.80
SOMERSET.......................................  MD                                        24039            4.80
TALBOT.........................................  MD                                        24041            4.60
WASHINGTON.....................................  MD                                        24043            4.20
WICOMICO.......................................  MD                                        24045            4.80
WORCESTER......................................  MD                                        24047            4.80
BALTIMORE CITY.................................  MD                                        24510            4.60
BARNSTABLE.....................................  MA                                        25001            5.10
BERKSHIRE......................................  MA                                        25003            4.50
BRISTOL........................................  MA                                        25005            5.10
DUKES..........................................  MA                                        25007            5.10
ESSEX..........................................  MA                                        25009            5.10
FRANKLIN.......................................  MA                                        25011            4.70
HAMPDEN........................................  MA                                        25013            4.70
HAMPSHIRE......................................  MA                                        25015            4.70
MIDDLESEX......................................  MA                                        25017            5.10
NANTUCKET......................................  MA                                        25019            5.10
NORFOLK........................................  MA                                        25021            5.10
PLYMOUTH.......................................  MA                                        25023            5.10
SUFFOLK........................................  MA                                        25025            5.10
WORCESTER......................................  MA                                        25027            4.90
ALCONA.........................................  MI                                        26001            3.30
ALGER..........................................  MI                                        26003            3.00
ALLEGAN........................................  MI                                        26005            3.30
ALPENA.........................................  MI                                        26007            3.30
ANTRIM.........................................  MI                                        26009            3.30
ARENAC.........................................  MI                                        26011            3.30
BARAGA.........................................  MI                                        26013            3.00
BARRY..........................................  MI                                        26015            3.30
BAY............................................  MI                                        26017            3.30
BENZIE.........................................  MI                                        26019            3.30
BERRIEN........................................  MI                                        26021            3.30
BRANCH.........................................  MI                                        26023            3.30
CALHOUN........................................  MI                                        26025            3.30
CASS...........................................  MI                                        26027            3.30
CHARLEVOIX.....................................  MI                                        26029            3.30
CHEBOYGAN......................................  MI                                        26031            3.30
CHIPPEWA.......................................  MI                                        26033            3.00
CLARE..........................................  MI                                        26035            3.30
CLINTON........................................  MI                                        26037            3.30
CRAWFORD.......................................  MI                                        26039            3.30
DELTA..........................................  MI                                        26041            2.80
DICKINSON......................................  MI                                        26043            2.80
EATON..........................................  MI                                        26045            3.30
EMMET..........................................  MI                                        26047            3.30
GENESEE........................................  MI                                        26049            3.30
GLADWIN........................................  MI                                        26051            3.30
GOGEBIC........................................  MI                                        26053            2.80
GRAND TRAVERSE.................................  MI                                        26055            3.30
GRATIOT........................................  MI                                        26057            3.30
HILLSDALE......................................  MI                                        26059            3.30
HOUGHTON.......................................  MI                                        26061            3.00
HURON..........................................  MI                                        26063            3.30
INGHAM.........................................  MI                                        26065            3.30
IONIA..........................................  MI                                        26067            3.30
IOSCO..........................................  MI                                        26069            3.30
IRON...........................................  MI                                        26071            2.80
ISABELLA.......................................  MI                                        26073            3.30
JACKSON........................................  MI                                        26075            3.30
KALAMAZOO......................................  MI                                        26077            3.30
KALKASKA.......................................  MI                                        26079            3.30
KENT...........................................  MI                                        26081            3.30
KEWEENAW.......................................  MI                                        26083            3.00
LAKE...........................................  MI                                        26085            3.30
LAPEER.........................................  MI                                        26087            3.30
LEELANAU.......................................  MI                                        26089            3.30
LENAWEE........................................  MI                                        26091            3.30
LIVINGSTON.....................................  MI                                        26093            3.30
LUCE...........................................  MI                                        26095            3.00

[[Page 95557]]

 
MACKINAC.......................................  MI                                        26097            3.00
MACOMB.........................................  MI                                        26099            3.30
MANISTEE.......................................  MI                                        26101            3.30
MARQUETTE......................................  MI                                        26103            3.00
MASON..........................................  MI                                        26105            3.30
MECOSTA........................................  MI                                        26107            3.30
MENOMINEE......................................  MI                                        26109            2.80
MIDLAND........................................  MI                                        26111            3.30
MISSAUKEE......................................  MI                                        26113            3.30
MONROE.........................................  MI                                        26115            3.30
MONTCALM.......................................  MI                                        26117            3.30
MONTMORENCY....................................  MI                                        26119            3.30
MUSKEGON.......................................  MI                                        26121            3.30
NEWAYGO........................................  MI                                        26123            3.30
OAKLAND........................................  MI                                        26125            3.30
OCEANA.........................................  MI                                        26127            3.30
OGEMAW.........................................  MI                                        26129            3.30
ONTONAGON......................................  MI                                        26131            2.80
OSCEOLA........................................  MI                                        26133            3.30
OSCODA.........................................  MI                                        26135            3.30
OTSEGO.........................................  MI                                        26137            3.30
OTTAWA.........................................  MI                                        26139            3.30
PRESQUE ISLE...................................  MI                                        26141            3.30
ROSCOMMON......................................  MI                                        26143            3.30
SAGINAW........................................  MI                                        26145            3.30
ST. CLAIR......................................  MI                                        26147            3.30
ST. JOSEPH.....................................  MI                                        26149            3.30
SANILAC........................................  MI                                        26151            3.30
SCHOOLCRAFT....................................  MI                                        26153            3.00
SHIAWASSEE.....................................  MI                                        26155            3.30
TUSCOLA........................................  MI                                        26157            3.30
VAN BUREN......................................  MI                                        26159            3.30
WASHTENAW......................................  MI                                        26161            3.30
WAYNE..........................................  MI                                        26163            3.30
WEXFORD........................................  MI                                        26165            3.30
AITKIN.........................................  MN                                        27001            2.80
ANOKA..........................................  MN                                        27003            2.80
BECKER.........................................  MN                                        27005            2.80
BELTRAMI.......................................  MN                                        27007            2.30
BENTON.........................................  MN                                        27009            2.80
BIG STONE......................................  MN                                        27011            2.70
BLUE EARTH.....................................  MN                                        27013            2.80
BROWN..........................................  MN                                        27015            2.80
CARLTON........................................  MN                                        27017            2.80
CARVER.........................................  MN                                        27019            2.80
CASS...........................................  MN                                        27021            2.80
CHIPPEWA.......................................  MN                                        27023            2.80
CHISAGO........................................  MN                                        27025            2.80
CLAY...........................................  MN                                        27027            2.80
CLEARWATER.....................................  MN                                        27029            2.30
COOK...........................................  MN                                        27031            2.30
COTTONWOOD.....................................  MN                                        27033            2.80
CROW WING......................................  MN                                        27035            2.80
DAKOTA.........................................  MN                                        27037            2.90
DODGE..........................................  MN                                        27039            2.80
DOUGLAS........................................  MN                                        27041            2.80
FARIBAULT......................................  MN                                        27043            2.80
FILLMORE.......................................  MN                                        27045            2.80
FREEBORN.......................................  MN                                        27047            2.80
GOODHUE........................................  MN                                        27049            2.80
GRANT..........................................  MN                                        27051            2.80
HENNEPIN.......................................  MN                                        27053            2.90
HOUSTON........................................  MN                                        27055            2.80
HUBBARD........................................  MN                                        27057            2.80
ISANTI.........................................  MN                                        27059            2.80
ITASCA.........................................  MN                                        27061            2.30
JACKSON........................................  MN                                        27063            2.80
KANABEC........................................  MN                                        27065            2.80
KANDIYOHI......................................  MN                                        27067            2.80
KITTSON........................................  MN                                        27069            2.30
KOOCHICHING....................................  MN                                        27071            2.30

[[Page 95558]]

 
LAC QUI PARLE..................................  MN                                        27073            2.70
LAKE...........................................  MN                                        27075            2.30
LAKE OF THE WOODS..............................  MN                                        27077            2.30
LE SUEUR.......................................  MN                                        27079            2.80
LINCOLN........................................  MN                                        27081            2.60
LYON...........................................  MN                                        27083            2.70
MCLEOD.........................................  MN                                        27085            2.80
MAHNOMEN.......................................  MN                                        27087            2.60
MARSHALL.......................................  MN                                        27089            2.30
MARTIN.........................................  MN                                        27091            2.80
MEEKER.........................................  MN                                        27093            2.80
MILLE LACS.....................................  MN                                        27095            2.80
MORRISON.......................................  MN                                        27097            2.80
MOWER..........................................  MN                                        27099            2.80
MURRAY.........................................  MN                                        27101            2.70
NICOLLET.......................................  MN                                        27103            2.80
NOBLES.........................................  MN                                        27105            2.70
NORMAN.........................................  MN                                        27107            2.60
OLMSTED........................................  MN                                        27109            2.80
OTTER TAIL.....................................  MN                                        27111            2.80
PENNINGTON.....................................  MN                                        27113            2.30
PINE...........................................  MN                                        27115            2.80
PIPESTONE......................................  MN                                        27117            2.60
POLK...........................................  MN                                        27119            2.30
POPE...........................................  MN                                        27121            2.80
RAMSEY.........................................  MN                                        27123            2.90
RED LAKE.......................................  MN                                        27125            2.30
REDWOOD........................................  MN                                        27127            2.80
RENVILLE.......................................  MN                                        27129            2.80
RICE...........................................  MN                                        27131            2.80
ROCK...........................................  MN                                        27133            2.60
ROSEAU.........................................  MN                                        27135            2.30
ST. LOUIS......................................  MN                                        27137            2.30
SCOTT..........................................  MN                                        27139            2.90
SHERBURNE......................................  MN                                        27141            2.80
SIBLEY.........................................  MN                                        27143            2.80
STEARNS........................................  MN                                        27145            2.80
STEELE.........................................  MN                                        27147            2.80
STEVENS........................................  MN                                        27149            2.80
SWIFT..........................................  MN                                        27151            2.80
TODD...........................................  MN                                        27153            2.80
TRAVERSE.......................................  MN                                        27155            2.70
WABASHA........................................  MN                                        27157            2.80
WADENA.........................................  MN                                        27159            2.80
WASECA.........................................  MN                                        27161            2.80
WASHINGTON.....................................  MN                                        27163            2.90
WATONWAN.......................................  MN                                        27165            2.80
WILKIN.........................................  MN                                        27167            2.80
WINONA.........................................  MN                                        27169            2.80
WRIGHT.........................................  MN                                        27171            2.80
YELLOW MEDICINE................................  MN                                        27173            2.70
ADAMS..........................................  MS                                        28001            5.20
ALCORN.........................................  MS                                        28003            4.90
AMITE..........................................  MS                                        28005            5.40
ATTALA.........................................  MS                                        28007            5.20
BENTON.........................................  MS                                        28009            4.90
BOLIVAR........................................  MS                                        28011            4.90
CALHOUN........................................  MS                                        28013            5.20
CARROLL........................................  MS                                        28015            5.20
CHICKASAW......................................  MS                                        28017            5.20
CHOCTAW........................................  MS                                        28019            5.20
CLAIBORNE......................................  MS                                        28021            5.20
CLARKE.........................................  MS                                        28023            5.60
CLAY...........................................  MS                                        28025            5.20
COAHOMA........................................  MS                                        28027            4.90
COPIAH.........................................  MS                                        28029            5.40
COVINGTON......................................  MS                                        28031            5.60
DE SOTO........................................  MS                                        28033            4.60
FORREST........................................  MS                                        28035            5.80
FRANKLIN.......................................  MS                                        28037            5.20
GEORGE.........................................  MS                                        28039            5.80

[[Page 95559]]

 
GREENE.........................................  MS                                        28041            5.80
GRENADA........................................  MS                                        28043            5.20
HANCOCK........................................  MS                                        28045            5.80
HARRISON.......................................  MS                                        28047            5.80
HINDS..........................................  MS                                        28049            5.40
HOLMES.........................................  MS                                        28051            5.20
HUMPHREYS......................................  MS                                        28053            5.20
ISSAQUENA......................................  MS                                        28055            5.20
ITAWAMBA.......................................  MS                                        28057            5.20
JACKSON........................................  MS                                        28059            5.80
JASPER.........................................  MS                                        28061            5.60
JEFFERSON......................................  MS                                        28063            5.20
JEFFERSON DAVIS................................  MS                                        28065            5.60
JONES..........................................  MS                                        28067            5.60
KEMPER.........................................  MS                                        28069            5.40
LAFAYETTE......................................  MS                                        28071            4.90
LAMAR..........................................  MS                                        28073            5.80
LAUDERDALE.....................................  MS                                        28075            5.60
LAWRENCE.......................................  MS                                        28077            5.60
LEAKE..........................................  MS                                        28079            5.40
LEE............................................  MS                                        28081            5.20
LEFLORE........................................  MS                                        28083            5.20
LINCOLN........................................  MS                                        28085            5.40
LOWNDES........................................  MS                                        28087            5.20
MADISON........................................  MS                                        28089            5.40
MARION.........................................  MS                                        28091            5.60
MARSHALL.......................................  MS                                        28093            4.90
MONROE.........................................  MS                                        28095            5.20
MONTGOMERY.....................................  MS                                        28097            5.20
NESHOBA........................................  MS                                        28099            5.40
NEWTON.........................................  MS                                        28101            5.60
NOXUBEE........................................  MS                                        28103            5.40
OKTIBBEHA......................................  MS                                        28105            5.20
PANOLA.........................................  MS                                        28107            4.90
PEARL RIVER....................................  MS                                        28109            5.80
PERRY..........................................  MS                                        28111            5.80
PIKE...........................................  MS                                        28113            5.40
PONTOTOC.......................................  MS                                        28115            4.90
PRENTISS.......................................  MS                                        28117            4.90
QUITMAN........................................  MS                                        28119            4.90
RANKIN.........................................  MS                                        28121            5.40
SCOTT..........................................  MS                                        28123            5.40
SHARKEY........................................  MS                                        28125            5.20
SIMPSON........................................  MS                                        28127            5.60
SMITH..........................................  MS                                        28129            5.60
STONE..........................................  MS                                        28131            5.80
SUNFLOWER......................................  MS                                        28133            4.90
TALLAHATCHIE...................................  MS                                        28135            4.90
TATE...........................................  MS                                        28137            4.90
TIPPAH.........................................  MS                                        28139            4.90
TISHOMINGO.....................................  MS                                        28141            4.90
TUNICA.........................................  MS                                        28143            4.60
UNION..........................................  MS                                        28145            4.90
WALTHALL.......................................  MS                                        28147            5.60
WARREN.........................................  MS                                        28149            5.20
WASHINGTON.....................................  MS                                        28151            4.90
WAYNE..........................................  MS                                        28153            5.80
WEBSTER........................................  MS                                        28155            5.20
WILKINSON......................................  MS                                        28157            5.20
WINSTON........................................  MS                                        28159            5.40
YALOBUSHA......................................  MS                                        28161            4.90
YAZOO..........................................  MS                                        28163            5.20
ADAIR..........................................  MO                                        29001            3.20
ANDREW.........................................  MO                                        29003            2.90
ATCHISON.......................................  MO                                        29005            2.70
AUDRAIN........................................  MO                                        29007            3.40
BARRY..........................................  MO                                        29009            3.20
BARTON.........................................  MO                                        29011            3.20
BATES..........................................  MO                                        29013            3.20
BENTON.........................................  MO                                        29015            3.20
BOLLINGER......................................  MO                                        29017            3.60

[[Page 95560]]

 
BOONE..........................................  MO                                        29019            3.40
BUCHANAN.......................................  MO                                        29021            3.20
BUTLER.........................................  MO                                        29023            4.00
CALDWELL.......................................  MO                                        29025            3.20
CALLAWAY.......................................  MO                                        29027            3.40
CAMDEN.........................................  MO                                        29029            3.40
CAPE GIRARDEAU.................................  MO                                        29031            3.60
CARROLL........................................  MO                                        29033            3.20
CARTER.........................................  MO                                        29035            4.00
CASS...........................................  MO                                        29037            3.20
CEDAR..........................................  MO                                        29039            3.20
CHARITON.......................................  MO                                        29041            3.20
CHRISTIAN......................................  MO                                        29043            3.30
CLARK..........................................  MO                                        29045            3.20
CLAY...........................................  MO                                        29047            3.20
CLINTON........................................  MO                                        29049            3.20
COLE...........................................  MO                                        29051            3.40
COOPER.........................................  MO                                        29053            3.40
CRAWFORD.......................................  MO                                        29055            3.60
DADE...........................................  MO                                        29057            3.20
DALLAS.........................................  MO                                        29059            3.30
DAVIESS........................................  MO                                        29061            3.20
DE KALB........................................  MO                                        29063            3.20
DENT...........................................  MO                                        29065            3.60
DOUGLAS........................................  MO                                        29067            3.30
DUNKLIN........................................  MO                                        29069            4.30
FRANKLIN.......................................  MO                                        29071            3.60
GASCONADE......................................  MO                                        29073            3.60
GENTRY.........................................  MO                                        29075            2.90
GREENE.........................................  MO                                        29077            3.20
GRUNDY.........................................  MO                                        29079            3.20
HARRISON.......................................  MO                                        29081            2.90
HENRY..........................................  MO                                        29083            3.20
HICKORY........................................  MO                                        29085            3.20
HOLT...........................................  MO                                        29087            2.90
HOWARD.........................................  MO                                        29089            3.40
HOWELL.........................................  MO                                        29091            3.60
IRON...........................................  MO                                        29093            3.60
JACKSON........................................  MO                                        29095            3.20
JASPER.........................................  MO                                        29097            3.20
JEFFERSON......................................  MO                                        29099            3.60
JOHNSON........................................  MO                                        29101            3.20
KNOX...........................................  MO                                        29103            3.20
LACLEDE........................................  MO                                        29105            3.30
LAFAYETTE......................................  MO                                        29107            3.20
LAWRENCE.......................................  MO                                        29109            3.20
LEWIS..........................................  MO                                        29111            3.20
LINCOLN........................................  MO                                        29113            3.60
LINN...........................................  MO                                        29115            3.20
LIVINGSTON.....................................  MO                                        29117            3.20
MCDONALD.......................................  MO                                        29119            3.20
MACON..........................................  MO                                        29121            3.20
MADISON........................................  MO                                        29123            3.60
MARIES.........................................  MO                                        29125            3.60
MARION.........................................  MO                                        29127            3.20
MERCER.........................................  MO                                        29129            2.90
MILLER.........................................  MO                                        29131            3.40
MISSISSIPPI....................................  MO                                        29133            4.00
MONITEAU.......................................  MO                                        29135            3.40
MONROE.........................................  MO                                        29137            3.40
MONTGOMERY.....................................  MO                                        29139            3.40
MORGAN.........................................  MO                                        29141            3.40
NEW MADRID.....................................  MO                                        29143            4.00
NEWTON.........................................  MO                                        29145            3.20
NODAWAY........................................  MO                                        29147            2.90
OREGON.........................................  MO                                        29149            4.00
OSAGE..........................................  MO                                        29151            3.60
OZARK..........................................  MO                                        29153            3.60
PEMISCOT.......................................  MO                                        29155            4.30
PERRY..........................................  MO                                        29157            3.60
PETTIS.........................................  MO                                        29159            3.40

[[Page 95561]]

 
PHELPS.........................................  MO                                        29161            3.60
PIKE...........................................  MO                                        29163            3.40
PLATTE.........................................  MO                                        29165            3.20
POLK...........................................  MO                                        29167            3.20
PULASKI........................................  MO                                        29169            3.40
PUTNAM.........................................  MO                                        29171            2.90
RALLS..........................................  MO                                        29173            3.40
RANDOLPH.......................................  MO                                        29175            3.40
RAY............................................  MO                                        29177            3.20
REYNOLDS.......................................  MO                                        29179            3.60
RIPLEY.........................................  MO                                        29181            4.00
ST. CHARLES....................................  MO                                        29183            3.60
ST. CLAIR......................................  MO                                        29185            3.20
STE. GENEVIEVE.................................  MO                                        29186            3.60
ST. FRANCOIS...................................  MO                                        29187            3.60
ST. LOUIS......................................  MO                                        29189            3.60
SALINE.........................................  MO                                        29195            3.40
SCHUYLER.......................................  MO                                        29197            3.20
SCOTLAND.......................................  MO                                        29199            3.20
SCOTT..........................................  MO                                        29201            4.00
SHANNON........................................  MO                                        29203            3.60
SHELBY.........................................  MO                                        29205            3.20
STODDARD.......................................  MO                                        29207            4.00
STONE..........................................  MO                                        29209            3.30
SULLIVAN.......................................  MO                                        29211            3.20
TANEY..........................................  MO                                        29213            3.30
TEXAS..........................................  MO                                        29215            3.60
VERNON.........................................  MO                                        29217            3.20
WARREN.........................................  MO                                        29219            3.60
WASHINGTON.....................................  MO                                        29221            3.60
WAYNE..........................................  MO                                        29223            4.00
WEBSTER........................................  MO                                        29225            3.20
WORTH..........................................  MO                                        29227            2.90
WRIGHT.........................................  MO                                        29229            3.30
ST. LOUIS CITY.................................  MO                                        29510            3.60
BEAVERHEAD.....................................  MT                                        30001            1.80
BIG HORN.......................................  MT                                        30003            2.40
BLAINE.........................................  MT                                        30005            2.00
BROADWATER.....................................  MT                                        30007            1.80
CARBON.........................................  MT                                        30009            2.40
CARTER.........................................  MT                                        30011            2.40
CASCADE........................................  MT                                        30013            1.80
CHOUTEAU.......................................  MT                                        30015            1.80
CUSTER.........................................  MT                                        30017            2.40
DANIELS........................................  MT                                        30019            2.30
DAWSON.........................................  MT                                        30021            2.40
DEER LODGE.....................................  MT                                        30023            1.80
FALLON.........................................  MT                                        30025            2.40
FERGUS.........................................  MT                                        30027            2.00
FLATHEAD.......................................  MT                                        30029            2.00
GALLATIN.......................................  MT                                        30031            2.00
GARFIELD.......................................  MT                                        30033            2.40
GLACIER........................................  MT                                        30035            1.80
GOLDEN VALLEY..................................  MT                                        30037            2.00
GRANITE........................................  MT                                        30039            1.80
HILL...........................................  MT                                        30041            1.80
JEFFERSON......................................  MT                                        30043            1.80
JUDITH BASIN...................................  MT                                        30045            2.00
LAKE...........................................  MT                                        30047            2.00
LEWIS AND CLARK................................  MT                                        30049            1.70
LIBERTY........................................  MT                                        30051            1.80
LINCOLN........................................  MT                                        30053            2.00
MCCONE.........................................  MT                                        30055            2.40
MADISON........................................  MT                                        30057            1.80
MEAGHER........................................  MT                                        30059            1.80
MINERAL........................................  MT                                        30061            2.00
MISSOULA.......................................  MT                                        30063            1.80
MUSSELSHELL....................................  MT                                        30065            2.40
PARK...........................................  MT                                        30067            2.00
PETROLEUM......................................  MT                                        30069            2.40
PHILLIPS.......................................  MT                                        30071            2.30

[[Page 95562]]

 
PONDERA........................................  MT                                        30073            1.70
POWDER RIVER...................................  MT                                        30075            2.40
POWELL.........................................  MT                                        30077            1.80
PRAIRIE........................................  MT                                        30079            2.40
RAVALLI........................................  MT                                        30081            1.80
RICHLAND.......................................  MT                                        30083            2.40
ROOSEVELT......................................  MT                                        30085            2.30
ROSEBUD........................................  MT                                        30087            2.40
SANDERS........................................  MT                                        30089            2.00
SHERIDAN.......................................  MT                                        30091            2.30
SILVER BOW.....................................  MT                                        30093            1.80
STILLWATER.....................................  MT                                        30095            2.40
SWEET GRASS....................................  MT                                        30097            2.00
TETON..........................................  MT                                        30099            1.70
TOOLE..........................................  MT                                        30101            1.80
TREASURE.......................................  MT                                        30103            2.40
VALLEY.........................................  MT                                        30105            2.30
WHEATLAND......................................  MT                                        30107            2.00
WIBAUX.........................................  MT                                        30109            2.40
YELLOWSTONE....................................  MT                                        30111            2.40
ADAMS..........................................  NE                                        31001            2.60
ANTELOPE.......................................  NE                                        31003            2.60
ARTHUR.........................................  NE                                        31005            2.40
BANNER.........................................  NE                                        31007            2.40
BLAINE.........................................  NE                                        31009            2.50
BOONE..........................................  NE                                        31011            2.60
BOX BUTTE......................................  NE                                        31013            2.40
BOYD...........................................  NE                                        31015            2.50
BROWN..........................................  NE                                        31017            2.50
BUFFALO........................................  NE                                        31019            2.50
BURT...........................................  NE                                        31021            2.60
BUTLER.........................................  NE                                        31023            2.60
CASS...........................................  NE                                        31025            2.70
CEDAR..........................................  NE                                        31027            2.60
CHASE..........................................  NE                                        31029            2.50
CHERRY.........................................  NE                                        31031            2.40
CHEYENNE.......................................  NE                                        31033            2.40
CLAY...........................................  NE                                        31035            2.60
COLFAX.........................................  NE                                        31037            2.60
CUMING.........................................  NE                                        31039            2.60
CUSTER.........................................  NE                                        31041            2.50
DAKOTA.........................................  NE                                        31043            2.60
DAWES..........................................  NE                                        31045            2.40
DAWSON.........................................  NE                                        31047            2.50
DEUEL..........................................  NE                                        31049            2.40
DIXON..........................................  NE                                        31051            2.60
DODGE..........................................  NE                                        31053            2.60
DOUGLAS........................................  NE                                        31055            2.70
DUNDY..........................................  NE                                        31057            2.50
FILLMORE.......................................  NE                                        31059            2.60
FRANKLIN.......................................  NE                                        31061            2.60
FRONTIER.......................................  NE                                        31063            2.50
FURNAS.........................................  NE                                        31065            2.50
GAGE...........................................  NE                                        31067            2.70
GARDEN.........................................  NE                                        31069            2.40
GARFIELD.......................................  NE                                        31071            2.50
GOSPER.........................................  NE                                        31073            2.50
GRANT..........................................  NE                                        31075            2.40
GREELEY........................................  NE                                        31077            2.60
HALL...........................................  NE                                        31079            2.60
HAMILTON.......................................  NE                                        31081            2.60
HARLAN.........................................  NE                                        31083            2.50
HAYES..........................................  NE                                        31085            2.50
HITCHCOCK......................................  NE                                        31087            2.50
HOLT...........................................  NE                                        31089            2.50
HOOKER.........................................  NE                                        31091            2.40
HOWARD.........................................  NE                                        31093            2.60
JEFFERSON......................................  NE                                        31095            2.60
JOHNSON........................................  NE                                        31097            2.70
KEARNEY........................................  NE                                        31099            2.60
KEITH..........................................  NE                                        31101            2.50

[[Page 95563]]

 
KEYA PAHA......................................  NE                                        31103            2.50
KIMBALL........................................  NE                                        31105            2.40
KNOX...........................................  NE                                        31107            2.60
LANCASTER......................................  NE                                        31109            2.60
LINCOLN........................................  NE                                        31111            2.50
LOGAN..........................................  NE                                        31113            2.40
LOUP...........................................  NE                                        31115            2.50
MCPHERSON......................................  NE                                        31117            2.40
MADISON........................................  NE                                        31119            2.60
MERRICK........................................  NE                                        31121            2.60
MORRILL........................................  NE                                        31123            2.40
NANCE..........................................  NE                                        31125            2.60
NEMAHA.........................................  NE                                        31127            2.70
NUCKOLLS.......................................  NE                                        31129            2.60
OTOE...........................................  NE                                        31131            2.70
PAWNEE.........................................  NE                                        31133            2.70
PERKINS........................................  NE                                        31135            2.50
PHELPS.........................................  NE                                        31137            2.50
PIERCE.........................................  NE                                        31139            2.60
PLATTE.........................................  NE                                        31141            2.60
POLK...........................................  NE                                        31143            2.60
RED WILLOW.....................................  NE                                        31145            2.50
RICHARDSON.....................................  NE                                        31147            2.70
ROCK...........................................  NE                                        31149            2.50
SALINE.........................................  NE                                        31151            2.60
SARPY..........................................  NE                                        31153            2.70
SAUNDERS.......................................  NE                                        31155            2.60
SCOTTS BLUFF...................................  NE                                        31157            2.40
SEWARD.........................................  NE                                        31159            2.60
SHERIDAN.......................................  NE                                        31161            2.40
SHERMAN........................................  NE                                        31163            2.50
SIOUX..........................................  NE                                        31165            2.40
STANTON........................................  NE                                        31167            2.60
THAYER.........................................  NE                                        31169            2.60
THOMAS.........................................  NE                                        31171            2.40
THURSTON.......................................  NE                                        31173            2.60
VALLEY.........................................  NE                                        31175            2.50
WASHINGTON.....................................  NE                                        31177            2.60
WAYNE..........................................  NE                                        31179            2.60
WEBSTER........................................  NE                                        31181            2.60
WHEELER........................................  NE                                        31183            2.50
YORK...........................................  NE                                        31185            2.60
CHURCHILL......................................  NV                                        32001            1.90
CLARK..........................................  NV                                        32003            2.60
DOUGLAS........................................  NV                                        32005            1.80
ELKO...........................................  NV                                        32007            2.00
ESMERALDA......................................  NV                                        32009            2.20
EUREKA.........................................  NV                                        32011            2.20
HUMBOLDT.......................................  NV                                        32013            1.90
LANDER.........................................  NV                                        32015            2.00
LINCOLN........................................  NV                                        32017            2.50
LYON...........................................  NV                                        32019            1.90
MINERAL........................................  NV                                        32021            2.00
NYE............................................  NV                                        32023            2.20
PERSHING.......................................  NV                                        32027            1.90
STOREY.........................................  NV                                        32029            1.90
WASHOE.........................................  NV                                        32031            2.00
WHITE PINE.....................................  NV                                        32033            2.20
CARSON CITY....................................  NV                                        32510            1.90
BELKNAP........................................  NH                                        33001            4.50
CARROLL........................................  NH                                        33003            4.50
CHESHIRE.......................................  NH                                        33005            4.50
COOS...........................................  NH                                        33007            4.20
GRAFTON........................................  NH                                        33009            4.40
HILLSBOROUGH...................................  NH                                        33011            4.50
MERRIMACK......................................  NH                                        33013            4.50
ROCKINGHAM.....................................  NH                                        33015            4.50
STRAFFORD......................................  NH                                        33017            4.50
SULLIVAN.......................................  NH                                        33019            4.50
ATLANTIC.......................................  NJ                                        34001            4.70
BERGEN.........................................  NJ                                        34003            5.00

[[Page 95564]]

 
BURLINGTON.....................................  NJ                                        34005            4.70
CAMDEN.........................................  NJ                                        34007            4.70
CAPE MAY.......................................  NJ                                        34009            4.70
CUMBERLAND.....................................  NJ                                        34011            4.70
ESSEX..........................................  NJ                                        34013            5.00
GLOUCESTER.....................................  NJ                                        34015            4.70
HUDSON.........................................  NJ                                        34017            5.00
HUNTERDON......................................  NJ                                        34019            4.70
MERCER.........................................  NJ                                        34021            4.70
MIDDLESEX......................................  NJ                                        34023            4.90
MONMOUTH.......................................  NJ                                        34025            4.90
MORRIS.........................................  NJ                                        34027            4.90
OCEAN..........................................  NJ                                        34029            4.90
PASSAIC........................................  NJ                                        34031            5.00
SALEM..........................................  NJ                                        34033            4.70
SOMERSET.......................................  NJ                                        34035            4.90
SUSSEX.........................................  NJ                                        34037            4.70
UNION..........................................  NJ                                        34039            5.00
WARREN.........................................  NJ                                        34041            4.70
BERNALILLO.....................................  NM                                        35001            2.50
CATRON.........................................  NM                                        35003            2.30
CHAVES.........................................  NM                                        35005            2.50
CIBOLA.........................................  NM                                        35006            2.30
COLFAX.........................................  NM                                        35007            2.50
CURRY..........................................  NM                                        35009            2.50
DE BACA........................................  NM                                        35011            2.50
DONA ANA.......................................  NM                                        35013            2.50
EDDY...........................................  NM                                        35015            2.50
GRANT..........................................  NM                                        35017            2.50
GUADALUPE......................................  NM                                        35019            2.50
HARDING........................................  NM                                        35021            2.50
HIDALGO........................................  NM                                        35023            2.50
LEA............................................  NM                                        35025            2.50
LINCOLN........................................  NM                                        35027            2.50
LOS ALAMOS.....................................  NM                                        35028            2.50
LUNA...........................................  NM                                        35029            2.50
MCKINLEY.......................................  NM                                        35031            2.30
MORA...........................................  NM                                        35033            2.50
OTERO..........................................  NM                                        35035            2.50
QUAY...........................................  NM                                        35037            2.50
RIO ARRIBA.....................................  NM                                        35039            2.30
ROOSEVELT......................................  NM                                        35041            2.50
SANDOVAL.......................................  NM                                        35043            2.50
SAN JUAN.......................................  NM                                        35045            2.30
SAN MIGUEL.....................................  NM                                        35047            2.50
SANTA FE.......................................  NM                                        35049            2.50
SIERRA.........................................  NM                                        35051            2.50
SOCORRO........................................  NM                                        35053            2.50
TAOS...........................................  NM                                        35055            2.50
TORRANCE.......................................  NM                                        35057            2.50
UNION..........................................  NM                                        35059            2.50
VALENCIA.......................................  NM                                        35061            2.50
ALBANY.........................................  NY                                        36001            4.40
ALLEGANY.......................................  NY                                        36003            3.90
BRONX..........................................  NY                                        36005            5.10
BROOME.........................................  NY                                        36007            4.00
CATTARAUGUS....................................  NY                                        36009            3.90
CAYUGA.........................................  NY                                        36011            3.90
CHAUTAUQUA.....................................  NY                                        36013            3.90
CHEMUNG........................................  NY                                        36015            4.00
CHENANGO.......................................  NY                                        36017            4.00
CLINTON........................................  NY                                        36019            4.20
COLUMBIA.......................................  NY                                        36021            4.40
CORTLAND.......................................  NY                                        36023            3.90
DELAWARE.......................................  NY                                        36025            4.20
DUTCHESS.......................................  NY                                        36027            4.70
ERIE...........................................  NY                                        36029            3.90
ESSEX..........................................  NY                                        36031            4.20
FRANKLIN.......................................  NY                                        36033            4.10
FULTON.........................................  NY                                        36035            4.10
GENESEE........................................  NY                                        36037            3.90

[[Page 95565]]

 
GREENE.........................................  NY                                        36039            4.40
HAMILTON.......................................  NY                                        36041            4.10
HERKIMER.......................................  NY                                        36043            4.00
JEFFERSON......................................  NY                                        36045            3.90
KINGS..........................................  NY                                        36047            5.10
LEWIS..........................................  NY                                        36049            3.90
LIVINGSTON.....................................  NY                                        36051            3.90
MADISON........................................  NY                                        36053            3.90
MONROE.........................................  NY                                        36055            3.90
MONTGOMERY.....................................  NY                                        36057            4.10
NASSAU.........................................  NY                                        36059            5.10
NEW YORK.......................................  NY                                        36061            5.10
NIAGARA........................................  NY                                        36063            3.90
ONEIDA.........................................  NY                                        36065            3.90
ONONDAGA.......................................  NY                                        36067            3.90
ONTARIO........................................  NY                                        36069            3.90
ORANGE.........................................  NY                                        36071            4.70
ORLEANS........................................  NY                                        36073            3.90
OSWEGO.........................................  NY                                        36075            3.90
OTSEGO.........................................  NY                                        36077            4.10
PUTNAM.........................................  NY                                        36079            4.70
QUEENS.........................................  NY                                        36081            5.10
RENSSELAER.....................................  NY                                        36083            4.40
RICHMOND.......................................  NY                                        36085            5.10
ROCKLAND.......................................  NY                                        36087            5.00
ST. LAWRENCE...................................  NY                                        36089            3.90
SARATOGA.......................................  NY                                        36091            4.20
SCHENECTADY....................................  NY                                        36093            4.20
SCHOHARIE......................................  NY                                        36095            4.20
SCHUYLER.......................................  NY                                        36097            3.90
SENECA.........................................  NY                                        36099            3.90
STEUBEN........................................  NY                                        36101            3.90
SUFFOLK........................................  NY                                        36103            5.10
SULLIVAN.......................................  NY                                        36105            4.40
TIOGA..........................................  NY                                        36107            4.00
TOMPKINS.......................................  NY                                        36109            3.90
ULSTER.........................................  NY                                        36111            4.40
WARREN.........................................  NY                                        36113            4.20
WASHINGTON.....................................  NY                                        36115            4.20
WAYNE..........................................  NY                                        36117            3.90
WESTCHESTER....................................  NY                                        36119            5.00
WYOMING........................................  NY                                        36121            3.90
YATES..........................................  NY                                        36123            3.90
ALAMANCE.......................................  NC                                        37001            5.40
ALEXANDER......................................  NC                                        37003            5.60
ALLEGHANY......................................  NC                                        37005            5.40
ANSON..........................................  NC                                        37007            5.80
ASHE...........................................  NC                                        37009            5.40
AVERY..........................................  NC                                        37011            5.40
BEAUFORT.......................................  NC                                        37013            5.80
BERTIE.........................................  NC                                        37015            5.60
BLADEN.........................................  NC                                        37017            5.80
BRUNSWICK......................................  NC                                        37019            6.00
BUNCOMBE.......................................  NC                                        37021            5.40
BURKE..........................................  NC                                        37023            5.60
CABARRUS.......................................  NC                                        37025            5.60
CALDWELL.......................................  NC                                        37027            5.60
CAMDEN.........................................  NC                                        37029            5.60
CARTERET.......................................  NC                                        37031            6.00
CASWELL........................................  NC                                        37033            5.40
CATAWBA........................................  NC                                        37035            5.60
CHATHAM........................................  NC                                        37037            5.60
CHEROKEE.......................................  NC                                        37039            5.40
CHOWAN.........................................  NC                                        37041            5.60
CLAY...........................................  NC                                        37043            5.60
CLEVELAND......................................  NC                                        37045            5.60
COLUMBUS.......................................  NC                                        37047            6.00
CRAVEN.........................................  NC                                        37049            6.00
CUMBERLAND.....................................  NC                                        37051            5.80
CURRITUCK......................................  NC                                        37053            5.60
DARE...........................................  NC                                        37055            5.80

[[Page 95566]]

 
DAVIDSON.......................................  NC                                        37057            5.60
DAVIE..........................................  NC                                        37059            5.60
DUPLIN.........................................  NC                                        37061            5.80
DURHAM.........................................  NC                                        37063            5.40
EDGECOMBE......................................  NC                                        37065            5.60
FORSYTH........................................  NC                                        37067            5.40
FRANKLIN.......................................  NC                                        37069            5.60
GASTON.........................................  NC                                        37071            5.60
GATES..........................................  NC                                        37073            5.60
GRAHAM.........................................  NC                                        37075            5.40
GRANVILLE......................................  NC                                        37077            5.40
GREENE.........................................  NC                                        37079            5.80
GUILFORD.......................................  NC                                        37081            5.40
HALIFAX........................................  NC                                        37083            5.60
HARNETT........................................  NC                                        37085            5.80
HAYWOOD........................................  NC                                        37087            5.40
HENDERSON......................................  NC                                        37089            5.60
HERTFORD.......................................  NC                                        37091            5.60
HOKE...........................................  NC                                        37093            5.80
HYDE...........................................  NC                                        37095            5.80
IREDELL........................................  NC                                        37097            5.60
JACKSON........................................  NC                                        37099            5.60
JOHNSTON.......................................  NC                                        37101            5.80
JONES..........................................  NC                                        37103            6.00
LEE............................................  NC                                        37105            5.60
LENOIR.........................................  NC                                        37107            5.80
LINCOLN........................................  NC                                        37109            5.60
MCDOWELL.......................................  NC                                        37111            5.60
MACON..........................................  NC                                        37113            5.60
MADISON........................................  NC                                        37115            5.40
MARTIN.........................................  NC                                        37117            5.80
MECKLENBURG....................................  NC                                        37119            5.60
MITCHELL.......................................  NC                                        37121            5.40
MONTGOMERY.....................................  NC                                        37123            5.60
MOORE..........................................  NC                                        37125            5.60
NASH...........................................  NC                                        37127            5.60
NEW HANOVER....................................  NC                                        37129            6.00
NORTHAMPTON....................................  NC                                        37131            5.60
ONSLOW.........................................  NC                                        37133            6.00
ORANGE.........................................  NC                                        37135            5.40
PAMLICO........................................  NC                                        37137            6.00
PASQUOTANK.....................................  NC                                        37139            5.60
PENDER.........................................  NC                                        37141            6.00
PERQUIMANS.....................................  NC                                        37143            5.60
PERSON.........................................  NC                                        37145            5.40
PITT...........................................  NC                                        37147            5.80
POLK...........................................  NC                                        37149            5.60
RANDOLPH.......................................  NC                                        37151            5.60
RICHMOND.......................................  NC                                        37153            5.80
ROBESON........................................  NC                                        37155            5.80
ROCKINGHAM.....................................  NC                                        37157            5.40
ROWAN..........................................  NC                                        37159            5.60
RUTHERFORD.....................................  NC                                        37161            5.60
SAMPSON........................................  NC                                        37163            5.80
SCOTLAND.......................................  NC                                        37165            5.80
STANLY.........................................  NC                                        37167            5.60
STOKES.........................................  NC                                        37169            5.40
SURRY..........................................  NC                                        37171            5.40
SWAIN..........................................  NC                                        37173            5.40
TRANSYLVANIA...................................  NC                                        37175            5.60
TYRRELL........................................  NC                                        37177            5.80
UNION..........................................  NC                                        37179            5.80
VANCE..........................................  NC                                        37181            5.40
WAKE...........................................  NC                                        37183            5.60
WARREN.........................................  NC                                        37185            5.40
WASHINGTON.....................................  NC                                        37187            5.80
WATAUGA........................................  NC                                        37189            5.40
WAYNE..........................................  NC                                        37191            5.80
WILKES.........................................  NC                                        37193            5.40
WILSON.........................................  NC                                        37195            5.80
YADKIN.........................................  NC                                        37197            5.40

[[Page 95567]]

 
YANCEY.........................................  NC                                        37199            5.40
ADAMS..........................................  ND                                        38001            2.40
BARNES.........................................  ND                                        38003            2.60
BENSON.........................................  ND                                        38005            2.30
BILLINGS.......................................  ND                                        38007            2.40
BOTTINEAU......................................  ND                                        38009            2.30
BOWMAN.........................................  ND                                        38011            2.40
BURKE..........................................  ND                                        38013            2.30
BURLEIGH.......................................  ND                                        38015            2.40
CASS...........................................  ND                                        38017            2.80
CAVALIER.......................................  ND                                        38019            2.30
DICKEY.........................................  ND                                        38021            2.60
DIVIDE.........................................  ND                                        38023            2.30
DUNN...........................................  ND                                        38025            2.40
EDDY...........................................  ND                                        38027            2.40
EMMONS.........................................  ND                                        38029            2.40
FOSTER.........................................  ND                                        38031            2.40
GOLDEN VALLEY..................................  ND                                        38033            2.40
GRAND FORKS....................................  ND                                        38035            2.30
GRANT..........................................  ND                                        38037            2.40
GRIGGS.........................................  ND                                        38039            2.60
HETTINGER......................................  ND                                        38041            2.40
KIDDER.........................................  ND                                        38043            2.40
LA MOURE.......................................  ND                                        38045            2.60
LOGAN..........................................  ND                                        38047            2.40
MCHENRY........................................  ND                                        38049            2.30
MCINTOSH.......................................  ND                                        38051            2.40
MCKENZIE.......................................  ND                                        38053            2.40
MCLEAN.........................................  ND                                        38055            2.40
MERCER.........................................  ND                                        38057            2.40
MORTON.........................................  ND                                        38059            2.40
MOUNTRAIL......................................  ND                                        38061            2.30
NELSON.........................................  ND                                        38063            2.30
OLIVER.........................................  ND                                        38065            2.40
PEMBINA........................................  ND                                        38067            2.30
PIERCE.........................................  ND                                        38069            2.30
RAMSEY.........................................  ND                                        38071            2.30
RANSOM.........................................  ND                                        38073            2.60
RENVILLE.......................................  ND                                        38075            2.30
RICHLAND.......................................  ND                                        38077            2.60
ROLETTE........................................  ND                                        38079            2.30
SARGENT........................................  ND                                        38081            2.60
SHERIDAN.......................................  ND                                        38083            2.40
SIOUX..........................................  ND                                        38085            2.40
SLOPE..........................................  ND                                        38087            2.40
STARK..........................................  ND                                        38089            2.40
STEELE.........................................  ND                                        38091            2.60
STUTSMAN.......................................  ND                                        38093            2.40
TOWNER.........................................  ND                                        38095            2.30
TRAILL.........................................  ND                                        38097            2.60
WALSH..........................................  ND                                        38099            2.30
WARD...........................................  ND                                        38101            2.30
WELLS..........................................  ND                                        38103            2.40
WILLIAMS.......................................  ND                                        38105            2.30
ADAMS..........................................  OH                                        39001            4.00
ALLEN..........................................  OH                                        39003            3.30
ASHLAND........................................  OH                                        39005            3.80
ASHTABULA......................................  OH                                        39007            3.80
ATHENS.........................................  OH                                        39009            4.00
AUGLAIZE.......................................  OH                                        39011            3.60
BELMONT........................................  OH                                        39013            3.80
BROWN..........................................  OH                                        39015            4.00
BUTLER.........................................  OH                                        39017            3.80
CARROLL........................................  OH                                        39019            3.80
CHAMPAIGN......................................  OH                                        39021            3.60
CLARK..........................................  OH                                        39023            3.60
CLERMONT.......................................  OH                                        39025            4.00
CLINTON........................................  OH                                        39027            3.80
COLUMBIANA.....................................  OH                                        39029            4.00
COSHOCTON......................................  OH                                        39031            3.80
CRAWFORD.......................................  OH                                        39033            3.60

[[Page 95568]]

 
CUYAHOGA.......................................  OH                                        39035            3.80
DARKE..........................................  OH                                        39037            3.60
DEFIANCE.......................................  OH                                        39039            3.30
DELAWARE.......................................  OH                                        39041            3.60
ERIE...........................................  OH                                        39043            3.60
FAIRFIELD......................................  OH                                        39045            3.80
FAYETTE........................................  OH                                        39047            3.80
FRANKLIN.......................................  OH                                        39049            3.60
FULTON.........................................  OH                                        39051            3.30
GALLIA.........................................  OH                                        39053            4.30
GEAUGA.........................................  OH                                        39055            3.80
GREENE.........................................  OH                                        39057            3.60
GUERNSEY.......................................  OH                                        39059            3.80
HAMILTON.......................................  OH                                        39061            3.80
HANCOCK........................................  OH                                        39063            3.60
HARDIN.........................................  OH                                        39065            3.60
HARRISON.......................................  OH                                        39067            3.80
HENRY..........................................  OH                                        39069            3.30
HIGHLAND.......................................  OH                                        39071            4.00
HOCKING........................................  OH                                        39073            4.00
HOLMES.........................................  OH                                        39075            3.80
HURON..........................................  OH                                        39077            3.60
JACKSON........................................  OH                                        39079            4.00
JEFFERSON......................................  OH                                        39081            3.80
KNOX...........................................  OH                                        39083            3.80
LAKE...........................................  OH                                        39085            3.80
LAWRENCE.......................................  OH                                        39087            4.30
LICKING........................................  OH                                        39089            3.80
LOGAN..........................................  OH                                        39091            3.60
LORAIN.........................................  OH                                        39093            3.80
LUCAS..........................................  OH                                        39095            3.30
MADISON........................................  OH                                        39097            3.60
MAHONING.......................................  OH                                        39099            4.00
MARION.........................................  OH                                        39101            3.60
MEDINA.........................................  OH                                        39103            3.80
MEIGS..........................................  OH                                        39105            4.30
MERCER.........................................  OH                                        39107            3.30
MIAMI..........................................  OH                                        39109            3.60
MONROE.........................................  OH                                        39111            4.00
MONTGOMERY.....................................  OH                                        39113            3.60
MORGAN.........................................  OH                                        39115            3.90
MORROW.........................................  OH                                        39117            3.60
MUSKINGUM......................................  OH                                        39119            3.80
NOBLE..........................................  OH                                        39121            3.80
OTTAWA.........................................  OH                                        39123            3.60
PAULDING.......................................  OH                                        39125            3.30
PERRY..........................................  OH                                        39127            3.80
PICKAWAY.......................................  OH                                        39129            3.80
PIKE...........................................  OH                                        39131            4.00
PORTAGE........................................  OH                                        39133            3.80
PREBLE.........................................  OH                                        39135            3.60
PUTNAM.........................................  OH                                        39137            3.30
RICHLAND.......................................  OH                                        39139            3.60
ROSS...........................................  OH                                        39141            4.00
SANDUSKY.......................................  OH                                        39143            3.60
SCIOTO.........................................  OH                                        39145            4.00
SENECA.........................................  OH                                        39147            3.60
SHELBY.........................................  OH                                        39149            3.60
STARK..........................................  OH                                        39151            3.80
SUMMIT.........................................  OH                                        39153            3.80
TRUMBULL.......................................  OH                                        39155            4.00
TUSCARAWAS.....................................  OH                                        39157            3.80
UNION..........................................  OH                                        39159            3.60
VAN WERT.......................................  OH                                        39161            3.30
VINTON.........................................  OH                                        39163            4.00
WARREN.........................................  OH                                        39165            3.80
WASHINGTON.....................................  OH                                        39167            4.00
WAYNE..........................................  OH                                        39169            3.80
WILLIAMS.......................................  OH                                        39171            3.30
WOOD...........................................  OH                                        39173            3.60
WYANDOT........................................  OH                                        39175            3.60

[[Page 95569]]

 
ADAIR..........................................  OK                                        40001            3.30
ALFALFA........................................  OK                                        40003            2.60
ATOKA..........................................  OK                                        40005            3.60
BEAVER.........................................  OK                                        40007            2.50
BECKHAM........................................  OK                                        40009            2.60
BLAINE.........................................  OK                                        40011            2.90
BRYAN..........................................  OK                                        40013            3.60
CADDO..........................................  OK                                        40015            2.90
CANADIAN.......................................  OK                                        40017            2.90
CARTER.........................................  OK                                        40019            3.30
CHEROKEE.......................................  OK                                        40021            3.30
CHOCTAW........................................  OK                                        40023            3.60
CIMARRON.......................................  OK                                        40025            2.50
CLEVELAND......................................  OK                                        40027            3.30
COAL...........................................  OK                                        40029            3.60
COMANCHE.......................................  OK                                        40031            2.90
COTTON.........................................  OK                                        40033            3.30
CRAIG..........................................  OK                                        40035            3.20
CREEK..........................................  OK                                        40037            3.30
CUSTER.........................................  OK                                        40039            2.60
DELAWARE.......................................  OK                                        40041            3.20
DEWEY..........................................  OK                                        40043            2.60
ELLIS..........................................  OK                                        40045            2.60
GARFIELD.......................................  OK                                        40047            2.90
GARVIN.........................................  OK                                        40049            3.30
GRADY..........................................  OK                                        40051            3.30
GRANT..........................................  OK                                        40053            2.90
GREER..........................................  OK                                        40055            2.60
HARMON.........................................  OK                                        40057            2.60
HARPER.........................................  OK                                        40059            2.60
HASKELL........................................  OK                                        40061            3.60
HUGHES.........................................  OK                                        40063            3.30
JACKSON........................................  OK                                        40065            2.90
JEFFERSON......................................  OK                                        40067            3.30
JOHNSTON.......................................  OK                                        40069            3.60
KAY............................................  OK                                        40071            2.90
KINGFISHER.....................................  OK                                        40073            2.90
KIOWA..........................................  OK                                        40075            2.90
LATIMER........................................  OK                                        40077            3.60
LE FLORE.......................................  OK                                        40079            3.60
LINCOLN........................................  OK                                        40081            3.30
LOGAN..........................................  OK                                        40083            3.30
LOVE...........................................  OK                                        40085            3.30
MCCLAIN........................................  OK                                        40087            3.30
MCCURTAIN......................................  OK                                        40089            3.60
MCINTOSH.......................................  OK                                        40091            3.30
MAJOR..........................................  OK                                        40093            2.60
MARSHALL.......................................  OK                                        40095            3.60
MAYES..........................................  OK                                        40097            3.20
MURRAY.........................................  OK                                        40099            3.30
MUSKOGEE.......................................  OK                                        40101            3.30
NOBLE..........................................  OK                                        40103            3.20
NOWATA.........................................  OK                                        40105            3.20
OKFUSKEE.......................................  OK                                        40107            3.30
OKLAHOMA.......................................  OK                                        40109            3.30
OKMULGEE.......................................  OK                                        40111            3.30
OSAGE..........................................  OK                                        40113            3.20
OTTAWA.........................................  OK                                        40115            3.20
PAWNEE.........................................  OK                                        40117            3.20
PAYNE..........................................  OK                                        40119            3.30
PITTSBURG......................................  OK                                        40121            3.60
PONTOTOC.......................................  OK                                        40123            3.30
POTTAWATOMIE...................................  OK                                        40125            3.30
PUSHMATAHA.....................................  OK                                        40127            3.60
ROGER MILLS....................................  OK                                        40129            2.60
ROGERS.........................................  OK                                        40131            3.20
SEMINOLE.......................................  OK                                        40133            3.30
SEQUOYAH.......................................  OK                                        40135            3.30
STEPHENS.......................................  OK                                        40137            3.30
TEXAS..........................................  OK                                        40139            2.50
TILLMAN........................................  OK                                        40141            2.90

[[Page 95570]]

 
TULSA..........................................  OK                                        40143            3.30
WAGONER........................................  OK                                        40145            3.30
WASHINGTON.....................................  OK                                        40147            3.20
WASHITA........................................  OK                                        40149            2.60
WOODS..........................................  OK                                        40151            2.60
WOODWARD.......................................  OK                                        40153            2.60
BAKER..........................................  OR                                        41001            2.20
BENTON.........................................  OR                                        41003            2.20
CLACKAMAS......................................  OR                                        41005            2.70
CLATSOP........................................  OR                                        41007            2.20
COLUMBIA.......................................  OR                                        41009            2.20
COOS...........................................  OR                                        41011            2.20
CROOK..........................................  OR                                        41013            2.20
CURRY..........................................  OR                                        41015            2.20
DESCHUTES......................................  OR                                        41017            2.20
DOUGLAS........................................  OR                                        41019            2.20
GILLIAM........................................  OR                                        41021            2.20
GRANT..........................................  OR                                        41023            2.20
HARNEY.........................................  OR                                        41025            2.20
HOOD RIVER.....................................  OR                                        41027            2.20
JACKSON........................................  OR                                        41029            2.20
JEFFERSON......................................  OR                                        41031            2.20
JOSEPHINE......................................  OR                                        41033            2.20
KLAMATH........................................  OR                                        41035            2.20
LAKE...........................................  OR                                        41037            2.20
LANE...........................................  OR                                        41039            2.20
LINCOLN........................................  OR                                        41041            2.20
LINN...........................................  OR                                        41043            2.20
MALHEUR........................................  OR                                        41045            1.80
MARION.........................................  OR                                        41047            2.20
MORROW.........................................  OR                                        41049            2.20
MULTNOMAH......................................  OR                                        41051            2.70
POLK...........................................  OR                                        41053            2.20
SHERMAN........................................  OR                                        41055            2.20
TILLAMOOK......................................  OR                                        41057            2.20
UMATILLA.......................................  OR                                        41059            2.20
UNION..........................................  OR                                        41061            2.20
WALLOWA........................................  OR                                        41063            2.20
WASCO..........................................  OR                                        41065            2.20
WASHINGTON.....................................  OR                                        41067            2.20
WHEELER........................................  OR                                        41069            2.20
YAMHILL........................................  OR                                        41071            2.20
ADAMS..........................................  PA                                        42001            4.30
ALLEGHENY......................................  PA                                        42003            4.00
ARMSTRONG......................................  PA                                        42005            4.00
BEAVER.........................................  PA                                        42007            4.00
BEDFORD........................................  PA                                        42009            4.10
BERKS..........................................  PA                                        42011            4.30
BLAIR..........................................  PA                                        42013            4.00
BRADFORD.......................................  PA                                        42015            4.00
BUCKS..........................................  PA                                        42017            4.50
BUTLER.........................................  PA                                        42019            4.00
CAMBRIA........................................  PA                                        42021            4.00
CAMERON........................................  PA                                        42023            4.00
CARBON.........................................  PA                                        42025            4.30
CENTRE.........................................  PA                                        42027            4.00
CHESTER........................................  PA                                        42029            4.30
CLARION........................................  PA                                        42031            4.00
CLEARFIELD.....................................  PA                                        42033            4.00
CLINTON........................................  PA                                        42035            4.00
COLUMBIA.......................................  PA                                        42037            4.10
CRAWFORD.......................................  PA                                        42039            4.00
CUMBERLAND.....................................  PA                                        42041            4.20
DAUPHIN........................................  PA                                        42043            4.20
DELAWARE.......................................  PA                                        42045            4.40
ELK............................................  PA                                        42047            4.00
ERIE...........................................  PA                                        42049            3.90
FAYETTE........................................  PA                                        42051            4.00
FOREST.........................................  PA                                        42053            4.00
FRANKLIN.......................................  PA                                        42055            4.20
FULTON.........................................  PA                                        42057            4.10

[[Page 95571]]

 
GREENE.........................................  PA                                        42059            4.00
HUNTINGDON.....................................  PA                                        42061            4.10
INDIANA........................................  PA                                        42063            4.00
JEFFERSON......................................  PA                                        42065            4.00
JUNIATA........................................  PA                                        42067            4.10
LACKAWANNA.....................................  PA                                        42069            4.30
LANCASTER......................................  PA                                        42071            4.30
LAWRENCE.......................................  PA                                        42073            4.00
LEBANON........................................  PA                                        42075            4.20
LEHIGH.........................................  PA                                        42077            4.30
LUZERNE........................................  PA                                        42079            4.20
LYCOMING.......................................  PA                                        42081            4.10
MCKEAN.........................................  PA                                        42083            3.90
MERCER.........................................  PA                                        42085            4.00
MIFFLIN........................................  PA                                        42087            4.10
MONROE.........................................  PA                                        42089            4.40
MONTGOMERY.....................................  PA                                        42091            4.40
MONTOUR........................................  PA                                        42093            4.10
NORTHAMPTON....................................  PA                                        42095            4.40
NORTHUMBERLAND.................................  PA                                        42097            4.10
PERRY..........................................  PA                                        42099            4.20
PHILADELPHIA...................................  PA                                        42101            4.60
PIKE...........................................  PA                                        42103            4.40
POTTER.........................................  PA                                        42105            3.90
SCHUYLKILL.....................................  PA                                        42107            4.20
SNYDER.........................................  PA                                        42109            4.10
SOMERSET.......................................  PA                                        42111            4.10
SULLIVAN.......................................  PA                                        42113            4.10
SUSQUEHANNA....................................  PA                                        42115            4.20
TIOGA..........................................  PA                                        42117            4.00
UNION..........................................  PA                                        42119            4.10
VENANGO........................................  PA                                        42121            4.00
WARREN.........................................  PA                                        42123            3.90
WASHINGTON.....................................  PA                                        42125            4.00
WAYNE..........................................  PA                                        42127            4.30
WESTMORELAND...................................  PA                                        42129            4.00
WYOMING........................................  PA                                        42131            4.20
YORK...........................................  PA                                        42133            4.30
BRISTOL........................................  RI                                        44001            5.10
KENT...........................................  RI                                        44003            5.10
NEWPORT........................................  RI                                        44005            5.10
PROVIDENCE.....................................  RI                                        44007            5.10
WASHINGTON.....................................  RI                                        44009            5.10
ABBEVILLE......................................  SC                                        45001            5.80
AIKEN..........................................  SC                                        45003            6.00
ALLENDALE......................................  SC                                        45005            6.00
ANDERSON.......................................  SC                                        45007            5.60
BAMBERG........................................  SC                                        45009            6.00
BARNWELL.......................................  SC                                        45011            6.00
BEAUFORT.......................................  SC                                        45013            6.00
BERKELEY.......................................  SC                                        45015            6.00
CALHOUN........................................  SC                                        45017            6.00
CHARLESTON.....................................  SC                                        45019            6.00
CHEROKEE.......................................  SC                                        45021            5.60
CHESTER........................................  SC                                        45023            5.80
CHESTERFIELD...................................  SC                                        45025            5.80
CLARENDON......................................  SC                                        45027            6.00
COLLETON.......................................  SC                                        45029            6.00
DARLINGTON.....................................  SC                                        45031            6.00
DILLON.........................................  SC                                        45033            6.00
DORCHESTER.....................................  SC                                        45035            6.00
EDGEFIELD......................................  SC                                        45037            5.80
FAIRFIELD......................................  SC                                        45039            5.80
FLORENCE.......................................  SC                                        45041            6.00
GEORGETOWN.....................................  SC                                        45043            6.00
GREENVILLE.....................................  SC                                        45045            5.60
GREENWOOD......................................  SC                                        45047            5.80
HAMPTON........................................  SC                                        45049            6.00
HORRY..........................................  SC                                        45051            6.00
JASPER.........................................  SC                                        45053            6.00
KERSHAW........................................  SC                                        45055            6.00

[[Page 95572]]

 
LANCASTER......................................  SC                                        45057            5.80
LAURENS........................................  SC                                        45059            5.80
LEE............................................  SC                                        45061            6.00
LEXINGTON......................................  SC                                        45063            6.00
MCCORMICK......................................  SC                                        45065            5.80
MARION.........................................  SC                                        45067            6.00
MARLBORO.......................................  SC                                        45069            5.80
NEWBERRY.......................................  SC                                        45071            5.80
OCONEE.........................................  SC                                        45073            5.60
ORANGEBURG.....................................  SC                                        45075            6.00
PICKENS........................................  SC                                        45077            5.60
RICHLAND.......................................  SC                                        45079            6.00
SALUDA.........................................  SC                                        45081            5.80
SPARTANBURG....................................  SC                                        45083            5.60
SUMTER.........................................  SC                                        45085            6.00
UNION..........................................  SC                                        45087            5.80
WILLIAMSBURG...................................  SC                                        45089            6.00
YORK...........................................  SC                                        45091            5.60
AURORA.........................................  SD                                        46003            2.60
BEADLE.........................................  SD                                        46005            2.60
BENNETT........................................  SD                                        46007            2.40
BON HOMME......................................  SD                                        46009            2.60
BROOKINGS......................................  SD                                        46011            2.60
BROWN..........................................  SD                                        46013            2.60
BRULE..........................................  SD                                        46015            2.50
BUFFALO........................................  SD                                        46017            2.50
BUTTE..........................................  SD                                        46019            2.40
CAMPBELL.......................................  SD                                        46021            2.50
CHARLES MIX....................................  SD                                        46023            2.50
CLARK..........................................  SD                                        46025            2.60
CLAY...........................................  SD                                        46027            2.60
CODINGTON......................................  SD                                        46029            2.60
CORSON.........................................  SD                                        46031            2.40
CUSTER.........................................  SD                                        46033            2.40
DAVISON........................................  SD                                        46035            2.60
DAY............................................  SD                                        46037            2.60
DEUEL..........................................  SD                                        46039            2.60
DEWEY..........................................  SD                                        46041            2.40
DOUGLAS........................................  SD                                        46043            2.60
EDMUNDS........................................  SD                                        46045            2.50
FALL RIVER.....................................  SD                                        46047            2.40
FAULK..........................................  SD                                        46049            2.50
GRANT..........................................  SD                                        46051            2.60
GREGORY........................................  SD                                        46053            2.50
HAAKON.........................................  SD                                        46055            2.40
HAMLIN.........................................  SD                                        46057            2.60
HAND...........................................  SD                                        46059            2.50
HANSON.........................................  SD                                        46061            2.60
HARDING........................................  SD                                        46063            2.40
HUGHES.........................................  SD                                        46065            2.50
HUTCHINSON.....................................  SD                                        46067            2.60
HYDE...........................................  SD                                        46069            2.50
JACKSON........................................  SD                                        46071            2.40
JERAULD........................................  SD                                        46073            2.60
JONES..........................................  SD                                        46075            2.40
KINGSBURY......................................  SD                                        46077            2.60
LAKE...........................................  SD                                        46079            2.60
LAWRENCE.......................................  SD                                        46081            2.40
LINCOLN........................................  SD                                        46083            2.60
LYMAN..........................................  SD                                        46085            2.50
MCCOOK.........................................  SD                                        46087            2.60
MCPHERSON......................................  SD                                        46089            2.50
MARSHALL.......................................  SD                                        46091            2.60
MEADE..........................................  SD                                        46093            2.40
MELLETTE.......................................  SD                                        46095            2.40
MINER..........................................  SD                                        46097            2.60
MINNEHAHA......................................  SD                                        46099            2.60
MOODY..........................................  SD                                        46101            2.60
OGLALA LAKOTA..................................  SD                                        46102            2.40
PENNINGTON.....................................  SD                                        46103            2.40
PERKINS........................................  SD                                        46105            2.40

[[Page 95573]]

 
POTTER.........................................  SD                                        46107            2.50
ROBERTS........................................  SD                                        46109            2.60
SANBORN........................................  SD                                        46111            2.60
SHANNON........................................  SD                                        46113            0.00
SPINK..........................................  SD                                        46115            2.60
STANLEY........................................  SD                                        46117            2.40
SULLY..........................................  SD                                        46119            2.50
TODD...........................................  SD                                        46121            2.40
TRIPP..........................................  SD                                        46123            2.50
TURNER.........................................  SD                                        46125            2.60
UNION..........................................  SD                                        46127            2.60
WALWORTH.......................................  SD                                        46129            2.50
YANKTON........................................  SD                                        46135            2.60
ZIEBACH........................................  SD                                        46137            2.40
ANDERSON.......................................  TN                                        47001            4.90
BEDFORD........................................  TN                                        47003            4.90
BENTON.........................................  TN                                        47005            4.60
BLEDSOE........................................  TN                                        47007            4.90
BLOUNT.........................................  TN                                        47009            5.20
BRADLEY........................................  TN                                        47011            5.20
CAMPBELL.......................................  TN                                        47013            4.90
CANNON.........................................  TN                                        47015            4.90
CARROLL........................................  TN                                        47017            4.60
CARTER.........................................  TN                                        47019            5.20
CHEATHAM.......................................  TN                                        47021            4.60
CHESTER........................................  TN                                        47023            4.60
CLAIBORNE......................................  TN                                        47025            4.90
CLAY...........................................  TN                                        47027            4.60
COCKE..........................................  TN                                        47029            5.20
COFFEE.........................................  TN                                        47031            4.90
CROCKETT.......................................  TN                                        47033            4.30
CUMBERLAND.....................................  TN                                        47035            4.90
DAVIDSON.......................................  TN                                        47037            4.60
DECATUR........................................  TN                                        47039            4.60
DE KALB........................................  TN                                        47041            4.90
DICKSON........................................  TN                                        47043            4.60
DYER...........................................  TN                                        47045            4.30
FAYETTE........................................  TN                                        47047            4.60
FENTRESS.......................................  TN                                        47049            4.60
FRANKLIN.......................................  TN                                        47051            5.20
GIBSON.........................................  TN                                        47053            4.30
GILES..........................................  TN                                        47055            4.90
GRAINGER.......................................  TN                                        47057            4.90
GREENE.........................................  TN                                        47059            5.20
GRUNDY.........................................  TN                                        47061            4.90
HAMBLEN........................................  TN                                        47063            5.20
HAMILTON.......................................  TN                                        47065            5.20
HANCOCK........................................  TN                                        47067            4.90
HARDEMAN.......................................  TN                                        47069            4.60
HARDIN.........................................  TN                                        47071            4.90
HAWKINS........................................  TN                                        47073            5.20
HAYWOOD........................................  TN                                        47075            4.60
HENDERSON......................................  TN                                        47077            4.60
HENRY..........................................  TN                                        47079            4.30
HICKMAN........................................  TN                                        47081            4.60
HOUSTON........................................  TN                                        47083            4.60
HUMPHREYS......................................  TN                                        47085            4.60
JACKSON........................................  TN                                        47087            4.60
JEFFERSON......................................  TN                                        47089            5.20
JOHNSON........................................  TN                                        47091            5.20
KNOX...........................................  TN                                        47093            4.90
LAKE...........................................  TN                                        47095            4.30
LAUDERDALE.....................................  TN                                        47097            4.30
LAWRENCE.......................................  TN                                        47099            4.90
LEWIS..........................................  TN                                        47101            4.90
LINCOLN........................................  TN                                        47103            5.20
LOUDON.........................................  TN                                        47105            5.20
MCMINN.........................................  TN                                        47107            5.20
MCNAIRY........................................  TN                                        47109            4.90
MACON..........................................  TN                                        47111            4.60
MADISON........................................  TN                                        47113            4.60

[[Page 95574]]

 
MARION.........................................  TN                                        47115            5.20
MARSHALL.......................................  TN                                        47117            4.90
MAURY..........................................  TN                                        47119            4.90
MEIGS..........................................  TN                                        47121            5.20
MONROE.........................................  TN                                        47123            5.20
MONTGOMERY.....................................  TN                                        47125            4.30
MOORE..........................................  TN                                        47127            4.90
MORGAN.........................................  TN                                        47129            4.90
OBION..........................................  TN                                        47131            4.30
OVERTON........................................  TN                                        47133            4.60
PERRY..........................................  TN                                        47135            4.60
PICKETT........................................  TN                                        47137            4.60
POLK...........................................  TN                                        47139            5.40
PUTNAM.........................................  TN                                        47141            4.60
RHEA...........................................  TN                                        47143            4.90
ROANE..........................................  TN                                        47145            4.90
ROBERTSON......................................  TN                                        47147            4.60
RUTHERFORD.....................................  TN                                        47149            4.60
SCOTT..........................................  TN                                        47151            4.90
SEQUATCHIE.....................................  TN                                        47153            5.20
SEVIER.........................................  TN                                        47155            5.20
SHELBY.........................................  TN                                        47157            4.60
SMITH..........................................  TN                                        47159            4.60
STEWART........................................  TN                                        47161            4.30
SULLIVAN.......................................  TN                                        47163            5.20
SUMNER.........................................  TN                                        47165            4.60
TIPTON.........................................  TN                                        47167            4.60
TROUSDALE......................................  TN                                        47169            4.60
UNICOI.........................................  TN                                        47171            5.40
UNION..........................................  TN                                        47173            4.90
VAN BUREN......................................  TN                                        47175            4.90
WARREN.........................................  TN                                        47177            4.90
WASHINGTON.....................................  TN                                        47179            5.20
WAYNE..........................................  TN                                        47181            4.90
WEAKLEY........................................  TN                                        47183            4.30
WHITE..........................................  TN                                        47185            4.90
WILLIAMSON.....................................  TN                                        47187            4.60
WILSON.........................................  TN                                        47189            4.60
ANDERSON.......................................  TX                                        48001            4.00
ANDREWS........................................  TX                                        48003            2.90
ANGELINA.......................................  TX                                        48005            4.60
ARANSAS........................................  TX                                        48007            4.60
ARCHER.........................................  TX                                        48009            3.30
ARMSTRONG......................................  TX                                        48011            2.50
ATASCOSA.......................................  TX                                        48013            4.30
AUSTIN.........................................  TX                                        48015            4.30
BAILEY.........................................  TX                                        48017            2.50
BANDERA........................................  TX                                        48019            4.00
BASTROP........................................  TX                                        48021            4.30
BAYLOR.........................................  TX                                        48023            2.90
BEE............................................  TX                                        48025            4.60
BELL...........................................  TX                                        48027            4.00
BEXAR..........................................  TX                                        48029            4.30
BLANCO.........................................  TX                                        48031            4.00
BORDEN.........................................  TX                                        48033            2.90
BOSQUE.........................................  TX                                        48035            3.60
BOWIE..........................................  TX                                        48037            4.00
BRAZORIA.......................................  TX                                        48039            4.80
BRAZOS.........................................  TX                                        48041            4.30
BREWSTER.......................................  TX                                        48043            3.30
BRISCOE........................................  TX                                        48045            2.50
BROOKS.........................................  TX                                        48047            4.60
BROWN..........................................  TX                                        48049            3.60
BURLESON.......................................  TX                                        48051            4.30
BURNET.........................................  TX                                        48053            4.00
CALDWELL.......................................  TX                                        48055            4.30
CALHOUN........................................  TX                                        48057            4.60
CALLAHAN.......................................  TX                                        48059            3.30
CAMERON........................................  TX                                        48061            4.60
CAMP...........................................  TX                                        48063            3.70
CARSON.........................................  TX                                        48065            2.50

[[Page 95575]]

 
CASS...........................................  TX                                        48067            4.00
CASTRO.........................................  TX                                        48069            2.50
CHAMBERS.......................................  TX                                        48071            4.80
CHEROKEE.......................................  TX                                        48073            4.00
CHILDRESS......................................  TX                                        48075            2.60
CLAY...........................................  TX                                        48077            3.30
COCHRAN........................................  TX                                        48079            2.50
COKE...........................................  TX                                        48081            3.30
COLEMAN........................................  TX                                        48083            3.60
COLLIN.........................................  TX                                        48085            3.70
COLLINGSWORTH..................................  TX                                        48087            2.60
COLORADO.......................................  TX                                        48089            4.30
COMAL..........................................  TX                                        48091            4.00
COMANCHE.......................................  TX                                        48093            3.60
CONCHO.........................................  TX                                        48095            3.60
COOKE..........................................  TX                                        48097            3.30
CORYELL........................................  TX                                        48099            4.00
COTTLE.........................................  TX                                        48101            2.60
CRANE..........................................  TX                                        48103            2.90
CROCKETT.......................................  TX                                        48105            3.30
CROSBY.........................................  TX                                        48107            2.60
CULBERSON......................................  TX                                        48109            2.90
DALLAM.........................................  TX                                        48111            2.50
DALLAS.........................................  TX                                        48113            3.70
DAWSON.........................................  TX                                        48115            2.90
DEAF SMITH.....................................  TX                                        48117            2.50
DELTA..........................................  TX                                        48119            3.70
DENTON.........................................  TX                                        48121            3.70
DE WITT........................................  TX                                        48123            4.30
DICKENS........................................  TX                                        48125            2.60
DIMMIT.........................................  TX                                        48127            4.00
DONLEY.........................................  TX                                        48129            2.50
DUVAL..........................................  TX                                        48131            4.60
EASTLAND.......................................  TX                                        48133            3.60
ECTOR..........................................  TX                                        48135            2.90
EDWARDS........................................  TX                                        48137            3.60
ELLIS..........................................  TX                                        48139            3.70
EL PASO........................................  TX                                        48141            2.70
ERATH..........................................  TX                                        48143            3.60
FALLS..........................................  TX                                        48145            4.00
FANNIN.........................................  TX                                        48147            3.70
FAYETTE........................................  TX                                        48149            4.30
FISHER.........................................  TX                                        48151            2.90
FLOYD..........................................  TX                                        48153            2.60
FOARD..........................................  TX                                        48155            2.90
FORT BEND......................................  TX                                        48157            4.60
FRANKLIN.......................................  TX                                        48159            3.70
FREESTONE......................................  TX                                        48161            4.00
FRIO...........................................  TX                                        48163            4.30
GAINES.........................................  TX                                        48165            2.60
GALVESTON......................................  TX                                        48167            4.80
GARZA..........................................  TX                                        48169            2.90
GILLESPIE......................................  TX                                        48171            4.00
GLASSCOCK......................................  TX                                        48173            3.30
GOLIAD.........................................  TX                                        48175            4.60
GONZALES.......................................  TX                                        48177            4.30
GRAY...........................................  TX                                        48179            2.50
GRAYSON........................................  TX                                        48181            3.70
GREGG..........................................  TX                                        48183            4.00
GRIMES.........................................  TX                                        48185            4.60
GUADALUPE......................................  TX                                        48187            4.30
HALE...........................................  TX                                        48189            2.50
HALL...........................................  TX                                        48191            2.50
HAMILTON.......................................  TX                                        48193            3.60
HANSFORD.......................................  TX                                        48195            2.50
HARDEMAN.......................................  TX                                        48197            2.90
HARDIN.........................................  TX                                        48199            4.80
HARRIS.........................................  TX                                        48201            4.80
HARRISON.......................................  TX                                        48203            4.00
HARTLEY........................................  TX                                        48205            2.50
HASKELL........................................  TX                                        48207            2.90

[[Page 95576]]

 
HAYS...........................................  TX                                        48209            4.00
HEMPHILL.......................................  TX                                        48211            2.60
HENDERSON......................................  TX                                        48213            3.70
HIDALGO........................................  TX                                        48215            4.60
HILL...........................................  TX                                        48217            3.70
HOCKLEY........................................  TX                                        48219            2.60
HOOD...........................................  TX                                        48221            3.70
HOPKINS........................................  TX                                        48223            3.70
HOUSTON........................................  TX                                        48225            4.00
HOWARD.........................................  TX                                        48227            2.90
HUDSPETH.......................................  TX                                        48229            2.70
HUNT...........................................  TX                                        48231            3.70
HUTCHINSON.....................................  TX                                        48233            2.50
IRION..........................................  TX                                        48235            3.30
JACK...........................................  TX                                        48237            3.30
JACKSON........................................  TX                                        48239            4.60
JASPER.........................................  TX                                        48241            4.80
JEFF DAVIS.....................................  TX                                        48243            2.90
JEFFERSON......................................  TX                                        48245            4.80
JIM HOGG.......................................  TX                                        48247            4.60
JIM WELLS......................................  TX                                        48249            4.60
JOHNSON........................................  TX                                        48251            3.70
JONES..........................................  TX                                        48253            3.30
KARNES.........................................  TX                                        48255            4.30
KAUFMAN........................................  TX                                        48257            3.70
KENDALL........................................  TX                                        48259            4.00
KENEDY.........................................  TX                                        48261            4.60
KENT...........................................  TX                                        48263            2.90
KERR...........................................  TX                                        48265            4.00
KIMBLE.........................................  TX                                        48267            3.60
KING...........................................  TX                                        48269            2.90
KINNEY.........................................  TX                                        48271            4.00
KLEBERG........................................  TX                                        48273            4.60
KNOX...........................................  TX                                        48275            2.90
LAMAR..........................................  TX                                        48277            3.70
LAMB...........................................  TX                                        48279            2.50
LAMPASAS.......................................  TX                                        48281            4.00
LA SALLE.......................................  TX                                        48283            4.30
LAVACA.........................................  TX                                        48285            4.30
LEE............................................  TX                                        48287            4.30
LEON...........................................  TX                                        48289            4.00
LIBERTY........................................  TX                                        48291            4.80
LIMESTONE......................................  TX                                        48293            4.00
LIPSCOMB.......................................  TX                                        48295            2.60
LIVE OAK.......................................  TX                                        48297            4.30
LLANO..........................................  TX                                        48299            4.00
LOVING.........................................  TX                                        48301            2.90
LUBBOCK........................................  TX                                        48303            2.60
LYNN...........................................  TX                                        48305            2.90
MCCULLOCH......................................  TX                                        48307            3.60
MCLENNAN.......................................  TX                                        48309            4.00
MCMULLEN.......................................  TX                                        48311            4.30
MADISON........................................  TX                                        48313            4.00
MARION.........................................  TX                                        48315            4.00
MARTIN.........................................  TX                                        48317            2.90
MASON..........................................  TX                                        48319            3.60
MATAGORDA......................................  TX                                        48321            4.80
MAVERICK.......................................  TX                                        48323            4.00
MEDINA.........................................  TX                                        48325            4.00
MENARD.........................................  TX                                        48327            3.60
MIDLAND........................................  TX                                        48329            2.90
MILAM..........................................  TX                                        48331            4.00
MILLS..........................................  TX                                        48333            3.60
MITCHELL.......................................  TX                                        48335            3.30
MONTAGUE.......................................  TX                                        48337            3.30
MONTGOMERY.....................................  TX                                        48339            4.80
MOORE..........................................  TX                                        48341            2.50
MORRIS.........................................  TX                                        48343            3.70
MOTLEY.........................................  TX                                        48345            2.60
NACOGDOCHES....................................  TX                                        48347            4.00
NAVARRO........................................  TX                                        48349            3.70

[[Page 95577]]

 
NEWTON.........................................  TX                                        48351            4.80
NOLAN..........................................  TX                                        48353            3.30
NUECES.........................................  TX                                        48355            4.60
OCHILTREE......................................  TX                                        48357            2.50
OLDHAM.........................................  TX                                        48359            2.50
ORANGE.........................................  TX                                        48361            4.80
PALO PINTO.....................................  TX                                        48363            3.30
PANOLA.........................................  TX                                        48365            4.00
PARKER.........................................  TX                                        48367            3.70
PARMER.........................................  TX                                        48369            2.50
PECOS..........................................  TX                                        48371            3.30
POLK...........................................  TX                                        48373            4.60
POTTER.........................................  TX                                        48375            2.50
PRESIDIO.......................................  TX                                        48377            2.90
RAINS..........................................  TX                                        48379            3.70
RANDALL........................................  TX                                        48381            2.50
REAGAN.........................................  TX                                        48383            3.30
REAL...........................................  TX                                        48385            4.00
RED RIVER......................................  TX                                        48387            3.70
REEVES.........................................  TX                                        48389            2.90
REFUGIO........................................  TX                                        48391            4.60
ROBERTS........................................  TX                                        48393            2.50
ROBERTSON......................................  TX                                        48395            4.00
ROCKWALL.......................................  TX                                        48397            3.70
RUNNELS........................................  TX                                        48399            3.30
RUSK...........................................  TX                                        48401            4.00
SABINE.........................................  TX                                        48403            4.60
SAN AUGUSTINE..................................  TX                                        48405            4.60
SAN JACINTO....................................  TX                                        48407            4.60
SAN PATRICIO...................................  TX                                        48409            4.60
SAN SABA.......................................  TX                                        48411            3.60
SCHLEICHER.....................................  TX                                        48413            3.60
SCURRY.........................................  TX                                        48415            2.90
SHACKELFORD....................................  TX                                        48417            3.30
SHELBY.........................................  TX                                        48419            4.60
SHERMAN........................................  TX                                        48421            2.50
SMITH..........................................  TX                                        48423            3.70
SOMERVELL......................................  TX                                        48425            3.70
STARR..........................................  TX                                        48427            4.60
STEPHENS.......................................  TX                                        48429            3.30
STERLING.......................................  TX                                        48431            3.30
STONEWALL......................................  TX                                        48433            2.90
SUTTON.........................................  TX                                        48435            3.60
SWISHER........................................  TX                                        48437            2.50
TARRANT........................................  TX                                        48439            3.70
TAYLOR.........................................  TX                                        48441            3.30
TERRELL........................................  TX                                        48443            3.30
TERRY..........................................  TX                                        48445            2.60
THROCKMORTON...................................  TX                                        48447            3.30
TITUS..........................................  TX                                        48449            3.70
TOM GREEN......................................  TX                                        48451            3.30
TRAVIS.........................................  TX                                        48453            4.00
TRINITY........................................  TX                                        48455            4.60
TYLER..........................................  TX                                        48457            4.80
UPSHUR.........................................  TX                                        48459            3.70
UPTON..........................................  TX                                        48461            3.30
UVALDE.........................................  TX                                        48463            4.00
VAL VERDE......................................  TX                                        48465            3.60
VAN ZANDT......................................  TX                                        48467            3.70
VICTORIA.......................................  TX                                        48469            4.60
WALKER.........................................  TX                                        48471            4.60
WALLER.........................................  TX                                        48473            4.60
WARD...........................................  TX                                        48475            2.90
WASHINGTON.....................................  TX                                        48477            4.30
WEBB...........................................  TX                                        48479            4.30
WHARTON........................................  TX                                        48481            4.60
WHEELER........................................  TX                                        48483            2.60
WICHITA........................................  TX                                        48485            2.90
WILBARGER......................................  TX                                        48487            2.90
WILLACY........................................  TX                                        48489            4.60
WILLIAMSON.....................................  TX                                        48491            4.00

[[Page 95578]]

 
WILSON.........................................  TX                                        48493            4.30
WINKLER........................................  TX                                        48495            2.90
WISE...........................................  TX                                        48497            3.30
WOOD...........................................  TX                                        48499            3.70
YOAKUM.........................................  TX                                        48501            2.60
YOUNG..........................................  TX                                        48503            3.30
ZAPATA.........................................  TX                                        48505            4.30
ZAVALA.........................................  TX                                        48507            4.00
BEAVER.........................................  UT                                        49001            2.40
BOX ELDER......................................  UT                                        49003            2.00
CACHE..........................................  UT                                        49005            2.20
CARBON.........................................  UT                                        49007            2.20
DAGGETT........................................  UT                                        49009            2.30
DAVIS..........................................  UT                                        49011            2.20
DUCHESNE.......................................  UT                                        49013            2.20
EMERY..........................................  UT                                        49015            2.30
GARFIELD.......................................  UT                                        49017            2.30
GRAND..........................................  UT                                        49019            2.30
IRON...........................................  UT                                        49021            2.40
JUAB...........................................  UT                                        49023            2.20
KANE...........................................  UT                                        49025            2.40
MILLARD........................................  UT                                        49027            2.30
MORGAN.........................................  UT                                        49029            2.20
PIUTE..........................................  UT                                        49031            2.30
RICH...........................................  UT                                        49033            2.20
SALT LAKE......................................  UT                                        49035            2.20
SAN JUAN.......................................  UT                                        49037            2.30
SANPETE........................................  UT                                        49039            2.20
SEVIER.........................................  UT                                        49041            2.30
SUMMIT.........................................  UT                                        49043            2.20
TOOELE.........................................  UT                                        49045            2.20
UINTAH.........................................  UT                                        49047            2.30
UTAH...........................................  UT                                        49049            2.20
WASATCH........................................  UT                                        49051            2.20
WASHINGTON.....................................  UT                                        49053            2.50
WAYNE..........................................  UT                                        49055            2.30
WEBER..........................................  UT                                        49057            2.20
ADDISON........................................  VT                                        50001            4.30
BENNINGTON.....................................  VT                                        50003            4.50
CALEDONIA......................................  VT                                        50005            4.30
CHITTENDEN.....................................  VT                                        50007            4.30
ESSEX..........................................  VT                                        50009            4.20
FRANKLIN.......................................  VT                                        50011            4.20
GRAND ISLE.....................................  VT                                        50013            4.20
LAMOILLE.......................................  VT                                        50015            4.30
ORANGE.........................................  VT                                        50017            4.30
ORLEANS........................................  VT                                        50019            4.20
RUTLAND........................................  VT                                        50021            4.30
WASHINGTON.....................................  VT                                        50023            4.30
WINDHAM........................................  VT                                        50025            4.50
WINDSOR........................................  VT                                        50027            4.50
ACCOMACK.......................................  VA                                        51001            4.80
ALBEMARLE......................................  VA                                        51003            4.50
ALLEGHANY......................................  VA                                        51005            4.50
AMELIA.........................................  VA                                        51007            4.80
AMHERST........................................  VA                                        51009            4.50
APPOMATTOX.....................................  VA                                        51011            4.80
ARLINGTON......................................  VA                                        51013            4.60
AUGUSTA........................................  VA                                        51015            4.30
BATH...........................................  VA                                        51017            4.50
BEDFORD........................................  VA                                        51019            4.80
BLAND..........................................  VA                                        51021            4.80
BOTETOURT......................................  VA                                        51023            4.80
BRUNSWICK......................................  VA                                        51025            5.20
BUCHANAN.......................................  VA                                        51027            4.80
BUCKINGHAM.....................................  VA                                        51029            4.80
CAMPBELL.......................................  VA                                        51031            4.80
CAROLINE.......................................  VA                                        51033            4.80
CARROLL........................................  VA                                        51035            5.20
CHARLES CITY...................................  VA                                        51036            5.20
CHARLOTTE......................................  VA                                        51037            4.80

[[Page 95579]]

 
CHESTERFIELD...................................  VA                                        51041            4.80
CLARKE.........................................  VA                                        51043            4.30
CRAIG..........................................  VA                                        51045            4.80
CULPEPER.......................................  VA                                        51047            4.50
CUMBERLAND.....................................  VA                                        51049            4.80
DICKENSON......................................  VA                                        51051            4.80
DINWIDDIE......................................  VA                                        51053            5.20
ESSEX..........................................  VA                                        51057            4.80
FAIRFAX........................................  VA                                        51059            4.60
FAUQUIER.......................................  VA                                        51061            4.50
FLOYD..........................................  VA                                        51063            5.20
FLUVANNA.......................................  VA                                        51065            4.50
FRANKLIN COUNTY................................  VA                                        51067            4.80
FREDERICK......................................  VA                                        51069            4.30
GILES..........................................  VA                                        51071            4.80
GLOUCESTER.....................................  VA                                        51073            5.20
GOOCHLAND......................................  VA                                        51075            4.80
GRAYSON........................................  VA                                        51077            5.20
GREENE.........................................  VA                                        51079            4.50
GREENSVILLE....................................  VA                                        51081            5.20
HALIFAX........................................  VA                                        51083            5.20
HANOVER........................................  VA                                        51085            4.80
HENRICO........................................  VA                                        51087            4.80
HENRY..........................................  VA                                        51089            5.20
HIGHLAND.......................................  VA                                        51091            4.30
ISLE OF WIGHT..................................  VA                                        51093            5.20
JAMES CITY.....................................  VA                                        51095            5.20
KING AND QUEEN.................................  VA                                        51097            4.80
KING GEORGE....................................  VA                                        51099            4.80
KING WILLIAM...................................  VA                                        51101            4.80
LANCASTER......................................  VA                                        51103            5.20
LEE............................................  VA                                        51105            4.80
LOUDOUN........................................  VA                                        51107            4.40
LOUISA.........................................  VA                                        51109            4.50
LUNENBURG......................................  VA                                        51111            5.20
MADISON........................................  VA                                        51113            4.50
MATHEWS........................................  VA                                        51115            5.20
MECKLENBURG....................................  VA                                        51117            5.20
MIDDLESEX......................................  VA                                        51119            5.20
MONTGOMERY.....................................  VA                                        51121            4.80
NELSON.........................................  VA                                        51125            4.50
NEW KENT.......................................  VA                                        51127            5.20
NORTHAMPTON....................................  VA                                        51131            4.80
NORTHUMBERLAND.................................  VA                                        51133            4.80
NOTTOWAY.......................................  VA                                        51135            4.80
ORANGE.........................................  VA                                        51137            4.50
PAGE...........................................  VA                                        51139            4.30
PATRICK........................................  VA                                        51141            5.20
PITTSYLVANIA...................................  VA                                        51143            5.20
POWHATAN.......................................  VA                                        51145            4.80
PRINCE EDWARD..................................  VA                                        51147            4.80
PRINCE GEORGE..................................  VA                                        51149            5.20
PRINCE WILLIAM.................................  VA                                        51153            4.50
PULASKI........................................  VA                                        51155            4.80
RAPPAHANNOCK...................................  VA                                        51157            4.50
RICHMOND.......................................  VA                                        51159            4.80
ROANOKE........................................  VA                                        51161            4.80
ROCKBRIDGE.....................................  VA                                        51163            4.50
ROCKINGHAM.....................................  VA                                        51165            4.30
RUSSELL........................................  VA                                        51167            4.80
SCOTT..........................................  VA                                        51169            4.80
SHENANDOAH.....................................  VA                                        51171            4.30
SMYTH..........................................  VA                                        51173            5.20
SOUTHAMPTON....................................  VA                                        51175            5.20
SPOTSYLVANIA...................................  VA                                        51177            4.50
STAFFORD.......................................  VA                                        51179            4.50
SURRY..........................................  VA                                        51181            5.20
SUSSEX.........................................  VA                                        51183            5.20
TAZEWELL.......................................  VA                                        51185            4.80
WARREN.........................................  VA                                        51187            4.30
WASHINGTON.....................................  VA                                        51191            5.20

[[Page 95580]]

 
WESTMORELAND...................................  VA                                        51193            4.80
WISE...........................................  VA                                        51195            4.80
WYTHE..........................................  VA                                        51197            5.20
YORK...........................................  VA                                        51199            5.20
ALEXANDRIA CITY................................  VA                                        51510            4.50
BRISTOL CITY...................................  VA                                        51520            5.20
BUENA VISTA CITY...............................  VA                                        51530            4.50
CHARLOTTESVILLE CITY...........................  VA                                        51540            4.50
CHESAPEAKE CITY................................  VA                                        51550            5.20
COLONIAL HEIGHTS CITY..........................  VA                                        51570            4.80
COVINGTON CITY.................................  VA                                        51580            4.50
DANVILLE CITY..................................  VA                                        51590            5.20
EMPORIA CITY...................................  VA                                        51595            5.20
FAIRFAX CITY...................................  VA                                        51600            4.50
FALLS CHURCH CITY..............................  VA                                        51610            4.50
FRANKLIN CITY..................................  VA                                        51620            5.20
FREDERICKSBURG CITY............................  VA                                        51630            4.50
GALAX CITY.....................................  VA                                        51640            5.20
HAMPTON CITY...................................  VA                                        51650            5.20
HARRISONBURG CITY..............................  VA                                        51660            4.30
HOPEWELL CITY..................................  VA                                        51670            5.20
LEXINGTON CITY.................................  VA                                        51678            4.50
LYNCHBURG CITY.................................  VA                                        51680            4.80
MANASSAS CITY..................................  VA                                        51683            4.50
MANASSAS PARK CITY.............................  VA                                        51685            4.50
MARTINSVILLE CITY..............................  VA                                        51690            5.20
NEWPORT NEWS CITY..............................  VA                                        51700            5.20
NORFOLK CITY...................................  VA                                        51710            5.20
NORTON CITY....................................  VA                                        51720            4.80
PETERSBURG CITY................................  VA                                        51730            5.20
POQUOSON CITY..................................  VA                                        51735            5.20
PORTSMOUTH CITY................................  VA                                        51740            5.20
RADFORD CITY...................................  VA                                        51750            4.80
RICHMOND CITY..................................  VA                                        51760            4.80
ROANOKE CITY...................................  VA                                        51770            4.80
SALEM CITY.....................................  VA                                        51775            4.80
STAUNTON CITY..................................  VA                                        51790            4.30
SUFFOLK CITY...................................  VA                                        51800            5.20
VIRGINIA BEACH CITY............................  VA                                        51810            5.20
WAYNESBORO CITY................................  VA                                        51820            4.30
WILLIAMSBURG CITY..............................  VA                                        51830            5.20
WINCHESTER CITY................................  VA                                        51840            4.30
ADAMS..........................................  WA                                        53001            2.20
ASOTIN.........................................  WA                                        53003            2.20
BENTON.........................................  WA                                        53005            2.20
CHELAN.........................................  WA                                        53007            2.40
CLALLAM........................................  WA                                        53009            2.40
CLARK..........................................  WA                                        53011            2.70
COLUMBIA.......................................  WA                                        53013            2.20
COWLITZ........................................  WA                                        53015            2.40
DOUGLAS........................................  WA                                        53017            2.40
FERRY..........................................  WA                                        53019            2.40
FRANKLIN.......................................  WA                                        53021            2.20
GARFIELD.......................................  WA                                        53023            2.20
GRANT..........................................  WA                                        53025            2.20
GRAYS HARBOR...................................  WA                                        53027            2.40
ISLAND.........................................  WA                                        53029            2.40
JEFFERSON......................................  WA                                        53031            2.40
KING...........................................  WA                                        53033            2.70
KITSAP.........................................  WA                                        53035            2.40
KITTITAS.......................................  WA                                        53037            2.40
KLICKITAT......................................  WA                                        53039            2.20
LEWIS..........................................  WA                                        53041            2.40
LINCOLN........................................  WA                                        53043            2.40
MASON..........................................  WA                                        53045            2.40
OKANOGAN.......................................  WA                                        53047            2.40
PACIFIC........................................  WA                                        53049            2.40
PEND OREILLE...................................  WA                                        53051            2.40
PIERCE.........................................  WA                                        53053            2.40
SAN JUAN.......................................  WA                                        53055            2.40
SKAGIT.........................................  WA                                        53057            2.40

[[Page 95581]]

 
SKAMANIA.......................................  WA                                        53059            2.40
SNOHOMISH......................................  WA                                        53061            2.40
SPOKANE........................................  WA                                        53063            2.40
STEVENS........................................  WA                                        53065            2.40
THURSTON.......................................  WA                                        53067            2.40
WAHKIAKUM......................................  WA                                        53069            2.40
WALLA WALLA....................................  WA                                        53071            2.20
WHATCOM........................................  WA                                        53073            2.40
WHITMAN........................................  WA                                        53075            2.20
YAKIMA.........................................  WA                                        53077            2.20
BARBOUR........................................  WV                                        54001            4.30
BERKELEY.......................................  WV                                        54003            4.30
BOONE..........................................  WV                                        54005            4.50
BRAXTON........................................  WV                                        54007            4.30
BROOKE.........................................  WV                                        54009            4.00
CABELL.........................................  WV                                        54011            4.30
CALHOUN........................................  WV                                        54013            4.30
CLAY...........................................  WV                                        54015            4.30
DODDRIDGE......................................  WV                                        54017            4.30
FAYETTE........................................  WV                                        54019            4.50
GILMER.........................................  WV                                        54021            4.30
GRANT..........................................  WV                                        54023            4.30
GREENBRIER.....................................  WV                                        54025            4.50
HAMPSHIRE......................................  WV                                        54027            4.30
HANCOCK........................................  WV                                        54029            4.00
HARDY..........................................  WV                                        54031            4.30
HARRISON.......................................  WV                                        54033            4.30
JACKSON........................................  WV                                        54035            4.30
JEFFERSON......................................  WV                                        54037            4.30
KANAWHA........................................  WV                                        54039            4.30
LEWIS..........................................  WV                                        54041            4.30
LINCOLN........................................  WV                                        54043            4.50
LOGAN..........................................  WV                                        54045            4.50
MCDOWELL.......................................  WV                                        54047            4.80
MARION.........................................  WV                                        54049            4.00
MARSHALL.......................................  WV                                        54051            4.00
MASON..........................................  WV                                        54053            4.30
MERCER.........................................  WV                                        54055            4.80
MINERAL........................................  WV                                        54057            4.10
MINGO..........................................  WV                                        54059            4.50
MONONGALIA.....................................  WV                                        54061            4.10
MONROE.........................................  WV                                        54063            4.80
MORGAN.........................................  WV                                        54065            4.30
NICHOLAS.......................................  WV                                        54067            4.50
OHIO...........................................  WV                                        54069            4.00
PENDLETON......................................  WV                                        54071            4.30
PLEASANTS......................................  WV                                        54073            4.00
POCAHONTAS.....................................  WV                                        54075            4.50
PRESTON........................................  WV                                        54077            4.10
PUTNAM.........................................  WV                                        54079            4.30
RALEIGH........................................  WV                                        54081            4.50
RANDOLPH.......................................  WV                                        54083            4.30
RITCHIE........................................  WV                                        54085            4.30
ROANE..........................................  WV                                        54087            4.30
SUMMERS........................................  WV                                        54089            4.80
TAYLOR.........................................  WV                                        54091            4.30
TUCKER.........................................  WV                                        54093            4.30
TYLER..........................................  WV                                        54095            4.00
UPSHUR.........................................  WV                                        54097            4.30
WAYNE..........................................  WV                                        54099            4.50
WEBSTER........................................  WV                                        54101            4.50
WETZEL.........................................  WV                                        54103            4.00
WIRT...........................................  WV                                        54105            4.30
WOOD...........................................  WV                                        54107            4.00
WYOMING........................................  WV                                        54109            4.80
ADAMS..........................................  WI                                        55001            2.90
ASHLAND........................................  WI                                        55003            2.80
BARRON.........................................  WI                                        55005            2.80
BAYFIELD.......................................  WI                                        55007            2.80
BROWN..........................................  WI                                        55009            2.90
BUFFALO........................................  WI                                        55011            2.80

[[Page 95582]]

 
BURNETT........................................  WI                                        55013            2.80
CALUMET........................................  WI                                        55015            2.90
CHIPPEWA.......................................  WI                                        55017            2.80
CLARK..........................................  WI                                        55019            2.80
COLUMBIA.......................................  WI                                        55021            2.90
CRAWFORD.......................................  WI                                        55023            2.90
DANE...........................................  WI                                        55025            2.90
DODGE..........................................  WI                                        55027            2.90
DOOR...........................................  WI                                        55029            2.90
DOUGLAS........................................  WI                                        55031            2.80
DUNN...........................................  WI                                        55033            2.80
EAU CLAIRE.....................................  WI                                        55035            2.80
FLORENCE.......................................  WI                                        55037            2.80
FOND DU LAC....................................  WI                                        55039            2.90
FOREST.........................................  WI                                        55041            2.80
GRANT..........................................  WI                                        55043            2.90
GREEN..........................................  WI                                        55045            2.90
GREEN LAKE.....................................  WI                                        55047            2.90
IOWA...........................................  WI                                        55049            2.90
IRON...........................................  WI                                        55051            2.80
JACKSON........................................  WI                                        55053            2.80
JEFFERSON......................................  WI                                        55055            2.90
JUNEAU.........................................  WI                                        55057            2.90
KENOSHA........................................  WI                                        55059            3.10
KEWAUNEE.......................................  WI                                        55061            2.90
LA CROSSE......................................  WI                                        55063            2.90
LAFAYETTE......................................  WI                                        55065            2.90
LANGLADE.......................................  WI                                        55067            2.90
LINCOLN........................................  WI                                        55069            2.80
MANITOWOC......................................  WI                                        55071            2.90
MARATHON.......................................  WI                                        55073            2.90
MARINETTE......................................  WI                                        55075            2.90
MARQUETTE......................................  WI                                        55077            2.90
MENOMINEE......................................  WI                                        55078            2.90
MILWAUKEE......................................  WI                                        55079            3.10
MONROE.........................................  WI                                        55081            2.90
OCONTO.........................................  WI                                        55083            2.90
ONEIDA.........................................  WI                                        55085            2.80
OUTAGAMIE......................................  WI                                        55087            2.90
OZAUKEE........................................  WI                                        55089            3.10
PEPIN..........................................  WI                                        55091            2.80
PIERCE.........................................  WI                                        55093            2.80
POLK...........................................  WI                                        55095            2.80
PORTAGE........................................  WI                                        55097            2.90
PRICE..........................................  WI                                        55099            2.80
RACINE.........................................  WI                                        55101            3.10
RICHLAND.......................................  WI                                        55103            2.90
ROCK...........................................  WI                                        55105            2.90
RUSK...........................................  WI                                        55107            2.80
ST. CROIX......................................  WI                                        55109            2.80
SAUK...........................................  WI                                        55111            2.90
SAWYER.........................................  WI                                        55113            2.80
SHAWANO........................................  WI                                        55115            2.90
SHEBOYGAN......................................  WI                                        55117            2.90
TAYLOR.........................................  WI                                        55119            2.80
TREMPEALEAU....................................  WI                                        55121            2.80
VERNON.........................................  WI                                        55123            2.90
VILAS..........................................  WI                                        55125            2.80
WALWORTH.......................................  WI                                        55127            3.10
WASHBURN.......................................  WI                                        55129            2.80
WASHINGTON.....................................  WI                                        55131            2.90
WAUKESHA.......................................  WI                                        55133            2.90
WAUPACA........................................  WI                                        55135            2.90
WAUSHARA.......................................  WI                                        55137            2.90
WINNEBAGO......................................  WI                                        55139            2.90
WOOD...........................................  WI                                        55141            2.90
ALBANY.........................................  WY                                        56001            2.40
BIG HORN.......................................  WY                                        56003            2.40
CAMPBELL.......................................  WY                                        56005            2.40
CARBON.........................................  WY                                        56007            2.40
CONVERSE.......................................  WY                                        56009            2.40

[[Page 95583]]

 
CROOK..........................................  WY                                        56011            2.40
FREMONT........................................  WY                                        56013            2.40
GOSHEN.........................................  WY                                        56015            2.40
HOT SPRINGS....................................  WY                                        56017            2.40
JOHNSON........................................  WY                                        56019            2.40
LARAMIE........................................  WY                                        56021            2.50
LINCOLN........................................  WY                                        56023            2.20
NATRONA........................................  WY                                        56025            2.40
NIOBRARA.......................................  WY                                        56027            2.40
PARK...........................................  WY                                        56029            2.20
PLATTE.........................................  WY                                        56031            2.40
SHERIDAN.......................................  WY                                        56033            2.40
SUBLETTE.......................................  WY                                        56035            2.20
SWEETWATER.....................................  WY                                        56037            2.40
TETON..........................................  WY                                        56039            2.20
UINTA..........................................  WY                                        56041            2.20
WASHAKIE.......................................  WY                                        56043            2.40
WESTON.........................................  WY                                        56045            2.40
----------------------------------------------------------------------------------------------------------------

0
5. Amend Sec.  1000.76 by
0
a. Removing the words ``and Sec.  1135.11 of this chapter'' wherever 
they appear; and
0
b. Revising and republishing paragraphs (a)(2) through (4) and 
paragraph (c).
    The revisions and republications read as follows:


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

* * * * *
    (a) * * *
    (2) For orders with multiple component pricing, compute a Class I 
differential price by subtracting Class III price from the current 
month's applicable Class I price. Multiply the pounds remaining after 
the computation in paragraph (a)(1)(iii) of this section by the amount 
by which the Class I differential price exceeds the producer price 
differential, both prices to be applicable at the location of the 
partially regulated distributing plant except that neither the adjusted 
Class I differential price nor the adjusted producer price differential 
shall be less than zero;
    (3) For orders with skim milk and butterfat pricing, multiply the 
remaining pounds by the amount by which the applicable Class I price 
exceeds the uniform price, both prices to be applicable at the location 
of the partially regulated distributing plant except that neither the 
adjusted Class I price nor the adjusted uniform price differential 
shall be less than the lowest announced class price; and
    (4) Unless the payment option described in paragraph (d) of this 
section is selected, add the amount obtained from multiplying the 
pounds of labeled reconstituted milk included in paragraph (a)(1)(iii) 
of this section by any positive difference between the applicable Class 
I price at the location of the partially regulated distributing plant 
(less $1.00 if the reconstituted milk is labeled as such) and the Class 
IV price.
* * * * *
    (c) The operator of a partially regulated distributing plant that 
is subject to marketwide pooling of returns under a milk classification 
and pricing program that is imposed under the authority of a State 
government shall pay on or before the 25th day after the end of the 
month (except as provided in Sec.  1000.90) to the market administrator 
for the producer-settlement fund an amount computed as follows: after 
completing the computations described in paragraphs (a)(1)(i) and (ii) 
of this section, determine the value of the remaining pounds of fluid 
milk products disposed of as route disposition in the marketing area by 
multiplying the hundredweight of such pounds by the amount, if greater 
than zero, that remains after subtracting the State program's class 
prices applicable to such products at the plant's location from the 
applicable Federal order Class I price at the location of the plant.
* * * * *

PART 1001--MILK IN THE NORTHEAST MARKETING AREA

0
6. The authority citation for part 1001 continues to read as follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
7. Amend Sec.  1001.60 by:
0
a. Revising the introductory text;
0
b. Redesignating paragraph (i) as paragraph (j); and
0
c. Adding new paragraph (i).
    The revision and addition read as follows:


Sec.  1001.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (i) of this section and 
subtracting from that total amount the value computed in paragraph (j) 
of this section. Unless otherwise specified, the skim milk, butterfat, 
and the combined pounds of skim milk and butterfat referred to in this 
section shall result from the steps set forth in Sec.  1000.44(a), (b), 
and (c) of this chapter, respectively, and the nonfat components of 
producer milk in each class shall be based upon the proportion of such 
components in producer skim milk. Receipts of nonfluid milk products 
that are distributed as labeled reconstituted milk for which payments 
are made to the producer-settlement fund of another Federal order under 
Sec.  1000.76(a)(4) or (d) of this chapter shall be excluded from 
pricing under this section.
* * * * *
    (i) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

[[Page 95584]]

PART 1005--MILK IN THE APPLACHIAN MARKETING AREA

0
8. The authority citation for part 1005 continues to read as follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
9. Amend Sec.  1005.51 by revising paragraph (a) and removing and 
reserving paragraph (b) to read as follows:


Sec.  1005.51  Class I differential, adjustments to Class I prices, and 
Class I price.

    (a) The Class I differential shall be the differential established 
for Mecklenburg County, North Carolina, which is reported in Sec.  
1000.52 of this chapter. The Class I price shall be the price computed 
pursuant to Sec.  1000.50(a) of this chapter for Mecklenburg County, 
North Carolina.
    (b) [Reserved]
0
10. Amend Sec.  1005.60 by:
0
a. Revising the introductory text and paragraph (a);
0
b. Removing paragraph (g);
0
c. Redesignating paragraph (f) as paragraph (g); and
0
d. Adding new paragraph (f).
    The revisions and addition read as follows:


Sec.  1005.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (f) of this section and 
subtracting from that total amount the value computed in paragraph (g) 
of this section. Receipts of nonfluid milk products that are 
distributed as labeled reconstituted milk for which payments are made 
to the producer-settlement fund of another Federal order under Sec.  
1000.76(a)(4) or (d) of this chapter shall be excluded from pricing 
under this section.
    (a) Multiply the pounds of skim milk and butterfat in producer milk 
that were classified in each class pursuant to Sec.  1000.44(c) of this 
chapter by the applicable skim milk and butterfat prices, and add the 
resulting amounts;
* * * * *
    (f) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

PART 1006--MILK IN THE FLORIDA MARKETING AREA

0
11. The authority citation for part 1006 continues to read as follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
12. Amend Sec.  1006.51 by revising paragraph (a), removing and 
reserving paragraph (b), and removing paragraph (c) to read as follows:


Sec.  1006.51  Class I differential, adjustments to Class I prices, and 
Class I price.

    (a) The Class I differential shall be the differential established 
for Hillsborough County, Florida, which is reported in Sec.  1000.52 of 
this chapter. The Class I price shall be the price computed pursuant to 
Sec.  1000.50(a) of this chapter for Hillsborough County, Florida.
    (b) [Reserved]
0
13. Amend Sec.  1006.60 by:
0
a. Revising the introductory text and paragraph (a);
0
b. Removing paragraphs (g) through (i);
0
c. Redesignating paragraph (f) as paragraph (g); and
0
d. Adding new paragraph (f).
    The revisions and addition read as follows:


Sec.  1006.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (f) of this section and 
subtracting from that total amount the value computed in paragraph (g) 
of this section. Receipts of nonfluid milk products that are 
distributed as labeled reconstituted milk for which payments are made 
to the producer-settlement fund of another Federal order under Sec.  
1000.76(a)(4) or (d) of this chapter shall be excluded from pricing 
under this section.
    (a) Multiply the pounds of skim milk and butterfat in producer milk 
that were classified in each class pursuant to Sec.  1000.44(c) of this 
chapter by the applicable skim milk and butterfat prices, and add the 
resulting amounts;
* * * * *
    (f) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

PART 1007--MILK IN THE SOUTHEAST MARKETING AREA

0
14. The authority citation for part 1007 continues to read as follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
15. Amend Sec.  1007.51 by revising paragraph (a) and removing and 
reserving paragraph (b) to read as follows:


Sec.  1007.51  Class I differential, adjustments to Class I prices, and 
Class I price.

    (a) The Class I differential shall be the differential established 
for Fulton County, Georgia, which is reported in Sec.  1000.52 of this 
chapter. The Class I price shall be the price computed pursuant to 
Sec.  1000.50(a) of this chapter for Fulton County, Georgia.
    (b) [Reserved]
0
16. Amend Sec.  1007.60 by:
0
a. Revising the introductory text and paragraph (a);
0
b. Removing paragraph (g);
0
c. Redesignating paragraph (f) as paragraph (g); and
0
d. Adding new paragraph (f).
    The revisions and addition read as follows:


Sec.  1007.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (f) of this section and 
subtracting from that total amount the value computed in paragraph (g) 
of this section. Receipts of nonfluid milk products that are 
distributed as labeled reconstituted milk for which payments are made 
to the producer-settlement fund of another Federal order under Sec.  
1000.76(a)(4) or (d) of this chapter shall be excluded from pricing 
under this section.
    (a) Multiply the pounds of skim milk and butterfat in producer milk 
that were classified in each class pursuant to Sec.  1000.44(c) of this 
chapter by the applicable skim milk and butterfat prices, and add the 
resulting amounts;
* * * * *
    (f) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

[[Page 95585]]

PART 1030--MILK IN THE UPPER MIDWEST MARKETING AREA

0
17. The authority citation for part 1030 continues to read as follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
18. Amend Sec.  1030.60 by:
0
a. Revising the introductory text;
0
b. Redesignating paragraphs (j) and (k) as paragraphs (k) and (l); and
0
c. Adding new paragraph (j).
    The revision and addition read as follows:


Sec.  1030.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (j) of this section and 
subtracting from that total amount the values computed in paragraphs 
(k) and (l) of this section. Unless otherwise specified, the skim milk, 
butterfat, and the combined pounds of skim milk and butterfat referred 
to in this section shall result from the steps set forth in Sec.  
1000.44(a), (b), and (c) of this chapter, respectively, and the nonfat 
components of producer milk in each class shall be based upon the 
proportion of such components in producer skim milk. Receipts of 
nonfluid milk products that are distributed as labeled reconstituted 
milk for which payments are made to the producer-settlement fund of 
another Federal order under Sec.  1000.76(a)(4) or (d) of this chapter 
shall be excluded from pricing under this section.
* * * * *
    (j) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

PART 1032--MILK IN THE CENTRAL MARKETING AREA

0
19. The authority citation for part 1032 continues to read as follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
20. Amend Sec.  1032.60 by:
0
a. Revising the introductory text;
0
b. Redesignating paragraph (j) as paragraph (k); and
0
c. Adding new paragraph (j).
    The revision and addition read as follows:


Sec.  1032.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (j) of this section and 
subtracting from that total amount the value computed in paragraph (k) 
of this section. Unless otherwise specified, the skim milk, butterfat, 
and the combined pounds of skim milk and butterfat referred to in this 
section shall result from the steps set forth in Sec.  1000.44(a), (b), 
and (c) of this chapter, respectively, and the nonfat components of 
producer milk in each class shall be based upon the proportion of such 
components in producer skim milk. Receipts of nonfluid milk products 
that are distributed as labeled reconstituted milk for which payments 
are made to the producer-settlement fund of another Federal order under 
Sec.  1000.76(a)(4) or (d) of this chapter shall be excluded from 
pricing under this section.
* * * * *
    (j) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

PART 1033--MILK IN THE MIDEAST MARKETING AREA

0
21. The authority citation for part 1033 continues to read as follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
22. Amend Sec.  1033.60 by:
0
a. Revising the introductory text;
0
b. Redesignating paragraph (j) as paragraph (k); and
0
c. Adding new paragraph (j).
    The revision and addition read as follows:


Sec.  1033.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (j) of this section and 
subtracting from that total amount the value computed in paragraph (k) 
of this section. Unless otherwise specified, the skim milk, butterfat, 
and the combined pounds of skim milk and butterfat referred to in this 
section shall result from the steps set forth in Sec.  1000.44(a), (b), 
and (c) of this chapter, respectively, and the nonfat components of 
producer milk in each class shall be based upon the proportion of such 
components in producer skim milk. Receipts of nonfluid milk products 
that are distributed as labeled reconstituted milk for which payments 
are made to the producer-settlement fund of another Federal order under 
Sec.  1000.76(a)(4) or (d) of this chapter shall be excluded from 
pricing under this section.
* * * * *
    (j) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

PART 1051--MILK IN THE CALIFORNIA MARKETING AREA

0
23. The authority citation for part 1051 continues to read as follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
24. Amend Sec.  1051.60 by:
0
a. Revising the introductory text;
0
b. Redesignating paragraph (i) as paragraph (j); and
0
c. Adding new paragraph (i).
    The revision and addition read as follows:


Sec.  1051.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (i) of this section and 
subtracting from that total amount the value computed in paragraph (j) 
of this section. Unless otherwise specified, the skim milk, butterfat, 
and the combined pounds of skim milk and butterfat referred to in this 
section shall result from the steps set forth in Sec.  1000.44(a), (b), 
and (c) of this chapter, respectively, and the nonfat components of 
producer milk in each class shall be based upon the proportion of such 
components in producer skim milk. Receipts of nonfluid milk products 
that are distributed as labeled reconstituted

[[Page 95586]]

milk for which payments are made to the producer-settlement fund of 
another Federal order under Sec.  1000.76(a)(4) or (d) of this chapter 
shall be excluded from pricing under this section.
* * * * *
    (i) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

PART 1124--MILK IN THE PACIFIC NORTHWEST MARKETING AREA

0
25. The authority citation for part 1124 continues to read as follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
26. Amend Sec.  1124.60 by:
0
a. Revising the introductory text;
0
b. Redesignating paragraph (i) as paragraph (j); and
0
c. Adding new paragraph (i).
    The revision and addition read as follows:


Sec.  1124.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (i) of this section and 
subtracting from that total amount the value computed in paragraph (j) 
of this section. Unless otherwise specified, the skim milk, butterfat, 
and the combined pounds of skim milk and butterfat referred to in this 
section shall result from the steps set forth in Sec.  1000.44(a), (b), 
and (c) of this chapter, respectively, and the nonfat components of 
producer milk in each class shall be based upon the proportion of such 
components in producer skim milk. Receipts of nonfluid milk products 
that are distributed as labeled reconstituted milk for which payments 
are made to the producer-settlement fund of another Federal order under 
Sec.  1000.76(a)(4) or (d) of this chapter shall be excluded from 
pricing under this section.
* * * * *
    (i) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

PART 1126--MILK IN THE SOUTHWEST MARKETING AREA

0
27. The authority citation for part 1126 continues to read as follows:

    Authority:  7 U.S.C. 601-674, and 7253.

0
28. Amend Sec.  1126.60 by:
0
a. Revising the introductory text;
0
b. Redesignating paragraph (j) as paragraph (k); and
0
c. Adding new paragraph (j).
    The revision and addition read as follows:


Sec.  1126.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (j) of this section and 
subtracting from that total amount the value computed in paragraph (k) 
of this section. Unless otherwise specified, the skim milk, butterfat, 
and the combined pounds of skim milk and butterfat referred to in this 
section shall result from the steps set forth in Sec.  1000.44(a), (b), 
and (c) of this chapter, respectively, and the nonfat components of 
producer milk in each class shall be based upon the proportion of such 
components in producer skim milk. Receipts of nonfluid milk products 
that are distributed as labeled reconstituted milk for which payments 
are made to the producer-settlement fund of another Federal order under 
Sec.  1000.76(a)(4) or (d) of this chapter shall be excluded from 
pricing under this section.
* * * * *
    (j) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

PART 1131--MILK IN THE ARIZONA MARKETING AREA

0
29. The authority citation for part 1131 continues to read as follows:

    Authority: 7 U.S.C. 601-674, and 7253.

0
30. Amend Sec.  1131.60 by:
0
a. Revising the introductory paragraph;
0
b. Redesignating paragraph (f) as paragraph (g); and
0
c. Adding new paragraph (f).
    The revision and addition read as follows:


Sec.  1131.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec.  1000.9(c) of this chapter 
with respect to milk that was not received at a pool plant by adding 
the amounts computed in paragraphs (a) through (f) of this section and 
subtracting from that total amount the value computed in paragraph (g) 
of this section. Receipts of nonfluid milk products that are 
distributed as labeled reconstituted milk for which payments are made 
to the producer-settlement fund of another Federal order under Sec.  
1000.76(a)(4) or (d) of this chapter shall be excluded from pricing 
under this section.
* * * * *
    (f) Compute an adjustment for eligible Class I producer milk 
pursuant to Sec.  1000.43(e) of this chapter by multiplying the Class I 
skim milk price adjuster computed in Sec.  1000.50(r) of this chapter 
by the pounds of skim milk eligible in Class I.
* * * * *

PART 1170--DAIRY PRODUCT MANDATORY REPORTING

0
31. The authority citation for part 1170 continues to read as follows:

    Authority: 7 U.S.C. 1637-1637b, as amended by Pub. L. 106-532, 
114 Stat. 2541; Pub. L. 107-171, 116 Stat. 207; and Pub. L. 111-239, 
124 Stat. 2501.

0
32. Revise and republish Sec.  1170.8(a) to read as follows:


Sec.  1170.8  Price reporting specifications.

* * * * *
    (a) Specifications for Cheddar Cheese Prices:
    (1) Variety: Cheddar cheese.
    (2) Style: 40-pound blocks.
    (3) Age: Not less than 4 days or more than 30 days on date of sale. 
Exclude cheese that will be aged.
    (4) Grade: Product meets Wisconsin State Brand or USDA Grade A or 
better standards.
    (5) Color: Colored and within the color range of 6-8 on the 
National Cheese Institute color chart.
    (6) Packaging: Price should reflect cheese wrapped in a sealed, 
airtight package in corrugated or solid fiberboard containers with a 
reinforcing

[[Page 95587]]

inner liner or sleeve. Exclude all other packaging costs from the 
reported price.
    (7) Exclude: Intra-company sales, resales of purchased cheese, 
forward pricing sales (sales in which the selling price was set [not 
adjusted] 30 or more days before the transaction was completed), cheese 
produced under faith-based close supervision and marketed at a higher 
price than the manufacturer's wholesale market price for the basic 
commodity (for example, kosher cheese produced with a rabbi on site who 
is actively involved in supervision of the production process), sales 
under the Dairy Export Incentive Program or other premium-assisted 
sales (for example, export assistance sales through the Cooperatives 
Working Together program), and cheese certified as organic by a USDA-
accredited certifying agent.
* * * * *
    [Note: The following will not appear in the Code of Federal 
Regulations.]

Marketing Agreement Regulating the Handling of Milk in Certain 
Marketing Areas

    The parties hereto, in order to effectuate the declared policy of 
the Act, and in accordance with the rules of practice and procedure 
effective thereunder (7 CFR part 900), desire to enter into this 
marketing agreement and do hereby agree that the provisions referred to 
in paragraph I hereof as augmented by the provisions specified in 
paragraph II hereof, shall be and are the provisions of this marketing 
agreement as if set out in full herein.
    I. The findings and determinations, order relative to handling, and 
the provisions of Sec. Sec.  ___to___,\6\ all inclusive, of the order 
regulating the handling of milk in the___\7\ marketing area (7 CFR 
part___) \8\ which is annexed hereto; and
---------------------------------------------------------------------------

    \6\ First and last section of order.
    \7\ Name of order.
    \8\ Appropriate CFR part number.
---------------------------------------------------------------------------

    II. The following provisions: Sec.  ___\9\ Record of milk handled 
and authorization to correct typographical errors.
---------------------------------------------------------------------------

    \9\ Next consecutive section number.
---------------------------------------------------------------------------

    (a) Record of milk handled. The undersigned certifies that he/she 
handled during the month of_____,\10\___ hundredweight of milk covered 
by this marketing agreement.
---------------------------------------------------------------------------

    \10\ Appropriate representative period for the order.
---------------------------------------------------------------------------

    (b) Authorization to correct typographical errors. The undersigned 
hereby authorizes the Deputy Administrator, or Acting Deputy 
Administrator, Dairy Programs, Agricultural Marketing Service, to 
correct any typographical errors which may have been made in this 
marketing agreement.
    Effective date. This marketing agreement shall become effective 
upon the execution of a counterpart hereof by the Secretary in 
accordance with Sec.  900.14(a) of the aforesaid rules of practice and 
procedure.
    In Witness Whereof, the contracting handlers, acting under the 
provisions of the Act, for the purposes and subject to the limitations 
herein contained and not otherwise, have hereunto set their respective 
hands and seals.

Signature
By (Name)--------------------------------------------------------------
(Title)----------------------------------------------------------------
(Address)--------------------------------------------------------------
(Seal)-----------------------------------------------------------------
Attest-----------------------------------------------------------------

Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2024-27228 Filed 11-29-24; 8:45 am]
BILLING CODE P`