4802 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

1Section 143(b)(2) requires that a proposed rule

be published by April 4, 1998 and Section 143(b)(3)

provides that ‘‘in the event that the Secretary is

enjoined or otherwise restrained by a court order

from publishing or implementing the consolidation

and related reforms under subsection (a), the length

of time for which that injunction or other

restraining order is effective shall be added to the

time limitations specified in paragraph (2) thereby

extending those time limitations by a period of time

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1000, 1001, 1002, 1004,

1005, 1006, 1007, 1012, 1013, 1030,

1032, 1033, 1036, 1040, 1044, 1046,

1049, 1050, 1064, 1065, 1068, 1076,

1079, 1106, 1124, 1126, 1131, 1134,

1135, 1137, 1138 and 1139

[DA–97–12]

Milk in the New England and Other

Marketing Areas; Proposed Rule and

Opportunity To File Comments,

Including Written Exceptions, on

Proposed Amendments to Marketing

Agreements and Orders

7 CFR part Marketing area

1000 ........ General Provisions of Federal

Milk Marketing Orders.

1001 ........ New England.

1002 ........ New York-New Jersey.

1004 ........ Middle Atlantic.

1005 ........ Carolina.

1006 ........ Upper Florida.

1007 ........ Southeast.

1012 ........ Tampa Bay.

1013 ........ Southeastern Florida.

1030 ........ Chicago Regional.

1032 ........ Southern Illinois-Eastern Missouri.

1033 ........ Ohio Valley.

1036 ........ Eastern Ohio-Western Pennsylvania.

1040 ........ Southern Michigan.

1044 ........ Michigan Upper Peninsula.

1046 ........ Louisville-Lexington-Evansville.

1049 ........ Indiana.

1050 ........ Central Illinois.

1064 ........ Greater Kansas City.

1065 ........ Nebraska-Western Iowa.

1068 ........ Upper Midwest.

1076 ........ Eastern South Dakota.

1079 ........ Iowa.

1106 ........ Southwest Plains.

1124 ........ Pacific Northwest.

1126 ........ Texas.

1131 ........ Central Arizona.

1134 ........ Western Colorado.

1135 ........ Southwestern Idaho-Eastern Oregon.

1137 ........ Eastern Colorado.

1138 ........ New Mexico-West Texas.

1139 ........ Great Basin.

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Proposed rule.

SUMMARY: This proposed rule

consolidates the current 31 Federal milk

marketing orders into 11 orders. This

consolidation is proposed to comply

with the 1996 Farm Bill which

mandates that the current Federal milk

orders be consolidated into between 10

to 14 orders by April 4, 1999. This

proposed rule also sets forth two

options for consideration as a

replacement for the Class I price

structure and proposes replacing the

basic formula price with a multiple

component pricing system. This

proposed rule also establishes a new

Class IV which would include milk

used to produce nonfat dry milk, butter,

and other dry milk powders; reclassifies

eggnog and cream cheese; and addresses

other minor classification changes. Part

1000 is proposed to be expanded to

include sections that are identical to all

of the consolidated orders to assist in

simplifying and streamlining the orders.

DATES: Comments must be submitted on

or before March 31, 1998.

ADDRESSES: Comments (two copies)

should be submitted to Richard M.

McKee, Deputy Administrator, Dairy

Programs, USDA/AMS, Room 2968,

South Building, P.O. Box 96456,

Washington, DC 20090–6456.

Comments also may be sent by fax to

(202) 690–3410. Additionally,

comments may be submitted via E-mail

to: MilklOrderlReform@usda.gov.

All comments should be identified

with the docket number found in

brackets in the heading of this

document. To facilitate the review

process, please state the particular

topic(s) addressed, from the following

list, at the beginning of the comment:

consolidation, basic formula price, Class

I price structure, other class prices,

classification, provisions applicable to

all orders, regional issues (please

specify: Northeast, Southeast, Midwest,

Western), and miscellaneous and

administrative. If comments submitted

pertain to a specific order, please

identify such order.

Comments are also being requested on

the Executive Order 12866 analysis, the

Regulatory Flexibility Act analysis, and

the Paperwork Reduction Act analysis.

Additionally, comments may be sent

via E-mail to:

MilklOrderlReform@usda.gov.

All comments submitted in response

to this proposal will be available for

public inspection at the USDA/AMS/

Dairy Programs, Order Formulation

Branch, Room 2968, South Building,

14th and Independence Ave., S.W.,

Washington, D.C., during normal

business hours (7 CFR 1.27(b)). All

persons wanting to view the comments

are requested to make an appointment

in advance by calling Richard M. McKee

at (202) 720–4392.

FOR FURTHER INFORMATION CONTACT: John

F. Borovies, Branch Chief, USDA/AMS/

Dairy Programs, Order Formulation

Branch, Room 2971, South Building,

P.O. Box 96456, Washington, DC 20090–

6456, (202) 720–6274.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Legislative and Background Requirements

Legislative Requirements

Background

Actions Completed

Public Interaction

Public Input

Executive Order 12988

Executive Order 12866

The Regulatory Flexibility Act and the

Effects on Small Businesses

Paperwork Reduction Act of 1995

Preliminary Statement

II. Discussion of Material Issues and

Proposed Amendments to the Orders

Consolidation of marketing areas

Basic formula price replacement and other

class price issues

Class I price structure

Classification of milk and related issues

Provisions applicable to all orders

Regional Issues:

Northeast Region

Southeast Region

Midwest Region

Western Region

Miscellaneous and Administrative:

Consolidation of the marketing service,

administrative expense, and producersettlement funds

Consolidation of the transportation credit

balancing funds

Proposed general findings

III. Order Language

General provisions

Northeast order provisions

Appalachian order provisions

Florida order provisions

Southeast order provisions

Mideast order provisions

Upper Midwest order provisions

Central order provisions

Southwest order provisions

Arizona-Las Vegas order provisions

Western order provisions

Pacific Northwest order provisions

IV. Appendix

A: Summary of Preliminary Suggested

Order Consolidation Report

B: Summary of Pricing Options

C: Summary of Classification Report

D: Summary of Identical Provisions Report

E: Summary of Basic Formula Price Report

F: Summary of Revised Preliminary

Suggested Order Consolidation Report

I. Legislative and Background

Requirements

Legislative Requirements

Section 143 of the Federal Agriculture

Improvement and Reform Act of 1996.

(Farm Bill), 7 U.S.C. 7253, requires that

by April 4, 1999,1 the current Federal
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4803

equal to the period of time for which the injunction

or other restraining order is effective.’’

2Since this proceeding was initiated on May 2,

1996, the Black Hills, South Dakota and the

Tennessee Valley orders have been terminated.

Effective October 1, 1996, the operating provisions

of the Black Hills were terminated (61 FR 47038),

and the remaining administrative provisions were

terminated effective December 31, 1996 (61 FR

67927). Effective October 1, 1997, the operating

provisions of the Tennessee Valley order were

terminated (62 FR 47923). The remaining

administrative provisions of the Tennessee Valley

order will be terminated before this consolidation

process is completed.

3Copies of this report may be obtained by

contacting Ms. Wendy Barrett, Cornell University,

ARME, 348 Warren Hall, Ithaca, NY 14853–7801,

(607) 255–1581.

4Copies of these reports may be obtained by

contacting Dr. Ronald Knutson, Agricultural and

Food Policy Center, Dept. of Ag. Economics, Texas

A&M University, College Station, TX 77843–2124,

(409) 845–5913.

milk marketing orders be consolidated

into between 10 to 14 orders. The

Secretary of Agriculture (Secretary) is

also directed to designate the State of

California as a Federal milk order if

California dairy producers petition for

and approve such an order. In addition,

the Farm Bill provided that the

Secretary may address related issues

such as the use of utilization rates and

multiple basing points for the pricing of

fluid milk and the use of uniform

multiple component pricing when

developing one or more basic prices for

manufacturing milk. Besides

designating a date for completion of the

required consolidation, the Farm Bill

further requires that no later than April

1, 1997, the Secretary shall submit a

report to Congress on the progress of the

Federal order reform process. The report

must cover three areas: a description of

the progress made towards

implementation, a review of the Federal

order system in light of the reforms

required, and any recommendations

considered appropriate for further

improvements and reforms. This report

was submitted to Congress on April 1,

1997. Finally, the 1996 Farm Bill

specifies that USDA use informal

rulemaking to implement these

reforms.2

Background

The authorization of informal

rulemaking to achieve the mandated

reforms of the Farm Bill has resulted in

a rulemaking process that is

substantially different from the formal

rulemaking process required to

promulgate or amend Federal orders.

The formal rulemaking process requires

that decisions by USDA be based solely

on the evidentiary record of a public

hearing held before an Administrative

Law Judge. Formal rulemaking involves

the presentation of sworn testimony, the

cross-examination of witnesses, the

filing of briefs, the issuance of a

recommended decision, the filing of

exceptions, the issuance of a final

decision that is voted on by affected

producers, and upon approval by

producers, the issuance of a final order.

The informal rulemaking process does

not require these procedures. Instead,

informal rulemaking provides for the

issuance of a proposed rule by the

Agricultural Marketing Service, a period

of time for the filing of comments by

interested parties, and the issuance of a

final rule by the Secretary, which would

become effective if approved by the

requisite number of producers in a

referendum.

Full participation by interested

parties is essential in the reform of

Federal milk orders. The issues are too

important and complex for this

proposed rule to be developed without

significant input from all facets of the

dairy industry. The experience,

knowledge, and expertise of the

industry and public are integral to the

development of the proposed rule. To

ensure maximum public input into the

process while still meeting the

legislated deadline of April 4, 1999,

USDA developed a plan of action and

projected time line. The plan of action

developed consists of three phases:

developmental, rulemaking, and

implementation.

The first phase of the plan was the

developmental phase. The use of a

developmental phase allowed USDA to

interact freely with the public to

develop viable proposals that

accomplish the Farm Bill mandates, as

well as related reforms. The USDA met

with interested parties to discuss the

reform progress, assisted in developing

ideas or provided data and analysis on

various possibilities, issued program

announcements, and requested public

input on all aspects of the Federal order

program. The developmental phase

began on April 4, 1996, and concludes

with the issuance of this proposed rule.

The second phase of the plan is the

rulemaking phase. The rulemaking

phase begins with the issuance and

publication of this proposed rule. This

proposed rule provides the public 60

days to submit written comments on the

proposal to USDA. These comments

will be reviewed and considered prior

to the issuance of a final rule.

The third and final phase of the plan

is the implementation phase. The

implementation phase will begin after

the final rule is published in the Federal

Register. This phase will consist of

informational meetings conducted by

Market Administrator personnel. The

objective of the informational meetings

is to inform producers and handlers

about the newly consolidated orders

and explain the projected effects on

producers and handlers in the new

marketing order areas. After

informational meetings have been held,

referendums will be conducted. Upon

approval of the consolidated orders and

related reforms by the required number

of producers in each marketing area, a

final order implementing the new orders

will be issued and published in the

Federal Register.

Although all of the issues regarding

Federal milk order reform are

interrelated, USDA has established

several committees to address specific

issues. The use of committees has

allowed the reform process to be

divided into more manageable tasks.

The committees will work throughout

the developmental and rulemaking

phases. The committees that have been

established are: Price Structure, Basic

Formula Price, Identical Provisions,

Classification, and Regional. The

Regional committee is divided into four

sub-committees: Midwest, Northeast,

Southeast, and West. Committee

membership consists of both field and

headquarters Dairy Programs personnel.

The committees have been given

specific assignments related to their

designated issue and have been meeting

since May 1996.

In addition to utilizing USDA

personnel, partnerships have been

established with two university

consortia to provide expert analyses on

the issues relating to price structure and

basic formula price options. Dr. Andrew

Novakovic of Cornell University led the

analysis on price structure and

published a staff paper entitled ‘‘U.S.

Dairy Sector Simulator: A Spatially

Disaggregated Model of the U.S. Dairy

Industry’’ and a research bulletin

entitled ‘‘An Economic and

Mathematical Description of the U.S.

Dairy Sector Simulator’’3 Dr. Ronald

Knutson of Texas A&M University led

the analysis on basic formula price

options and published two working

papers entitled ‘‘An Economic

Evaluation of Basic Formula Price (BFP)

Alternatives’’ and ‘‘The Modified

Product Value and Fresh Milk Base

Price Formulas as BFP Alternatives.’’4

Actions Completed

USDA has maintained continual

contact with the industry regarding the

reform process. To begin, on May 2,

1996, the Agricultural Marketing

Service (AMS) Dairy Division issued a

memorandum to interested parties

announcing the planned procedures for
4804 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

5Copies of this announcement and all subsequent

announcements and reports can be obtained from

Dairy Programs at (202) 720–4392, any Market

Administrator office, or via the Internet at http://

www.ams.usda.gov/dairy/.

implementing the Farm Bill.5 In this

memorandum, all interested parties

were requested to submit ideas on

reforming Federal milk orders,

specifically as to the consolidation and

pricing structure of orders. Input was

requested by July 1, 1996.

On June 24, 1996, USDA issued a

press release announcing that a public

forum would be held in Madison,

Wisconsin, on July 29, 1996. The forum

would address price discovery

techniques for the value of milk used in

manufactured dairy products. Thirtyone Senators, Congressmen, university

professors, representatives of processor

and producer organizations, and dairy

farmers made presentations at the

forum.

On October 24, 1996, AMS Dairy

Division issued a memorandum to

interested parties requesting input

regarding all aspects of Federal milk

order reform and specifically as to its

impact on small businesses. USDA

anticipates that the consolidation of

Federal orders will have an economic

impact on handlers and producers

affected by the program, and USDA

wants to ensure that, while

accomplishing their intended purpose,

the newly consolidated Federal orders

will not unduly inhibit the ability of

small businesses to compete.

On December 3, 1996, AMS Dairy

Division issued a memorandum to

interested parties announcing the

release of the preliminary report on

Federal milk order consolidation. The

report recommends the consolidation of

the current 32 Federal milk orders into

ten orders. (See Appendix A for report

summary.) The memorandum requested

input from all interested parties on the

recommended consolidated orders and

on any other aspect of the milk

marketing order program by February

10, 1997.

On March 7, 1997, AMS Dairy

Division issued a memorandum to

interested parties announcing the

release of three reports that addressed

the Class I price structure, the

classification of milk, and the identical

provisions contained in a Federal milk

order. The price structure report

consisted of a summary report and a

technical report and discussed several

options for modifying the Class I price

structure. (See Appendix B for report

summary.) The classification report

recommended the reclassification of

certain dairy products, including the

removal of Class III–A pricing for nonfat

dry milk. (See Appendix C for report

summary.) The identical provisions

report recommended simplifying,

modifying, and eliminating unnecessary

differences in Federal order provisions.

(See Appendix D for report summary.)

Comments on the contents of these

reports, as well as on any other aspect

of the program, was requested from

interested parties by June 1, 1997.

On April 18, 1997, AMS Dairy

Division issued a memorandum to

interested parties announcing the

release of the preliminary report on

Alternatives to the Basic Formula Price

(BFP). The report contained suggestions,

ideas, and initial findings for BFP

alternatives. Over eight categories of

options were identified with four

options recommended for further review

and discussion. (See Appendix E for

report summary.) The memorandum

requested input from all interested

parties on a BFP alternative and on any

other aspect of the milk marketing order

program by June 1, 1997.

On May 20, 1997, AMS Dairy Division

issued a memorandum to interested

parties announcing the release of a

revised preliminary report on Federal

milk order consolidation. The revisions

were based on the input received from

interested parties in response to the

initial preliminary report on order

consolidation. (See Appendix F for

report summary.) Instead of

recommending 10 consolidated orders

as in the first report, the revised report

recommended 11 consolidated orders

and suggested the inclusion of some

currently unregulated territory. The

memorandum requested comments from

all interested parties on the

recommended consolidated orders and

on any other aspect of the milk

marketing order program by June 15,

1997.

To elicit further input on the role of

the National Cheese Exchange price in

calculating the basic formula price, on

January 29, 1997, the Secretary sissued

a press release announcing steps being

taken by USDA to address concerns

raised by dairy producers about how

milk prices are calculated. In the press

release, the Secretary requested further

comments from interested parties about

the use of the National Cheese Exchange

in the determination of the basic

formula price, which is the minimum

price that handlers must pay dairy

farmers for milk used to manufacture

Class III products (butter and cheese)

and the price used to establish the Class

I and Class II prices. These comments

were requested by March 31, 1997, and

have been useful in analyzing

alternatives to the basic formula price in

context of the order reform process.

Public Interaction

As a result of these announcements

and the forum, more than 1,600

individual comments have been

received by USDA. In addition to the

individual comments, more than 3000

form letters have been received. All

comments were reviewed by USDA

personnel and are available for public

inspection at USDA. To assist the public

in accessing the comments, USDA

contracted to have the comments

scanned and published on a CD. The

use of this technology has allowed

interested parties throughout the United

States access to the information received

by USDA.

USDA also made all publications and

requests for information available on the

Internet. A separate page under the

Dairy Division section of the AMS

Homepage was established to provide

information about the reform process.

To assist in transmitting correspondence

to USDA, a special electronic mail

account—

MilklOrderlReform@usda.gov—was

opened to receive input on Federal milk

order reforms.

USDA personnel met continually with

interested parties from May 1996

through the issuance of this proposed

rule to gather information and ideas on

the consolidation of Federal milk

orders. During this time period, USDA

personnel addressed over 250 groups

comprised of more than 22,000

individuals on various issues related to

Federal order reform.

USDA personnel also conducted inperson briefings for both the Senate and

House Agricultural Committees on the

progress of Federal milk order reforms.

Since May 1996, seven briefings were

conducted for the committees. The

briefings advised the committees of the

plan of action for implementing the

Farm Bill mandates; explained the

preliminary report on the consolidation

of Federal milk orders; explained the

contents of the reports addressing Class

I price structure, classification of milk,

identical provisions and basic formula

price; and discussed the congressional

report.

Public Input

To ensure the involvement of all

interested parties, particularly small

businesses as defined in the following

Initial Regulatory Flexibility Analysis,

in the process of Federal order reform,

three primary methods of contact have

been used: direct written notification,

publication of notices through various

media forms, and speaking and meeting

with organizations and individuals

regarding the issue of Federal order
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4805

6Copies of these press releases may be obtained

from Dairy Programs at (202) 720–4392, or via the

Internet at http://www.ams.usda.gov/news/

newsrel.htm.

reforms. In addition, information has

been made available to the public via

the Internet. USDA also made one

written program announcement

specifically requesting information from

small businesses.

All announcements made by USDA

have been mailed to over 20,000

interested parties, State Governors, State

Department of Agriculture Secretaries or

Commissioners, and the national and

ten regional Small Business

Administration offices. In addition,

most dairy producers under the orders

were notified through regular market

service bulletins published by Market

Administrators on a monthly basis.

Press releases were issued by USDA for

the May 2, 1996, December 3, 1996,

January 29, 1997, March 7, 1997, and

May 20, 1997, announcements, and for

the July 31, 1996, public forum.6 These

press releases were distributed to

approximately 33 wire services and

trade publications and to each State

Department of Agriculture

Communications Officer. These

methods of notification helped to ensure

that virtually all identified small

businesses were contacted.

Departmental personnel, both in the

field and from Washington, actively met

with interested parties to gather input

and to clarify and refine ideas already

submitted. Formal presentations, round

table discussions, and individually

scheduled meetings between industry

representatives and Departmental

personnel were held. Over 250

organizations and more than 22,000

individuals were reached through this

method. Of these individuals,

approximately 13,400 were identified as

small businesses.

As a result of the requests for

information, publication of

informational reports, meetings with

interested parties, and the comments,

AMS has prepared this proposed rule

which contains proposals addressing

the following issues: the consolidation

of marketing areas; basic formula price

replacement and other class price

issues; Class I price structure;

classification of milk; provisions

applicable to all orders; regional issues

relating to the Northeast, Southeast,

Midwest, and Western areas; and

various other miscellaneous and

administrative issues. Each proposal is

discussed in detail following this

preliminary statement that includes

Executive Order 12988 and 12866

discussions, the Regulatory Flexibility

Analysis, and the Paperwork Reduction

Analysis.

Executive Order 12988

This proposed rule has been reviewed

under Executive Order 12988, Civil

Justice Reform. This rule is not intended

to have a retroactive effect. If adopted,

this proposed rule will not preempt any

state or local laws, regulations, or

policies, unless they present an

irreconcilable conflict with the rule.

The Agricultural Marketing

Agreement Act of 1937, as amended (7

U.S.C. 601–674), provides that

administrative proceedings must be

exhausted before parties may file suit in

court. Under section 608c(15)(A) of the

Act, any handler subject to an order may

request modification or exemption from

such order by filing with the Secretary

a petition stating that the order, any

provision of the order, or any obligation

imposed in connection with the order is

not in accordance with law. A handler

is afforded the opportunity for a hearing

on the petition. After a hearing, the

Secretary would rule on the petition.

The Act provides that the district court

of the United States in any district in

which the handler is an inhabitant, or

has its principal place of business, has

jurisdiction in equity to review the

Secretary’s ruling on the petition,

provided a bill in equity is filed not

later than 20 days after the date of the

entry of the ruling.

Executive Order 12866

The Department is issuing this

proposed rule in conformance with

Executive Order 12866. This proposed

rule has been determined to be

economically significant for the

purposes of Executive Order 12866.

When proposing a regulation which is

determined to be economically

significant, agencies are required,

among other things, to: assess the costs

and benefits of available regulatory

alternatives; base regulatory decisions

on the best reasonably-obtainable

technical, economic, and other

information; avoid duplicative

regulations; and tailor regulations to

impose the least burden on society

consistent with obtaining regulatory

objectives. Therefore, to assist in

fulfilling the objectives of Executive

Order 12866, the USDA prepared an

initial Regulatory Impact Analysis

(RIA). Information contained in the RIA

pertaining to the costs and benefits of

the revised regulatory structure are

summarized in the following analysis.

Copies of the RIA can be obtained from

Dairy Programs at (202) 720–4392, any

Market Administrator office, or via the

Internet at http://www.ams.usda.gov/

dairy.

This rule proposes the consolidation

of the current 31 Federal milk marketing

order areas into 11 marketing order

areas. The proposed marketing areas are:

Northeast, Mideast, Upper Midwest,

Central, Appalachian, Southeast,

Florida, Southwest, Arizona-Las Vegas,

Western, and Pacific Northwest. The

consolidated marketing areas consist

primarily of territory that is in the

current Federal order markets. In

addition, they would include some

previously unregulated territory. At this

time, California is not proposed as a

Federal order. This consolidation is

proposed to comply with the 1996 Farm

Bill that mandates the current Federal

milk order marketing areas be

consolidated into between 10 to 14

marketing areas by April 4, 1999. This

proposed rule also sets forth two

options for consideration as a

replacement for the Class I price

structure and proposes replacing the

basic formula price with a multiple

component pricing system. These

changes are proposed to address

concerns that the current system of

pricing Class I milk may not adequately

reflect the value of Class I milk at

various locations or the value of milk

used in manufacturing products. The

1996 Farm Bill identified these as

related issues that may be addressed in

the consolidation of milk marketing

orders. The proposed rule further

proposes changes to classification of

milk by establishing a new Class IV

which would include milk used to

produce nonfat dry milk, butter, and

other dry milk powders; the

reclassification of eggnog and cream

cheese; and other minor changes. These

proposed changes should improve

handler reporting and accounting

procedures thereby providing for greater

market efficiencies. Finally, this

proposed rule expands Part 1000 to

include provisions that are identical

within each consolidated order to assist

in simplifying the orders. These

provisions include the definitions of

route disposition, plant, distributing

plant, supply plant, nonpool plant,

handler, other source milk, fluid milk

product, fluid cream product,

cooperative association, and commercial

food processing establishment. In

addition, the milk classification section,

pricing provisions, and most of the

provisions relating to payments have

been included in the General

Provisions. These proposed changes

adhere with the efforts of the National

Performance Review—Regulatory

Reform Initiative to simplify, modify,
4806 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

and eliminate unnecessary repetition of

regulations. Unique regional issues or

marketing conditions have been

considered and included in each

market’s order provisions. Not all of

these changes would be considered

economically significant; however,

changes dealing with marketing area

consolidation, the basic formula price,

and the Class I pricing structure may be

significant and are described further in

the following sections.

Economic Impacts of Consolidation

It is impossible to determine the

economic effects of the proposed

marketing area consolidation on

handlers, producers and consumers

without using assumptions about the

specific order provisions contained in

the consolidated order areas. The only

effect consolidation, as a single factor,

can have on the various market

participants is its effect on the

percentage of milk used in different

classes within the proposed

consolidated orders. Without

assumptions that include the specific

class prices and milk uses in different

products, there are no means of

quantifying the economic effects of

consolidation.

Handlers would be affected by class

prices, which would be determined by

the Class I price surface option that is

selected, and by the minimum prices

contained in all of the orders for milk

used in Classes II, III and IV. Handlers

similarly located would be subject to the

same minimum Class I, Class II, Class III

and Class IV prices for milk. Such

handlers would also be subject to the

same minimum prices to be paid to

producers.

Dairy farmers would be affected by

the proposed consolidation of marketing

areas because changes in utilization

percentages would result in changes in

blend prices. As in the case of effects on

handlers, however, it is impossible to

accurately determine a separate

consolidation effect on producers,

defined in monetary terms. The closest

approximation to such an estimate

would be the ‘‘weighted average

utilization value’’ (WAUV). These

‘‘prices’’ reflect only the change in value

that can be attributed to changes in

utilization rates, with no assumptions

about changes in the levels of the

various class prices. Such estimates, of

necessity, would reflect only anticipated

changes in blend prices, using class

prices that would no longer be in effect

under the consolidated orders. To the

extent that the WAUV computations

reflect some of the effect of the effect of

consolidation on producer prices, they

are included in this analysis. It should

be noted, however, that all producers in

any given current area would be affected

to an equal extent by the consolidation

factor.

The following table shows the

potential impact of three order

consolidation options on producers who

supply each of the current Federal milk

marketing order areas via WAUV

‘‘prices’’. The three consolidated

options are (1) the consolidated

marketing areas suggested in the

December 1996 initial Preliminary

Report on Order Consolidation; (2) the

consolidated marketing areas suggested

in the May 1997 Revised Preliminary

Report on Order Consolidation; and (3)

the consolidated marketing areas

suggested in this proposed rule.

WEIGHTED AVERAGE UTILIZATION VALUES (WAUV)

[Based on October 1995 information]

Consolidated Market Marketing areas in Initial

Consol. Report (Dec. 96)

(Option 1)

Marketing Areas in Revised

Consol. Report (May 97)

(Option 2)

Marketing Areas in Proposed

Rule

(Option 3)

Current Markets

Consol. Mkt. WAUV

($/cwt)

Consol. Mkt. WAUV

($/cwt)

Consol. Mkt. WAUV

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

Northeast ................................................... ........................ $13.46 ........................ $13.48 ........................ $13.47

New England (F.O. 1) ........................ $13.50 13.48 $13.52 13.51 $13.52 13.49

NY-NJ (F.O. 2) ................................... 13.44 13.48 13.48 13.50 13.45 13.48

Middle Atlantic (F.O. 4) ...................... 13.45 13.39 13.45 13.41 13.44 13.40

Appalachian .............................................. ........................ 14.13 ........................ 13.96 ........................ 13.97

Carolina (F.O. 5) ................................ 14.23 14.21 14.23 14.19 14.23 14.20

Tenn. Valley (F.O. 11) ....................... 13.92 13.95 13.92 13.93 13.92 13.94

Lville-Lex-Evan (F.O. 46) ................... n/a n/a 13.35 13.39 13.35 13.40

Florida ....................................................... ........................ 15.05 ........................ 15.05 ........................ 15.05

Upper Florida (F.O. 6) ....................... 14.67 14.78 14.67 14.78 14.67 14.78

Tampa Bay (F.O. 12) ......................... 15.09 15.04 15.09 15.04 15.09 1504

SE Florida (F.O. 13) .......................... 15.42 15.31 15.42 15.31 15.42 15.31

Southeast .................................................. ........................ 14.26 ........................ 14.25 ........................ 14.24

Southeast (F.O. 7) ............................. 14.26 14.26 14.25 14.25 14.24 14.27

Mideast ...................................................... ........................ 12.96 ........................ 12.94 ........................ 12.92

Ohio Valley (F.O. 33) ......................... 12.99 13.02 12.99 13.01 12.99 13.00

E. Ohio-W. PA (F.O. 36) ................... 13.07 13.00 13.10 12.99 13.07 12.97

S. Michigan (F.O. 40) ........................ 12.75 12.86 12.75 12.84 12.75 12.83

MI Upper Penin. (F.O. 44) ................. 12.81 12.62 12.81 12.62 12.81 12.61

Lville-Lex-Evan (F.O. 46) ................... 13.35 13.06 n/a n/a n/a n/a

Indiana (F.O. 49) ............................... 12.97 12.94 12.97 12.93 12.97 12.92

Upper Midwest .......................................... ........................ 12.60 ........................ 12.62 ........................ 12.60

Chicago Reg. (F.O. 30) ..................... 12.62 12.62 12.62 12.61 12.62 12.62

MI Upper Penin. (F.O. 44) ................. R R R R R R

Neb.-W. Iowa (F.O. 65) ..................... n/a n/a 12.63 12.74 n/a n/a

Upper Midwest (F.O. 68) ................... 12.55 12.56 12.55 12.54 12.55 12.56

E. South Dakota (F.O. 76) ................. n/a n/a 12.81 12.65 n/a n/a

Iowa (F.O. 79) .................................... n/a n/a 12.69 12.67 n/a n/a
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4807

7The Basic Formula Price Committee was

established in May 1996 to consider replacements

for the basic formula price during the Federal order

reform process. This committee and others

established are described further in the

‘‘Background’’ portion of this proposed rule.

8Copies of this report can be obtained from Dairy

Programs at (202) 720–4392, any Market

Administrator office, or via the Internet at http://

www.ams.usda.gov/dairy/.

9Copies of these reports may be obtained by

contacting Dr. Ronald Knutson, Agricultural and

Food Policy Center, Dept. of Ag. Economics, Texas

A&M University, College Station, TX 77843–2124,

or (409) 845–5913.

WEIGHTED AVERAGE UTILIZATION VALUES (WAUV)—Continued

[Based on October 1995 information]

Consolidated Market Marketing areas in Initial

Consol. Report (Dec. 96)

(Option 1)

Marketing Areas in Revised

Consol. Report (May 97)

(Option 2)

Marketing Areas in Proposed

Rule

(Option 3)

Current Markets

Consol. Mkt. WAUV

($/cwt)

Consol. Mkt. WAUV

($/cwt)

Consol. Mkt. WAUV

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

Central ....................................................... ........................ 13.16 ........................ 13.21 ........................ 12.95

S. IL-E. MO (F.O. 32) ........................ 12.93 12.90 13.00 12.95 13.00 12.88

Central IL (F.O. 50) ........................... 13.03 12.74 13.03 12.78 13.03 12.72

Greater K. City (F.O. 64) ................... 13.22 12.90 13.22 12.95 13.22 12.88

Neb.-W. Iowa (F.O. 65) ..................... 12.63 12.81 n/a n/a 12.63 12.79

E. South Dakota (F.O. 76) ................. 12.81 12.68 n/a n/a 12.81 12.67

Iowa (F.O. 79) .................................... 12.71 12.71 n/a n/a 12.71 12.70

SW Plains (F.O. 106) ........................ 13.31 13.33 13.31 13.41 13.08 13.29

E. Colorado (F.O. 137) ...................... 13.27 13.31 13.27 13.38 13.27 13.27

Southwest ................................................. ........................ 13.36 ........................ 13.39 ........................ 13.39

Texas (F.O. 126) ............................... 13.49 13.48 13.49 13.46 13.49 13.46

Central AZ (F.O. 131) ........................ 13.26 13.17 n/a n/a n/a n/a

NM-W. Texas (F.O. 138) ................... 13.00 13.09 13.00 13.07 13.00 13.07

Arizona-Las Vegas .................................... ........................ n/a ........................ 13.26 ........................ 13.26

Central AZ (F.O. 131) ........................ n/a n/a 13.26 13.29 13.26 13.29

Western ..................................................... ........................ 12.79 ........................ 12.78 ........................ 12.78

W. Colorado (F.O. 134) ..................... 13.41 12.84 13.41 12.82 13.41 12.82

SW ID-E. OR (F.O. 135) ................... 12.63 12.68 12.63 12.68 12.63 12.68

Great Basin (F.O. 139) ...................... 12.83 12.81 12.81 12.79 12.81 12.79

Pacific Northwest ...................................... ........................ 12.45 ........................ 12.44 ........................ 12.44

Pacific NW (F.O. 124) ....................... 12.45 12.45 12.44 12.44 12.44 12.44

n/a: Not applicable

R: Restricted

For each option, a weighted average

use value (WAUV) is computed for (a)

the consolidated order; (b) the current

order with current use of milk; and (c)

the current order with projected use of

milk in the consolidated order. The

difference between the weighted average

use values in (b) and (c) represents the

potential impact on producers.

For example, in this proposed rule,

the New England (F.O. 1) market’s

WAUV using its current utilization is

$13.52 per cwt. When the three markets

are consolidated and the new

consolidated utilization is used to

calculate the WAUV, New England’s

WAUV would be $13.49 per cwt. In this

comparison, the potential impact on

producers supplying the New England

market area would be a decrease of three

cents per cwt.

Each of the three options assumes the

pool distributing plant standards

suggested for each of the consolidated

orders in this proposed rule; thus the

calculated values in the preceding table

are not directly comparable to the

WAUV values published with either the

initial or the revised reports on order

consolidation.

Economic Impact of Basic Formula Price

Proposal

A number of options for determining

a basic formula price were considered

and analyzed in the process of

developing the proposed basic formula

price (BFP). In addition to the proposed

method of pricing components based on

their value in manufactured products,

other options examined by both the

Agricultural Marketing Service’s Basic

Formula Price Replacement Committee 7

and the University Study Committee

(USC), led by Dr. Ronald D. Knutson of

Texas A & M University, were:

economic formulas, futures markets,

cost of production, competitive pay

pricing, and pricing differentials only.

Descriptions of the two Committees’

analyses, and results of their work are

included in ‘‘A Preliminary Report on

Alternatives to the Basic Formula

Price,’’ published in April 1997 by the

Basic Formula Price Committee, Dairy

Division, AMS; 8 and the following

reports from the Agricultural and Food

Policy Center, Texas A&M University

System:

‘‘An Economic Evaluation of Basic

Formula Price (BFP) Alternatives,’’

AFPC Working Paper 97–2, June 1997.

‘‘Evaluation of Final Four Basic

Formula Price Options,’’ AFPC Working

Paper 97–9, August 1997.9

The primary criterion used by the BFP

Committee was that any replacement

BFP option reflect the supply of and

demand for milk used in manufactured

dairy products. At the same time, one of

the USC’s critical criteria for a

replacement BFP was that it reliably

reflect market conditions for all

manufactured products.

In trying to determine the most

appropriate replacement for the current

BFP, which uses a survey of prices paid

by manufacturing plants for non-Grade

A milk updated by a product price
4808 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

10 It was assumed that the current BFP

successfully reflects the supply and demand for

milk used in manufactured products.

formula, the goal of both groups was a

market-based alternative. The BFP

Committee measured the extent to

which each pricing option met its

primary goal by tracking the options

against the current BFP for a period of

prior months.10 The USC Committee

used an econometric procedure to test

the ability of the alternatives they

considered to reflect supply and

demand.

To the extent the goal of identifying

a BFP that reflects the value of milk

used in manufactured products is

capable of attainment, all market

participants—handlers, producers, and

consumers—would be affected by the

BFP replacement in the same manner as

if they were operating in a free market,

with no external impacts caused by

regulation. Consumers can be assured

that the prices generally charged for

dairy products are prices that reflect, as

closely as possible, the forces of supply

and demand in the market.

Of the options considered and

analyzed, both groups studying the

issue determined that the option of

pricing components of milk according to

their value in manufactured products, as

reflected by the sales prices of those

products, best approximates the

intersection of supply and demand for

milk used in manufactured dairy

products.

Economic Impact of Multiple

Component Pricing Provisions

Seven of the 11 proposed orders

provide for milk to be paid for on the

basis of its components (multiple

component pricing, or MCP). Five of the

7 MCP orders also provide for milk

values to be adjusted according to the

somatic cell count of producer milk.

The equipment needed for testing milk

for its component content can be very

expensive to purchase, and requires

highly-skilled personnel to maintain

and operate. The cost of infra-red

analyzers ranges from just under

$100,000 to $200,000. The infra-red

machines that are used by most

laboratories will test for total solids and

somatic cells at the same time the

butterfat and protein tests are done.

Some additional information is

necessary from handlers on their

monthly reports of receipts and

utilization to assure that producers are

paid correctly. In particular, handlers

would be required to report pounds of

protein, pounds of other solids, and, in

5 of the orders, somatic cell information.

This data would be required from each

handler for all producer receipts,

including milk diverted by the handler,

receipts from cooperatives as handlers

pursuant to § 1000.9(c), and, in some

cases, receipts of bulk milk received by

transfer or diversion.

Since producers would be receiving

payments based on the component

levels of their milk, the payroll reports

that handlers supply to producers must

reflect the basis for such payment.

Therefore, the handler would be

required to supply the producer not

only with the information currently

supplied, but also: (a) the pounds of

butterfat, the pounds of protein, and the

pounds of other solids contained in the

producer’s milk, as well as the

producer’s average somatic cell count;

and (b) the minimum rates that are

required for payment for each pricing

factor and, if a different rate is paid, the

effective rate also. It should be noted

that handlers already are required to

report information relative to pounds of

production, butterfat, and rates of

payment for butterfat and

hundredweight of milk.

Of over 74,000 producers whose milk

was pooled in December 1996 under 23

orders that would be part of

consolidated orders providing for

multiple component pricing, the milk of

52,500 of these producers was pooled

under 13 orders that currently have

MCP. Handlers in these markets already

have incurred the initial costs of testing

milk for its component content and have

already made the needed transition to

reporting the additional information

required for component pricing of milk.

Of the remaining 21,750 producers

who would be affected by MCP

provisions under a Federal order, the

milk of approximately 13,000 of these

producers currently is received by

handlers who test or have the capability

of testing for multiple components and,

in many cases, somatic cells. Many of

these handlers also report component

results to the producers with their

payments. Almost all of the producers

whose milk currently is not being tested

or paid for on the basis of components

are located in the New England and

New York-New Jersey marketing areas,

which would be consolidated with the

Middle Atlantic area into the proposed

Northeast order.

Accommodation has been made to

ameliorate handlers’ expenses of testing

producer milk for component content.

As component pricing plans have been

adopted under a number of the present

Federal milk orders since 1988, the

component testing needed to implement

these pricing plans has been performed

by the market administrators

responsible for the administration of the

orders involved for handlers who are

not equipped to make all of the

determinations required under the

amended orders. This policy would

continue under this proposed rule.

Thus, handlers who are unable to obtain

the equipment and personnel needed to

accomplish the required testing for

component pricing would be able to rely

on the market administrators to verify or

establish the tests under which

producers are paid.

Economic Impacts of Class I Price

Changes

Several different options were

considered for pricing fluid or Class I

milk. These pricing options included

using a market-driven basic formula

price plus differentials based on

location, differentials based on the ratio

of milk used for fluid purposes

compared to all other uses, flat

differentials, flat differentials modified

in high Class I use areas, and

differentials based on the demand for

fluid milk within a designated

marketing area and the associated

transportation costs. Other options

considered would have decoupled Class

I pricing from the basic formula price or

pooled Class I differentials only (i.e.,

eliminated the basic formula price

entirely). Finally, suggestions were

considered to base Class I pricing on the

cost of production and to base

differentials on only regional supply

and demand conditions. After analyzing

these options and more than 1400 letters

that were submitted from interested

persons, the Department narrowed the

pricing options to four and conducted

extensive quantitative and qualitative

analysis on them. The four options

selected include location-specific

differentials, relative value-specific

differentials, and decoupled Class I

prices with adjustors. Although four

Class I price structure options are

analyzed in the RIA, only two options

are considered as viable replacements

for the current Class I price structure in

the proposed rule. However, comments

are requested on all options prior to

determining which option should be

adopted.

Three of the four pricing options in

the RIA assume that milk would be

classified in the four classes of use

detailed in the proposed rule. One

option in the RIA has only two classes

of milk and thus is not detailed in the

proposed rule. For purposes of the RIA

analysis, Class IV milk is priced using

the proposed butter-nonfat dry milk

product formula, but since the product

prices proposed for use in the formula

are not presently available, the Chicago

Mercantile Exchange spot price for
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4809

11See Agricultural Baseline Projections to 2005,

Reflecting the 1996 Farm Act, Interagency

Agricultural Projections Committee, U.S.

Department of Agriculture, Office of the Chief

Economist, World Agricultural Outlook Board, Staff

Report, WAOB–97–1 and ‘‘Budget of the United

States Government, Fiscal Year 1998.’’

12The following analyses were completed prior to

the termination of the Tennessee Valley marketing

order and thus the results identify it as a pricing

point. Most of the plants and milk of the former

Tennessee Valley market have become regulated

under either the Southeast order or the Carolina

order.

13Bishop, Phillip, James Pratt, Eric Erba, Andrew

Novakovic, and Mark Stephenson, An Economic

and Mathematical Description of the U.S. Dairy

Sector Simulator, Research Bulletin 97–09, A

Publication of the Cornell Program on Dairy

Markets and Policy, Department of Agricultural,

Resource, and Managerial Economics, Cornell

University, July 1997.

butter and the average nonfat dry milk

wholesale price reported by USDA’s

Dairy Market News for the Western

States are substituted. Also, Class III

milk is priced using the proposed

cheese product formula, and the Class II

milk price for the month is equal to the

Class IV price for the month plus 70

cents per hundredweight (cwt).

The initial RIA assesses costs and

benefits for dairy farmers, fluid milk

processors, dairy product

manufacturers, and consumers. The

impact of each of the four Class I pricing

options is measured as a change from a

baseline. The model baseline was

adapted from the USDA dairy baseline

estimate published as part of the

President’s Budget for Fiscal Year

1998.11 That baseline, which is a

national annual projection of the

supply-demand-price situation for milk

and dairy products, was the basis for the

market-by-market baseline of the model.

Both the President’s Budget Baseline

and the model baseline assume the same

program assumptions: namely, that the

price support program will be phased

out by December 31, 1999, that the

Dairy Export Incentive Program will

continued to be utilized, and that the

Federal Milk Order Program will be

continued at the same level of class

prices currently in existence.

Assumptions also are made concerning

the cost of production—especially feed,

the commercial utilization of milk and

dairy products, commercial inventories,

and imports. All parameters, except

those associated with the changes in the

Federal Milk Order Program, are

assumed to remain unchanged.

To evaluate the impacts on dairy

farmers, fluid milk processors, and dairy

product manufacturers of the four

selected Class I pricing options, a

baseline estimate was constructed

assuming that the current 32 orders 12

would continue through the study

period, 1999–2004. To make

comparisons, proposed pricing points

for the proposed 11 consolidated orders

were identified to correspond with the

base pricing zones of the 32 current

marketing orders. For example, for the

consolidated Appalachian Region order,

which would have the city of Charlotte

as its base pricing point, prices also

were identified for Knoxville and

Louisville. These 3 pricing points

correspond with the base pricing points

of the 3 markets that are to be combined

into the Appalachian regional order.

Location-Specific Differentials (Option

1A) Analysis

This option would establish a

nationally coordinated system of

location-specific Class I price

differentials reflecting the relative

economic value of milk by location. An

important feature of the option is that it

would also include location adjustments

that geographically align minimum

Class I milk prices paid by fluid milk

processors nationwide regardless of

defined milk marketing area boundaries

or order pooling provisions. It is based

on the economic efficiency rationale

presented in Cornell University research

on the U.S. dairy sector.13 A basic

premise of this option is that the value

of milk varies according to location

across the United States. The concepts

of spatial price value and relative price

relationships together with marketing

data and expert knowledge of local

conditions and marketing practices and

a review of supply and demand

conditions are used to develop a

national Class I price structure.

Overall, the magnitude of changes in

price and income under this option

compared to the baseline are small. The

all-milk price for all Federal order

markets combined during the 1999–

2004 period is estimated to average 5

cents per cwt higher. For all of the U.S.

the all-milk price is estimated to average

3 cents higher. The average all-milk

price at the basing point of 18 current

markets could experience increases of 1

to 29 cents per cwt. At the basing point

of the 13 markets, the average all-milk

price could decrease from 3 to 83 cents

per cwt.

The 5 markets with the greatest

increases in all-milk prices were Eastern

Colorado ($0.29), New York-New Jersey

($0.28), Tampa Bay ($0.26), Southwest

Plains ($0.25), and Upper Florida

($0.24). The market with the greatest

reduction in price was Western

Colorado (¥$0.83), Central Illinois

(¥$0.66), Greater Kansas City (¥$0.53),

Eastern South Dakota (¥$0.51), and

Southern Illinois-Eastern Missouri

(¥$0.34). The annual average all-milk

price in the previously-unregulated

areas of New York and New England

declined $0.87 per cwt.

Changes in gross cash receipts, as

expected, moved in the same direction

as the change in the all-milk price in a

given market. Over the period 1999–

2004, location-specific differentials

raised gross receipts in 18 markets. It

appears that the estimated average

annual receipts for producers in the

current New York-New Jersey market

increased by $37.2 million. However,

most of this increase was the result of

adding to the all-milk price the current

$0.15 reduction on all milk marketings

for transportation. It is expected that

this apparent increase in the all-milk

price and dairy farmer income would be

offset by a like amount by increased

transportation costs paid by the

producer. The markets with the greatest

estimated increase in gross receipts for

milk marketing were Southwest Plains

($11.8 million), Chicago Regional ($10.9

million), Southern Michigan ($10.7

million), New England ($7.4 million),

and Eastern Colorado ($7.2 million).

Gross receipts in the current Chicago

Regional and Upper Midwest markets

may have been expected to increase

more since this option increased the

Class I differentials at those points

substantially. However, this option also

envisions the expansion of

transportation credits within the merged

order to move milk which is expected

to use 20 percent of the dollars

generated by the higher Class I

differentials. Over-order charges which

currently fund transportation credits are

expected to be reduced by a like

amount.

The largest estimated decreases in

cash receipts occur in the Southern

Illinois-Eastern Missouri (¥$8.5

million), Great Basin (¥$4.1 million),

Middle Atlantic (¥$2.9 million), Texas

(¥$2.5 million), and Greater Kansas

City (¥$2.5 million) markets. Nine

other current markets would lose

average annual gross cash receipts

during the period 1999–2004 of less

than $2.0 million each. The previously

unregulated areas of New York and New

England would lose an estimated

average of $16.9 million in annual gross

receipts from milk marketings. Under

location-specific differentials the

estimated average annual gross receipts

for all Federal order markets combined

increased by $68.1 million and the

entire US increased $53.1 million

compared to the baseline for the 1999–

2004 period.

Fluid processors in 21 of the 32

Federal order market areas face

increased Class I differentials if this
4810 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

option were adopted compared with

Class I differentials under the baseline.

Fluid processors in four of the Federal

order markets and in the previouslyunregulated areas of New York and New

England would see no changes in Class

I differentials. Fluid processors in the

remaining seven Federal order markets

would see decreases in Class I

differentials compared with the

baseline. The increases in differentials

ranged from $0.01 per cwt in the New

England and New York-New Jersey

markets to $0.50 per cwt in the Upper

Midwest. Decreases in Class I

differentials would range from $0.03 per

cwt in the Middle Atlantic to $0.25 per

cwt in New Mexico-West Texas. Those

fluid processors facing higher Class I

differentials would see their monthly

obligations to the markets’ producersettlement funds increase while those

facing lower Class I differentials would

see their obligations decrease.

With virtually no change in the

amount of milk available for

manufacturing, manufacturers of dairy

products would face nearly the same

supply and demand conditions that they

now face when buying milk or selling

dairy products. Manufacturers in the

Southwest, where milk marketings are

expected to decline, may have less milk

to process while manufacturers in the

Upper Midwest may find that they have

slightly more milk for manufacturing.

Relative Value-Specific Differentials

(Option 1B) Analysis

Like a location-specific differential

structure, a relative value-specific

differential structure would also

establish a nationally coordinated

system of Class I price differentials and

adjustments that recognizes several low

pricing areas. Option 1B relies on a least

cost optimal solution from the USDSS

model to develop a Class I price

structure that is based on the most

efficient assembly and shipment of milk

and dairy products to meet all market

demands for milk and its products.

Option 1B relies more on the market

and the negotiating ability of processors

and producers to generate higher prices

when needed to provide the necessary

incentive to move milk in order to

satisfy demand.

Three methods of phasing into the

Class I differentials under Option 1B

were evaluated. First, a 20-percent

gradual phase-in was analyzed; then, a

transitional phase-in that would offset

any lost revenue was analyzed; and

finally, a revenue-enhancement phasein that would add additional revenue

into the Class I price structure was

analyzed.

Phase-in Method 1

With the gradual phase-in, the

estimated all-milk price for all Federal

order markets combined during the

1999–2004 period could average 8 cents

per cwt lower than the baseline. The

estimated average all-milk price at the

basing point of 11 Federal order markets

could increase from 1 to 32 cents per

cwt. At the basing point of the other 21

Federal order markets, the all-milk price

is estimated to decrease from 1 to 58

cents per cwt.

The 5 markets with the greatest

estimated increases in average all-milk

prices, for the 1999–2004 period are:

New Mexico-West Texas ($0.32),

Chicago Regional ($0.19), Tampa Bay

($0.19), Nebraska-Western Iowa ($0.17),

and Southwest Idaho-Eastern Oregon

($0.15). The 5 Federal order markets

with the greatest estimated reductions

in price are: Eastern South Dakota

(¥$0.58), Michigan Upper Peninsula

(¥$0.55), Western Colorado (¥$0.55),

Greater Kansas City (¥$0.53), and

Carolina (¥$0.46). The annual average

all-milk price in the previously

unregulated areas of New York and the

New England states is estimated to

decline by $0.96 per cwt compared to

the baseline.

Over the period 1999–2004, 1B

differentials could lower producer gross

cash receipts from minimum order

prices in 21 of the Federal order

markets. The five current markets that

would have the greatest decreases were:

Texas (¥$36.8 million), Middle Atlantic

(¥$26.2 million), Upper Midwest

(¥$15.9 million), Carolina (¥$15.2

million), and Southeast (¥$12.5

million). The annual average reduction

in estimated gross receipts in the

previously unregulated areas of New

York and the New England states is

estimated at $18.5 million from the

baseline. Estimated gross receipts

increased in 11 markets. The five

markets that would have the greatest

increases in gross receipts were: Chicago

Regional ($31.5 million), New MexicoWest Texas ($9.1 million), Southern

Michigan ($6.6 million), Southwestern

Idaho-Eastern Oregon ($5.8 million),

and New York-New Jersey ($5.3

million).

Phase-in Method 2

A possible modification to the relative

value-specific differentials would be to

initially raise Class I differentials by 55

cents per cwt above the level called for

in the first year of transition. During the

second year, Class I differentials would

be set at 35 cents above the transition

level; the third year, 20 cents above; and

the fourth year, 10 cents above the

called-for transition differentials. At the

beginning of the fifth year, Class I

differentials would be fully phased in

and no assistance provided.

Under this phase-in method, the

estimated all-milk price for all Federal

order markets combined during the

1999–2004 period could average 4 cents

per cwt lower than the baseline. The

estimated average all-milk price at the

basing point of 12 Federal order markets

could increase from 3 to 36 cents per

cwt. At the basing point of 20 Federal

order markets, the all-milk price is

estimated to decrease from 2 to 53 cents

per cwt from the baseline.

The five markets with the greatest

estimated increases in average all-milk

prices, per cwt, for the 1999–2004

period are: New Mexico-West Texas

($0.36), Tampa Bay ($0.32), NebraskaWestern Iowa ($0.22), Upper Florida

($0.20), and Chicago Regional ($0.23).

The five markets with the greatest

estimated reductions in price are:

Eastern South Dakota (¥$0.53), Western

Colorado (¥$0.52), Michigan Upper

Peninsula (¥$0.49), Greater Kansas City

(¥$0.48), and Texas (¥$0.34). The

annual average all-milk price in the

previously unregulated areas of New

York and the New England states is

estimated to decline by $0.93 per cwt

compared to the baseline.

Over the period 1999–2004, this

phase-in option would lower estimated

producer gross cash receipts attributable

to minimum order prices in 19 of the

Federal order markets. The 5 markets

with the greatest estimated decreases

were Texas (¥$32.6 million), Middle

Atlantic (¥$22.8 million), Upper

Midwest (¥$13.9 million), Carolina

(¥$10.7 million), and Arizona-Las

Vegas (¥$7.6 million). The annual

average reduction in estimated gross

receipts in the previously unregulated

areas of New York and the New England

states is $17.8 million lower than the

baseline. Gross receipts from milk

marketings could increase in the

following markets: Chicago Regional

($34.4 million), New York-New Jersey

($11.7 million), Southern Michigan

($10.4 million), New Mexico-West

Texas ($10.4 million), and Tampa Bay

($7.0 million). Total estimated cash

receipts for the combined current

Federal orders would average $40

million less for the 6-year period.

Phase-in Method 3

Another phase-in option would

enhance prices during the transition

period by $1.10 for first year phase-in

differentials, $0.70 in the second year,

$.40 in the third year, and $.20 in the

fourth year. The additional price

enhancement provided to dairy farmers
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4811

under this method is intended to help

producers make the necessary

investments and other changes to

compete in a more market-oriented

economy. At the beginning of the fifth

year, Class I differentials would be fully

phased in at the Option 1B levels.

With the use of additional revenue

under this phase-in option, the

estimated all-milk price for all Federal

order markets combined during the

1999–2004 period could be expected to

be unchanged from the baseline. The

estimated average all-milk price at the

basing point of 15 Federal order markets

would increase from 1 to 43 cents per

cwt. At the basing point of the other 17

Federal order markets, the all-milk price

is estimated to decrease from 3 to 52

cents per cwt.

The five markets with the greatest

estimated increases in average all-milk

prices, per cwt, for the 1999–2004

period were: Tampa Bay ($0.43) New

Mexico-West Texas ($0.41), Upper

Florida ($0.32), Nebraska-Western Iowa

($0.26), and South Eastern Florida

($0.26). The five markets with the

greatest estimated reductions in price

were: Western Colorado (¥$0.52),

Eastern South Dakota (¥$0.49), Greater

Kansas City (¥$0.44), Michigan Upper

Peninsula (¥$0.43), and Texas

(¥$0.33). The annual average all-milk

price in the previously unregulated

areas of New York and the New England

states is estimated to decline by $0.88

per cwt compared to the baseline. Total

estimated cash receipts for the

combined current Federal order markets

would average $34.9 million higher for

the 6-year period.

Over the period 1999–2004, this

phase-in option could lower estimated

producer gross cash receipts from milk

marketings in 16 of the current markets.

The five current markets with the

greatest decreases were: Texas (¥$28.2

million), Middle Atlantic (¥$19.0

million), Upper Midwest (¥$14.6

million), Carolina (¥$6.5 million) and

Arizona-Las Vegas (¥$6.0 million). The

annual average reduction in estimated

gross receipts in the previously

unregulated areas of New York and the

New England states is estimated at $16.9

million from the baseline. Gross receipts

from milk marketings increased in 16

markets. The five markets that would

have the greatest increases were:

Chicago Regional ($33.5 million), New

York-New Jersey ($19.0 million),

Southern Michigan ($14.4 million), New

Mexico-West Texas ($11.7 million), and

Tampa Bay ($9.8 million).

Decoupled Baseline Class I Price with

Adjustors (Option 5) Analysis

A third option analyzed in the RIA

would retain the current Class I

differentials, but floor Class I prices in

all markets at their 1996 average levels.

Adjustments to this price would be

made based on changes in fluid use

rates and short term costs of production

(i.e., feed costs). Under this option, the

all-milk price for all Federal order

markets combined would increase $0.07

per cwt and the U.S. is projected to

increase $0.03 per cwt over the 6-year

period. In 19 of the Federal order

markets, the average all-milk price

would be higher by $0.01 to $0.50 per

cwt. In 12 Federal order markets, the

average all-milk price would decrease

from $0.03 to $0.82 per cwt.

Flooring the Class I prices at the

average 1996 levels would result in

higher Class I prices in all markets in

1999 and 2000 and higher all-milk

prices in most markets when compared

to the baseline. These increased

incentives for milk production would

result in greater volumes of milk for

manufacturing and lower manufacturing

prices.

Location-Specific Differentials (Option

6) Analysis

This option would establish

minimum prices for milk used in Class

I by adding market-specific Class I

differentials to the proposed Class II

price. Class II would contain all

manufactured products and would be

priced by a cheese product price

formula using the National Agricultural

Statistical Service surveyed 40-pound

cheddar cheese price times 9.87 plus the

Chicago Mercantile Exchange Grade A

butter price times 0.238 less $1.80. The

Class I differentials in this option would

be phased in over a five-year period.

In general, the Class I differentials in

the central section of the country would

be reduced while those in the

Northwest, New England and Florida

are increased. After the proposed price

surface is fully phased in, 20 markets

would have Class I differentials that are

reduced and 10 markets would have

increases.

Under this option, the all-milk price

for all Federal order markets combined

would decline $0.10 per cwt over the

six year period. In 23 of the Federal

order markets, the average all-milk price

would decline by less than $0.01 to

$0.95 per cwt. In 9 orders, the all-milk

price would increase $0.02 to $0.19 per

cwt.

Gross cash receipts from milk

marketings in the combined Federal

orders would average $148.8 million

less than the baseline for the 6-year

period. Cash receipts would be lower in

23 markets and higher in 9 markets.

Because of this decline in cash receipts

and since it is inconsistent with the

four-class system contained in the

proposed rule, this Class I price option

is not detailed in the Class I price

structure section of the proposed rule.

This two-class pricing system was found

to be insufficient to recognize the

different use-values of milk for reasons

set forth in the Basic Formula

Replacement and Classification portions

of this proposed rule.

Other Impacts of Pricing Options

The potential impacts of the options

analyzed in the initial RIA on retail

prices, and thus consumers, is less

certain than the impacts on other sectors

of the dairy industry. In general,

changes in farm milk prices and

wholesale prices are passed onto

consumers. However, the timing and the

degree of these pass-throughs is

uncertain. It is assumed that all changes

in farm milk prices (fluid processor

costs) and the wholesale costs of

manufactured products would be passed

on to the retail level without any

changes in the farm-processor-retail or

farm-wholesale-retail margins.

Because of the bulky and perishable

nature of packaged fluid milk, all

international trading of dairy products,

with the exception of limited exports of

fluid milk to Mexico, is in manufactured

products. An appendix table in the

initial RIA details USDA’s baseline

estimates of international and domestic

prices for butter and nonfat dry milk.

Neither location-specific differentials

nor relative value-specific differentials

are expected to have a significant

impact on domestic, wholesale dairy

product prices and therefore little effect

on international trade of manufactured

dairy products.

Economic Impacts of Classification

Changes

The classification of milk

recommendations should not have a

significant economic impact on any

dairy industry participants. This

proposed rule provides uniform milk

classification provisions for the newly

consolidated milk orders. The

recommendations should improve

reporting and accounting procedures for

handlers and provide for greater market

efficiencies.

Most of the changes regarding milk

classification provisions proposed for

the newly consolidated orders would

simplify order language and remove

obsolete language.
4812 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

This proposed rule contains a

modified fluid milk product definition

and recommends that certain products

be reclassified. The revised fluid milk

product definition proposed for the new

orders should provide more consistency

in determining the classification of

products. The inclusion of eggnog to the

list of fluid milk products and the

reclassification of cream cheese from

Class III to Class II will cause a nominal

increase in the cost of the finished

product. However, these changes, which

will be applicable to all handlers

regulated under the new orders, should

not have a significant impact on the

retail price of these products. Although

producers will benefit from these

products being reclassified into higher

utilization classes, the impact of the

product classification changes on the

blend price to producers will be

marginal.

Another modification includes the

reclassification of butter and whole milk

powder from Class III to Class IV. This

change merely places these marketclearing products in the new Class IV

with nonfat dry milk. The change

promotes market efficiency and should

have a minimal impact on producers’

blend prices.

One recommendation with possible

economic implications concerns the

treatment of milk used to produce bulk

sweetened condensed milk/skim milk.

Some commenters argued that the wide

price difference that sometimes exists

between the Class II price and the Class

III–A price has put manufacturers of

sweetened condensed milk at a

competitive disadvantage with

manufacturers of nonfat dry milk, which

can be substituted for bulk sweetened

condensed milk and skim milk in some

higher-valued products.

Although this proposed rule does not

recommend a reclassification for milk

used in bulk sweetened condensed

milk, it does propose a change in the

relationship between the Class II and IV

prices which should eliminate the price

disparity that now, at times, exists. As

discussed in the ‘‘Class III and Class III–

A (i.e., Class IV) Milk’’ section of this

proposed rule, the proposed new Class

II price will be equal to the Class IV

price plus a 70-cent differential. The

coupling of the Class II and Class IV

prices will largely remove the incentive

to substitute nonfat dry milk for bulk

sweetened condensed milk.

The recommendations regarding

shrinkage provisions should provide

equity among handlers, improve market

efficiencies, and facilitate accounting

procedures. This proposed rule provides

that shrinkage be assigned pro rata

based on a handler’s utilization. As

discussed in the ‘‘Shrinkage and

Overage’’ section of this proposed rule,

this modification should result in a

slight increase (i.e., one cent per cwt.)

in the blend price paid to producers.

For the reasons stated above, the milk

classification provisions proposed

herein should have little economic

impact on dairy industry participants.

The Regulatory Flexibility Act and the

Effects on Small Businesses

Pursuant to the requirements set forth

in the Regulatory Flexibility Act (RFA)

(5 U.S.C. 601 et seq.), the Agricultural

Marketing Service (AMS) has

considered the economic impact of the

proposed rule on small entities and has

prepared this initial regulatory

flexibility analysis. The RFA provides

that when preparing such analysis an

agency shall address: the reasons,

objectives, and legal basis for the

proposed rule; the kind and number of

small entities which would be affected;

the projected recordkeeping, reporting,

and other requirements; and federal

rules which may duplicate, overlap, or

conflict with the proposed rule. Finally,

any significant alternatives to the

proposal should be addressed. This

initial regulatory flexibility analysis

considers these points and the impact of

this proposed regulation on small

entities, and evaluates alternatives that

would accomplish the objectives of the

rule without unduly burdening small

entities or erecting barriers that would

restrict their ability to compete in the

dairy industry.

This regulatory action is being

considered in accordance with Section

143 of the Federal Agriculture

Improvement and Reform Act of 1996,

7 U.S.C. 7253, (the Farm Bill) which

requires the Secretary of Agriculture

(Secretary) to consolidate the existing 31

Federal milk marketing orders, as

authorized by the Agricultural

Marketing Agreement Act of 1937, into

between 10 and 14 orders. The Secretary

is also directed to designate the State of

California as a Federal milk order if

California dairy producers petition for

and approve such an order. Finally, the

Farm Bill specifies that the Department

of Agriculture use informal rulemaking

to implement these reforms. The Farm

Bill requires that a proposed rule be

published by April 4, 998, and all

reforms of the Federal milk order

program be completed by April 4, 1999.

In addition to these required

mandates, the Farm Bill provides that

the Secretary may address related issues

such as the use of utilization rates and

multiple basing points for the pricing of

fluid milk and the use of uniform

multiple component pricing when

developing one or more basic formula

prices for manufacturing milk. This

proposed rule also sets forth two

options for consideration as a

replacement for the Class I price

structure and proposes replacing the

basic formula price with a multiple

component pricing system. These

changes are proposed to address

concerns that the current system of

pricing Class I milk may not adequately

reflect the value of Class I milk at

various locations or the value of milk

used in manufacturing products. The

1996 Farm Bill identified these as

related issues that may be addressed in

the consolidation of milk marketing

orders. The proposed rule further

proposes changes to classification of

milk by establishing a new Class IV

which would include milk used to

produce nonfat dry milk, butter, and

other dry milk powders; the

reclassification of eggnog and cream

cheese; and other minor changes. These

proposed changes should improve

handler reporting and accounting

procedures thereby providing for greater

market efficiencies. Finally, this

proposed rule expands Part 1000 to

include provisions that are identical

within each consolidated order to assist

in simplifying the orders. These

provisions include the definitions of

route disposition, plant, distributing

plant, supply plant, nonpool plant,

handler, other source milk, fluid milk

product, fluid cream product,

cooperative association, and commercial

food processing establishment. In

addition, the milk classification section,

pricing provisions, and most of the

provisions relating to payments have

been included in the General

Provisions. These proposed changes

adhere with the efforts of the National

Performance Review—Regulatory

Reform Initiative to simplify, modify,

and eliminate unnecessary repetition of

regulations. Unique regional issues or

marketing conditions have been

considered and included in each

market’s order provisions.

The purpose of the RFA is to fit

regulatory actions to the scale of

business subject to the actions in order

that small businesses would not be

unduly or disproportionately burdened.

To accomplish this purpose, it first is

necessary to define a small business.

According to the Small Business

Administration’s definition of a ‘‘small

business,’’ a dairy farm is a ‘‘small

business’’ if it has an annual gross

revenue of less than $500,00 and a

handler is a ‘‘small business’’ if it has

fewer than 500 employees. For the

purposes of determining which dairy
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4813

farms are ‘‘small businesses,’’ the

$500,000 per year criterion was used to

establish a production guideline of

326,000 pounds per month. Although

this guideline does not factor in

additional monies that may be received

by dairy producers, it should be an

inclusive standard for most ‘‘small’’

dairy farmers. For purposes of

determining a handler’s size, if the plant

is part of a larger company operating

multiple plants that collectively exceed

the 500-employee limit, the plant will

be considered a large business even if

the local plant has fewer than 500

employees. During the process of

developing this proposed rule, USDA

identified approximately 80,000 of the

83,000 dairy producers (farmers) that

have their milk pooled under a Federal

order as small businesses. Thus, small

businesses represent approximately 96

percent of the producers in the United

States. On the processing side, there are

over 1,200 plants associated with

Federal orders, and of these plants,

approximately 700 qualify as ‘‘small

businesses’’ representing about 55

percent of the total.

During August 1997, there were 524

fully regulated handlers (343

distributing and 181 supply plants), 134

partially regulated handlers and 111

producer-handlers submitting reports

under the Federal milk marketing order

program. During 1996, 83,012 dairy

farmers delivered over 104.5 billion

pounds of milk to handlers regulated

under the milk orders. This volume

represents 69 percent of all milk

marketed in the U.S. and 72 percent of

the milk of bottling quality (Grade A)

sold in the country. The value of the

milk delivered to Federal milk order

handlers at minimum order blend prices

was nearly $14.6 billion. Producer

deliveries of milk used in Class I

products (mainly fluid milk products)

totaled 45.5 billion pounds—43.5

percent of total Federal order producer

deliveries. More than 200 million

Americans reside in Federal order

marketing areas—77 percent of the total

U.S. population.

The Federal milk order program is

designed to set forth the terms of trade

between buyers and sellers of fluid

milk. A Federal order enforces the

minimum price that processors

(handlers) in a given marketing area

must pay producers or farmers for milk

according to how it is utilized. A

Federal order further requires that the

payments for milk be pooled and paid

to individual dairy farmers or

cooperative associations on the basis of

a uniform or average price. It is

important to note that a Federal milk

order, including the pricing and all

other provisions, only becomes effective

after approval, through a referendum, by

dairy farmers associated with the order.

Development of the proposed rule

began with the premise that no

additional burdens should be placed on

the industry as a result of Federal order

consolidation and reform. As a step in

accomplishing the goal of imposing no

additional regulatory burdens, a review

of the current reporting requirements

was completed pursuant to the

Paperwork Reduction Act of 1995 (44

U.S.C. Chapter 35). In light of this

review, it was determined that this

proposed rule would have little impact

on reporting, recordkeeping, or other

compliance requirements because these

would remain almost identical to the

current Federal order program. No new

forms have been proposed; however,

some additional reporting would be

necessary in the proposed orders that

would be adopting multiple component

pricing if the current orders do not

already have these provisions.

There are two principal reporting

forms for handlers to complete each

month that are needed to administer the

Federal milk marketing orders. The

forms are used to establish the quantity

of milk used and received by handlers,

the pooling status of the handler, the

class-use of the milk used by the

handler, and the butterfat content and

amounts of other components of the

milk. This information is used to

compute the monthly uniform price

paid to producers in each of the

markets. Handlers in the marketing

areas adopting multiple component

pricing would be required to complete

additional information regarding the

components of the milk. This

information would be necessary to

enable their values of milk to be

determined on the basis of these

components and to assure that

producers are paid correctly. Many

handlers already collect and report this

information.

This proposed rule does not require

additional information collection that

requires clearance by the OMB beyond

the currently approved information

collection. The primary source 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, the

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 industry average.

New territory, or pockets of

unregulated territory within and

between current order areas has been

included in the proposed consolidated

marketing areas where such expansion

would not have the effect of fully

regulating plants that are not now

regulated. The addition can benefit

regulated handlers by eliminating the

necessity of reporting sales outside the

Federal order marketing area for the

purpose of determining pool

qualification. Where such areas can be

added to a consolidated area without

having the effect of causing the

regulation of any currently-unregulated

handler, they are proposed to be added.

Handlers not currently fully regulated

under Federal orders may become

regulated for two main reasons: first, in

the process of consolidating marketing

areas, some handlers who currently are

partially regulated may become fully

regulated because their sales in the

combined marketing areas would meet

the pooling standards of a suggested

consolidated order area. Second,

previously unregulated area in New

York, Vermont, New Hampshire and

Massachusetts was added on the basis of

requests and supporting information. As

a result, previously unregulated

handlers would become fully regulated.

Because of these two reasons, 24

additional plants are expected to

become fully regulated under the

program. Of these 24 plants, it is

estimated that 15 are small businesses

that would need to comply with the

reporting, recordkeeping, and

compliance requirements. The

completion of these reports would

require a person knowledgeable about

the receipt and utilization of milk and

milk products handled at the plant. This

most likely would be a person already

on the payroll of the business such as

a bookkeeper, controller or plant

manager. The completion of the

necessary reporting, recordkeeping, and

compliance requirements would not

require any highly specialized skills and

should not require the addition of

personnel to complete. In fact, much of

the information that handlers report to

the market administrator is readily

available from normally maintained

business records, and as such, the

burden on handlers to complete these

recordkeeping and reporting

requirements is expected to be minimal.

In addition, assistance in completing

forms is readily available from market

administrator offices. A description of

the forms and a complete Paperwork

Reduction Act analysis follows this

section.

No other burdens are expected to fall

upon the dairy industry as a result of

overlapping Federal rules. This

proposed regulation does not duplicate,
4814 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

overlap or conflict with any existing

Federal rules.

To ensure that small businesses are

not unduly or disproportionately

burdened based on this proposed

regulation, consideration was given to

several options with the intention of

mitigating negative impacts. Three

options, including two suggested in the

preliminary reports issued by AMS in

December 1996 and May 1997, were

considered with regard to the

consolidation of Federal orders, five

options were considered as

replacements for the basic formula

price, and seven options were

considered with regard to the

development of a new Class I price

structure. The following options were

considered by AMS prior to and during

the development of the proposed

regulation.

Consolidation Options

It is impossible to determine the

economic effects of marketing area

consolidation on handlers, producers

and consumers without using

assumptions about the specific order

provisions contained in the

consolidated order areas. The only effect

consolidation, as a single factor, can

have on the various market participants

is through changes in the percentage of

milk used in different classes within the

proposed consolidated orders. Without

assumptions that include the specific

class prices and milk uses in different

products, there are no means of

quantifying the economic effects of

consolidation.

Handlers would be affected by class

prices, which would be determined by

the Class I price surface option that is

selected, and by the minimum prices

contained in all of the orders for milk

used in Classes II, III and IV. The Class

I price surface options considered could

have impacts on small handler entities,

however, handlers similarly located

would be subject to the same minimum

Class I prices, regardless of the size of

their operations, and all handlers would

be subject to the same minimum prices

for Class II, Class III and Class IV milk.

Such handlers would also be subject to

the same minimum prices to be paid to

producers.

Producers may be somewhat more

affected by consolidation of marketing

areas because changes in utilization

percentages would result in changes in

blend prices. As in the case of effects on

handlers, however, it is impossible to

determine a separate consolidation

effect on producers, defined in

monetary terms. The closest

approximation to such an estimate

would be the ‘‘weighted average

utilization value’’ (WAUV). These

‘‘prices’’ reflect only the change in value

that can be attributed to changes in

utilization rates, with no assumptions

about changes in the levels of the

various class prices. Such estimates, of

necessity, reflect only anticipated

changes in blend prices, using class

prices that would no longer be in effect

under the consolidated orders. To the

extent that the WAUV computations

reflect some of the effect of

consolidation on producer prices, they

are included in this analysis under each

option discussion. It should be noted,

however, that all producers in any given

current area would be affected to an

equal extent by the consolidation factor,

with no disproportionate effect on small

dairy farmer entities.

The following table shows the

potential impact of three order

consolidation options on producers who

supply each of the current Federal milk

marketing order areas via WAUV

‘‘prices’’. The three consolidated

options are (1) the consolidated

marketing areas suggested in the

December 1996 initial Preliminary

Report on Order Consolidation; (2) the

consolidated marketing areas suggested

in the May 1997 Revised Preliminary

Report on Order Consolidation; and (3)

the consolidated marketing areas

suggested in this proposed rule.

WEIGHTED AVERAGE UTILIZATION VALUES (WAUV)

[Based on October 1995 information ($/cwt)]

Consolidated Market Marketing Areas in Initial

Consol. Report (Dec. 96)

(Option 1)

Marketing Areas in Revised

Consol. Report (May 97)

(Option 2)

Marketing Areas in Proposed

Rule

(Option 3)

Current Markets

Consol. Mkt. WAUV

($/cwt)

Consol. Mkt. WAUV

($/cwt)

Consol. Mkt. WAUV

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

Northeast ................................................... $13.46 $13.48 $13.47

New England (F.O. 1) ........................ 13.50 13.48 13.52 13.51 13.52 13.49

NY–NJ (F.O. 2) .................................. 13.44 13.48 13.48 13.50 13.45 13.48

Middle Atlantic (F.O.4) ....................... 13.45 13.39 13.45 13.41 13.44 13.40

Appalachian .............................................. 14.13 13.96 13.97

Carolina (F.O. 5) ................................ 14.23 14.21 14.23 14.19 14.23 14.20

Tenn. Valley (F.O. 11) ....................... 13.92 13.95 13.92 13.93 13.92 13.94

Lville-Lex-Evan (F.O. 46) ................... n/a n/a 13.35 13.39 13.35 13.40

Florida ....................................................... 15.05 15.05 15.05

Upper Florida (F.O. 6) ....................... 14.67 14.78 14.67 14.78 14.67 14.78

Tampa Bay (F.O. 12) ......................... 15.09 15.04 15.09 15.04 15.09 15.04

SE Florida (F.O. 13) .......................... 15.42 15.31 15.42 15.31 15.42 15.31

Southeast .................................................. 14.26 14.25 14.24

Southeast (F.O. 7) ............................. 14.26 14.26 14.25 14.25 14.24 14.27

Mideast ...................................................... 12.96 12.94 12.92

Ohio Valley (F.O. 33) ......................... 12.99 13.02 12.99 13.01 12.99 13.00

E. Ohio-W. PA (F.O. 36) ................... 13.07 13.00 13.10 12.99 13.07 12.97

S. Michigan (F.O. 40) ........................ 12.75 12.86 12.75 12.84 12.75 12.83

MI Upper Penin. (F.O. 44) ................. 12.81 12.62 12.81 13.262 12.81 12.61

Lville-Lex-Evan (F.O. 46) ................... 13.35 13.06 n/a n/a n/a n/a

Indiana (F.O. 49) ............................... 12.97 12.94 12.97 12.93 12.97 12.92

Upper Midwest .......................................... 12.60 12.62 12.60
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4815

WEIGHTED AVERAGE UTILIZATION VALUES (WAUV)—Continued

[Based on October 1995 information ($/cwt)]

Consolidated Market Marketing Areas in Initial

Consol. Report (Dec. 96)

(Option 1)

Marketing Areas in Revised

Consol. Report (May 97)

(Option 2)

Marketing Areas in Proposed

Rule

(Option 3)

Current Markets

Consol. Mkt. WAUV

($/cwt)

Consol. Mkt. WAUV

($/cwt)

Consol. Mkt. WAUV

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

WAUV using

Current Mkt.

Utilization

($/cwt)

WAUV using

Consol. Mkt.

Utilization

($/cwt)

Chicago Reg. (F.O. 30) ..................... 12.62 12.62 12.62 12.61 12.62 12.62

MI Upper Penin. (F.O. 44) ................. R R R R R R

Neb.-W. Iowa (F.O. 65) ..................... n/a n/a 12.63 12.74 n/a n/a

Upper Midwest (F.O. 68) ................... 12.55 12.56 12.55 12.54 2.55 12.56

E. South Dakota (F.O. 76) ................. n/a n/a 12.81 12.65 n/a n/a

Iowa (F.O. 79) .................................... n/a n/a 12.69 12.67 n/a n/a

Central ....................................................... 13.16 13.21 12.95

S. IL–E MO (F.O. 32) ........................ 12.93 12.90 13.00 12.95 13.00 12.88

Central IL (F.O. 50) ........................... 13.03 12.74 13.03 12.78 13.03 12.72

Greater K. City (F.O. 64) ................... 13.22 12.90 13.22 12.95 13.22 12.88

Neb.-W. Iowa (F.O. 65) ..................... 12.63 12.81 n/a n/a 12.63 12.79

E. South Dakota (F.O. 76) ................. 12.81 12.68 n/a n/a 12.81 12.67

Iowa (F.O. 79) .................................... 12.71 12.71 n/a n/a 12.71 12.70

SW Plains (F.O. 106) ........................ 13.31 13.33 13.31 13.41 13.08 13.29

E. Colorado (F.O. 137) ...................... 13.27 13.31 13.27 13.38 13.27 13.27

Southwest ................................................. 13.36 13.39 13.39

Texas (F.O. 126) ............................... 13.49 13.48 13.49 13.46 13.49 13.46

Central AZ (F.O. 131) ........................ 13.26 13.17 n/a n/a n/a n/a

NW–W Texas (F.O. 138) ................... 13.00 13.09 13.00 13.07 13.00 13.07

Arizona–Las Vegas ................................... n/a 13.26 13.26

Central AZ (F.O. 131) ........................ n/a n/a 13.26 13.29 13.26 13.29

Western ..................................................... 12.79 12.78 12.78

W. Colorado (F.O. 134) ..................... 13.41 12.84 13.41 12.82 13.41 12.82

SW ID–E. OR (F.O. 135) ................... 12.63 12.68 12.63 12.68 12.63 12.68

Great Basin (F.O. 139) ...................... 12.83 12.81 12.81 12.79 12.81 12.79

Pacific Northwest ...................................... 12.45 12.44 12.44

Pacific NW (F.O. 124) ....................... 12.45 12.45 12.44 12.44 12.44 12.44

n/a: not applicable.

R: Restricted.

For each option, a weighted average

use value (WAUV) is computed for (a)

the consolidated order; (b) the current

order with current use of milk; and (c)

the current order with projected use of

milk in the consolidated order. The

difference between the weighted average

use values in (b) and (c) represents the

potential impact on producers.

For example, in this proposed rule,

the New England (F.O. 1) market’s

WAUV using its current utilization is

$13.52 per cwt. When the three markets

are consolidated and the new

consolidated utilization is used to

calculate the WAUV, New England’s

WAUV would be $13.49 per cwt. In this

comparison, the potential impact on

producers supplying the New England

market area would be a decrease of three

cents per cwt.

Each of the three options assumes the

pool distributing plant standards

suggested for each of the consolidated

orders in this proposed rule; thus the

calculated values in the preceding table

are not directly comparable to the

WAUV values published with either the

initial or the revised reports on order

consolidation.

During the process of developing this

proposed rule, AMS issued two reports

suggesting 10 and 11 marketing area

boundaries, respectively, to meet the

requirements of the 1996 Farm Bill. The

marketing areas defined in these reports

were based primarily on an analysis of

receipt and distributing data from fluid

distributing plants in October 1995.

Over 900 comments regarding

consolidation issues received thus far in

the development process also have been

considered: almost 50 comments prior

to the December 1996 release of the

Preliminary Report on Order

Consolidation (Option 1); an additional

60 comments prior to the May 1997

release of the Revised Preliminary

Report on Order Consolidation (Option

2); and another 800 comments since

release of the revised report. These

comments were filed primarily by

producers and handlers. Incorporated in

the marketing area boundaries suggested

in the revised report and in the

proposed consolidation in this rule

(Option 3) are both information

contained in the comments as well as

data gathered to update the information

on which the earlier report(s) were

based where questions were raised

about the boundaries of suggested

marketing areas and where marketing

changes had occurred.

Option 1 (Preliminary Report on Order

Consolidation, December 1996)

Based on seven criteria: ((1)

Overlapping route disposition; (2)

overlapping areas of milk supply; (3)

number of handlers within a market; (4)

natural boundaries; (5) cooperative

association service areas; (6) features

common to existing orders, such as

similar multiple component pricing

plans; and (7) milk utilization in

common dairy products), 10 marketing

areas (Northeast, Appalachian, Florida,

Southeast, Mideast, Upper Midwest,

Central, Southwest, Western and Pacific

Northwest) were suggested in this
4816 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

report. Data were gathered relating to

the receipts and distribution of fluid

milk products for all known distributing

plants located in the 47 contiguous

States, not including the State of

California, for the month of October

1995.

The current Federal orders that

comprise the initially-suggested

consolidated areas are as follows:

NORTHEAST—current marketing areas

of the New England, New York-New

Jersey, and Middle Atlantic Federal

milk orders; APPALACHIAN—current

marketing areas of the Carolina and

Tennessee Valley Federal milk orders,

and a portion of the LouisvilleLexington-Evansville Federal milk

order; FLORIDA—current marketing

areas of the Upper Florida, Tampa Bay,

and Southeastern Florida Federal milk

orders; SOUTHEAST—current

marketing areas of the Southeast Federal

milk order, plus 1 county from the

Louisville-Lexington-Evansville Federal

milk order marketing area, 15 currently

unregulated Kentucky counties, and 2

currently unregulated northeast Texas

counties; MIDEAST—current marketing

areas of the Ohio Valley, Eastern OhioWestern Pennsylvania, Southern

Michigan, and Indiana Federal milk

orders, plus most of the current

marketing area of the LouisvilleLexington-Evansville Federal milk

order, Zone 2 of the Michigan Upper

Peninsula Federal milk order, and 12

counties of the Southern Illinois-Eastern

Missouri Federal milk order; UPPER

MIDWEST—current marketing areas of

the Chicago Regional and Upper

Midwest Federal milk orders, plus

Zones I and I(a) of the Michigan Upper

Peninsula Federal milk order and seven

unregulated or partly regulated

Wisconsin counties; CENTRAL—current

marketing areas of the Southern IllinoisEastern Missouri (less 12 counties

included in the suggested Mideast

marketing area), Central Illinois, Greater

Kansas City, Nebraska-Western Iowa

(less 11 currently-regulated counties

suggested to be unregulated), Eastern

South Dakota, Iowa, Southwest Plains,

and Eastern Colorado Federal milk

orders, plus 63 currently-unregulated

counties in seven of the states;

SOUTHWEST—current marketing areas

of the Texas, New Mexico-West Texas,

and Central Arizona Federal milk

orders; WESTERN—current marketing

areas of the Western Colorado,

Southwestern Idaho-Eastern Oregon,

and Great Basin Federal milk orders;

and PACIFIC NORTHWEST—current

marketing area of the Pacific Northwest

Federal milk order plus 1 currentlyunregulated county in Oregon.

Based on the WAUV calculations

shown in the previous table, utilization

rate changes due to consolidation could

affect producer prices. The column

labeled ‘‘Option 1’’ shows the WAUV

for the consolidated order and each of

the current orders suggested in the

December 1996 report.

In the Northeast market, producers

currently affiliated with the New

England and Middle Atlantic would

have negative impacts on their WAUV,

respectively, while New York-New

Jersey producers would be positively

impacted. In the Appalachian market,

Carolina producers should expect some

negative impacts due to consolidation,

while Tennessee Valley producers

would experience positive effects from

this consolidation. In the Florida

market, Upper Florida producers would

gain while Tampa Bay and Southeastern

Florida producers would have a

negative impact resulting from this

consolidation. The Southeast market

remains virtually the same as it does

currently and thus, no or little impact

on producer prices would be expected.

In the Mideast market, producers

affiliated with the Ohio Valley and

Southern Michigan Federal orders

would probably see increases in blend

prices due to this consolidation, while

producers affiliated with the Eastern

Ohio-Western Pennsylvania, Michigan

Upper Peninsula, Louisville-LexingtonEvansville and Indiana Federal orders

would see decreases. In the Upper

Midwest market, the Upper Midwest

producers should see slight increases

while Chicago Regional producers

would probably have no impact due to

this consolidation. Of all the

consolidated markets, producers in the

current Orders that compose the Central

market probably would see the largest

changes due to this consolidation:

producers with the Nebraska-Western

Iowa, Southwest Plains and Eastern

Colorado markets may see increases,

while producers affiliated with the

Southern Illinois-Eastern Missouri,

Central Illinois, Greater Kansas City,

and Eastern South Dakota markets may

see decreases. Producers with the Iowa

market would probably have no impact

due to this suggested Central market

consolidation. In the Southwest market,

producers affiliated with the New

Mexico-West Texas would see increases

due to this consolidation while Texas

and Central Arizona producers would

see decreases. In the Western market,

Southwestern Idaho-Eastern Oregon

producers would see increases but

Western Colorado and Great Basin

producers would see decreases. The

Pacific Northwest market remains

virtually the same as it does currently

and thus, no or little impact on

producer prices would be expected.

Of approximately 83,000 dairy

producers delivering milk to handlers

regulated under the milk orders, about

80,000 are considered to be small

businesses under the production

guideline of less than 326,000 pounds

per month.

As stated above, handlers are

impacted more significantly by class

prices and minimum prices than by

expected utilization changes resulting

from consolidation. Of the 371

distributing plants expected to be fully

regulated under this 10-market

suggested configuration under the

assumptions used in the December 1996

report, an estimated 193 plants are small

businesses under the criteria provided

by the SBA (under 500 employees).

Option 2 (Revised Preliminary Report

on Order Consolidation, May 1997)

Eleven marketing areas were

suggested in this second report. Because

numerous comments indicated that the

boundaries of some marketing areas

should be re-evaluated, and also

because regulatory shifts and

distributing plant distribution areas had

occurred, more detailed and updated

data was obtained. The same seven

criteria used in Option 1 were applied

in this option as well. Modifications

were made to the Northeast,

Appalachian, Southeast, Mideast, Upper

Midwest, Central, Southwest and

Western regions, as follows (only the

changes to these orders are noted):

NORTHEAST—Addition of contiguous

unregulated areas of New Hampshire,

Vermont and New York; the western

non-Federally regulated portion of

Massachusetts, the Western New York

State order area, and Pennsylvania Milk

Marketing Board Areas 2 and 3 in

northeastern Pennsylvania;

APPALACHIAN—Addition of all of the

Louisville-Lexington-Evansville Federal

order (with the exception of one county

included in the suggested Southeast

market) and 26 currently-unregulated

counties in Indiana and Kentucky;

SOUTHEAST—Minus 2 currentlyunregulated counties in northeast Texas

(in the suggested Southwest market);

MIDEAST—Addition of Pennsylvania

Milk Marketing Board Area 6 (in

western/central Pennsylvania) and 2

currently-unregulated counties in New

York, and minus the LouisvilleLexington-Evansville Federal order area,

12 counties in Illinois, and unregulated

counties in Indiana and Kentucky (in

the suggested Appalachian market);

UPPER MIDWEST—Addition of the

Iowa, Eastern South Dakota, and most of
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4817

the Nebraska-Western Iowa Federal

order areas, plus currently-unregulated

counties in Iowa and Nebraska;

CENTRAL—Addition of 12 counties in

the current Southern Illinois-Eastern

Missouri Federal order that initially

were suggested as part of the

consolidated Mideast area, and minus

the Eastern South Dakota, Iowa, and

most of the Nebraska-Western Iowa

Federal order marketing area;

SOUTHWEST—Addition of 2 currentlyunregulated northeast Texas counties

that initially were suggested as part of

the consolidated Southeast market and

47 currently-unregulated counties in

southwest Texas, and minus the Central

Arizona marketing area; ARIZONA-LAS

VEGAS—this new eleventh marketing

area composed of the current marketing

area of the Central Arizona Federal

order and the Clark County, Nevada,

portion of the current Great Basin

marketing area, plus eight currentlyunregulated Arizona counties; and

WESTERN—Minus Clark County,

Nevada. The FLORIDA and PACIFIC

NORTHWEST marketing areas did not

change from the preliminary report.

Based on the WAUV calculations

shown in the previous table, utilization

rate changes due to consolidation could

affect producer prices. The column

labeled ‘‘Option 2’’ shows the WAUV

for the consolidated order and each of

the current orders suggested in the May

1997 report.

In the Northeast market, producers

currently affiliated with the New

England and Middle Atlantic orders

would have negative impacts on their

WAUV, respectively, while New YorkNew Jersey producers would remain

unchanged. In the Appalachian market,

Carolina producers should expect some

negative impacts due to consolidation,

while Tennessee Valley and LouisvilleLexington-Evansville producers would

experience positive effects from this

consolidation. In the Florida market,

Upper Florida producers would gain

while Tampa Bay and Southeastern

Florida producers would have a

negative impact resulting from this

consolidation. The Southeast market

remains virtually the same as it does

currently and thus, little impact on

producer prices would be expected. In

the Mideast market, producers affiliated

with the Ohio Valley and Southern

Michigan Federal orders would

probably see increases in blend prices

due to this consolidation, while

producers affiliated with the Eastern

Ohio-Western Pennsylvania, Michigan

Upper Peninsula, and Indiana Federal

orders would see decreases. In the

Upper Midwest market, the NebraskaWestern Iowa producers should see

increases, while Chicago Regional,

Upper Midwest, Eastern South Dakota,

and Iowa producers would have a

decrease in producer prices due to this

consolidation. In the Central market,

producers with the Southwest Plains

and Eastern Colorado markets would see

increases, while producers affiliated

with Southern Illinois-Eastern Missouri,

Central Illinois, and Greater Kansas City

markets may see decreases. In the

Southwest market, producers affiliated

with New Mexico-West Texas would see

increases due to this consolidation

while Texas producers would see

decreases. The added Arizona-Las Vegas

market is virtually the same as the

Central Arizona market but a positive

impact on producer prices may result

from an additional handler. In the

Western market, Southwestern IdahoEastern Oregon producers would see

increases but Western Colorado and

Great Basin producers would see

decreases. The Pacific Northwest market

remains virtually the same as it does

currently and thus, no or little impact

on producer prices would be expected.

Of approximately 83,000 dairy

producers delivering milk to handlers

regulated under the milk orders, about

80,000 are considered to be small

businesses under the production

guideline of less than 326,000 pounds

per month. In addition, it is estimated

that about 13 percent of the total milk

production in Pennsylvania is

represented only by the Pennsylvania

Milk Marketing Board. Under this

option, this production would be added

to the Federal order pool and affect an

undetermined number of businesses

which would include both small and

large producers.

As stated above, handlers are

impacted more significantly by class

prices and minimum prices than by

expected utilization changes resulting

from consolidation. Of the 379 plants

expected to be fully regulated under this

11-market suggested configuration

under the assumptions used in the May

1997 report, 175 plants are estimated to

be small businesses on the basis of

fewer than 500 employees.

The preliminary consolidation report

(Option 1) stated that the Farm Bill

requirement to consolidate existing

marketing areas did not specify

expansion of regulation to previously

non-Federally regulated areas where

such expansion would have the effect of

regulating handlers not currently

regulated. However, on the basis of data,

views and arguments filed by interested

persons in response to the initial

Preliminary Report (Option 1)

requesting that currently non-Federally

regulated areas be added to some

consolidated marketing areas, the

revised Preliminary Report (Option 2)

suggests that such areas be added to

several consolidated areas, the

Northeast and Mideast market areas in

particular. Approximately 20 handlers

who would have been affected by the

expansion of Federal order areas into

currently non-Federally regulated areas

were notified of the possible change in

their status and encouraged to comment.

Handlers located in Pennsylvania

Milk Marketing Board Areas 2, 3 and 6

are regulated under the State of

Pennsylvania if they do not have

enough sales in any Federal order area

to meet an order’s pooling standards. If

such plants do meet Federal order

pooling standards, the State continues

to enforce some of its regulations in

addition to Federal order regulations. As

state-regulated handlers, they must pay

a Class I price for milk used in fluid

products which is often higher than the

Federal order price would be. Inclusion

of the Pennsylvania-regulated handlers

in the consolidated marketing area

would have little effect on handlers’

costs of Class I milk (or might reduce

them), while reducing producer returns.

Option 3: The Proposed Consolidation

The proposed consolidation is a result

of extensive analysis of data as

previously indicated and consideration

of public comments submitted in

response to Options 1 and 2. Extensive

outreach, which is explained in the

‘‘Public Input’’ section, was completed.

After compiling this information, the

proposed order consolidation was

developed to ensure industry integrity.

Eleven marketing areas are proposed

in this rule, including modifications to

some of the 11 marketing orders

suggested in Option 2. Marketing data

was further examined for some of the

suggested consolidated marketing areas

to determine the most appropriate

configurations of the consolidated areas.

Primary criteria continues to be the

seven used in the two earlier reports on

order consolidation. As a result of

further analysis, the configurations of

the Northeast, Mideast, Southeast,

Upper Midwest and Central areas have

changed significantly from those

suggested in Option 2, and minor

changes have been made to the

Appalachian area. The modifications for

these areas from the revised preliminary

report (Option 2) are as follows:

NORTHEAST—Minus some previously

suggested area to be included in the

Northeast (the southern tier of 3 western

New York counties and Pennsylvania

Milk Marketing Board Areas 2 and 3);

APPALACHIAN—Minus five Kentucky

counties that were part of the former
4818 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

14The Identical Provisions Committee was

established in May 1996 to address uniformity in

order provisions during the Federal order reform

process. This committee and others established are

described further in the ‘‘Background’’ portion of

this proposed rule.

Paducah order area, now suggested to be

in the Southeast market;

SOUTHEAST—Addition of 11

northwest Arkansas and 22 entire and 1

partial Missouri counties currently part

of the Southwest Plains Federal order, 6

Missouri counties currently part of the

Southern Illinois-Eastern Missouri

Federal order, 16 currently unregulated

southeast Missouri counties, 20

currently unregulated Kentucky

counties (were suggested to be in the

Appalachian market); MIDEAST—

Minus the current Pennsylvania Milk

Marketing Board Area 6 and two

southwestern New York counties, all

currently non-Federally regulated;

UPPER MIDWEST—Minus the Iowa,

Eastern South Dakota, NebraskaWestern Iowa Federal order areas;

CENTRAL—Addition of the Iowa,

Eastern South Dakota, NebraskaWestern Iowa Federal order areas, 68

currently-unregulated counties in

Kansas, Missouri, Illinois, Iowa,

Nebraska and Colorado, and minus 11

northwest Arkansas and 22 entire and 1

partial Missouri counties currently part

of the Southwest Plains Federal order, 6

Missouri counties currently part of the

Southern Illinois-Eastern Missouri

Federal order, and 16 currently

unregulated southeast Missouri

counties. The FLORIDA, SOUTHWEST,

ARIZONA-LAS VEGAS, WESTERN and

PACIFIC NORTHWEST marketing areas

did not change from the revised

preliminary report.

Based on the WAUV calculations

shown in the previous table, utilization

rate changes due to consolidation could

affect producer prices. The column

labeled ‘‘Proposed Rule’’ shows the

WAUV for the consolidated order and

each of the current orders suggested in

this proposed rule.

In the Northeast market, for producers

currently affiliated with the New YorkNew Jersey order, the proposed option

would have positive impacts on their

WAUV, while New England and Middle

Atlantic producers would be negatively

impacted. In the Appalachian market,

Carolina producers should expect some

negative impacts due to consolidation,

while Tennessee Valley and LouisvilleLexington-Evansville producers would

experience positive effects from this

consolidation. In the Florida market,

Upper Florida producers would gain

while Tampa Bay and Southeastern

Florida producers would have a

negative impact resulting from this

consolidation. With the addition of

marketing area to the Southeast, the

WAUV for Southeast producers may be

expected to be positively impacted. In

the Mideast market, producers affiliated

with the Ohio Valley and Southern

Michigan Federal orders would

probably see increases in blend prices

due to this consolidation, while

producers affiliated with the Eastern

Ohio-Western Pennsylvania, Michigan

Upper Peninsula, and Indiana Federal

orders would see decreases. In the

Upper Midwest market, the Upper

Midwest producers should see slight

increases, while Chicago Regional

producers would have no impact due to

this consolidation. In the Central

market, producers with the NebraskaWestern Iowa and Southwest Plains

markets would see increases, producers

affiliated with Southern Illinois-Eastern

Missouri, Central Illinois, Greater

Kansas City, Eastern South Dakota, and

Iowa markets may see decreases, and

Eastern Colorado producers would see

no impact. In the Southwest market,

producers affiliated with New MexicoWest Texas would see increases due to

this consolidation while Texas

producers would see decreases.

Producers in the Arizona-Las Vegas

market may receive a positive impact on

producer prices due to an additional

handler regulated in this order area. In

the Western market, Southwestern

Idaho-Eastern Oregon producers would

see increases but Western Colorado and

Great Basin producers would see

decreases. The Pacific Northwest market

remains virtually the same as it does

currently and thus, no or little impact

on producer prices would be expected.

Of approximately 83,000 dairy

producers delivering milk to handlers

regulated under the milk orders, about

80,000 are considered to be small

businesses under the production

guideline of less than 326,000 pounds

per month. The additional estimated 13

percent of Pennsylvania’s total milk

production represented by the

Pennsylvania Milk Marketing Board

which would have been added in

Option 2, would not be included under

this option.

As stated above, handlers are

impacted more significantly by class

prices and minimum prices than by

expected utilization changes resulting

from consolidation. Of the 337 plants

expected to be fully regulated under this

11-market proposed configuration, 164

plants are estimated to be small

businesses on the basis of fewer than

500 employees.

Based on the comments received in

response to the revised preliminary

report (Option 2) it has been determined

that consolidation of the existing orders

does not necessitate expansion of the

consolidated orders into areas in which

handlers are subject to minimum Class

I pricing under State regulation,

especially when the states’ Class I prices

exceed or equal those that would be

established under Federal milk order

regulation. Such regulation would have

the effect of reducing returns to

producers already included under State

regulation without significantly

affecting prices paid by handlers who

compete with Federally-regulated

handlers.

In an effort to avoid extending Federal

regulation to handlers whose primary

sales areas are outside current Federal

order marketing areas, but who already

are subject to similar minimum uniform

pricing under State regulation, the inarea Class I disposition percentage

portion of the pool distributing plant

definition is proposed to be 25 percent

for the Northeast order and 30 percent

for the Mideast order, instead of the 10

or 15 percent used in the other nine

consolidated order areas. It is estimated

that five plants in Pennsylvania,

Maryland and Virginia that would have

been fully regulated using 15 percent

would remain partially regulated, as

they currently are, using 25 and 30

percent, respectively. At least three of

these five handlers meet the small

business criteria.

Exempt Plants

Options 2 and 3 both recognize the

Identical Provisions Committee 14

determination than a handler

distributing less than 150,000 pounds

per month of fluid milk products does

not have a significant competitive effect

on the market, and that handlers of such

size should, therefore, be exempt from

the pricing and pooling provisions of

the orders. The level of route

disposition required before an exempt

plant becomes regulated varies in the

current orders. As recommended, any

plant with route disposition during the

month of 150,000 pounds or less would

be exempt in the consolidated orders.

This limit reflects the maximum amount

of fluid milk products allowed by an

exempt plant in any current Federal

milk order and ensures plants that are

currently exempt from regulation would

remain so. Under this proposed rule, it

is expected that 36 distributing plants

that otherwise would be identified as

fully regulated plants are identified as

exempt plants. Therefore under this

provision, these plants would not be

subject to the pricing and pooling

provisions of their respective order.

Although 150,000 pounds of fluid

milk disposition per month may
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4819

15These reports can be obtained from the

Agricultural and Food Policy Center, Department of

Agricultural Economics, Texas A&M University,

College Station, Texas 77843–2124, telephone (409)

845–5913 or on the Internet at http://

AFPC1.TAMU.EDU.

represent a level at which exempting a

distributing plant could be expected not

to have a serious detrimental impact on

the ability of a Federal milk order to

provide for uniform pricing to handlers

and producers, it would be quite

difficult to select a higher level of

exemption without compromising the

purposes of the regulation. The under500-employee definition of a small

business assures that nearly all singleplant milk handlers would qualify as a

small business. Many of the ‘‘small’’

businesses may be among the largest

competitors in a particular market.

In addition, numbers of employees

could be expected to vary greatly with

the nature of a plant’s operation. For

instance, the number of persons

employed by two plants processing and

distributing equal volumes of fluid milk

products could be very different if one

plant contracts out its producer milk

hauling, laboratory operations and

packaged product distribution, while

the other plant performs all of these

operations with its own employees. For

this reason alone, it would be

inappropriate to exempt handlers from

regulation, or to impose differing

regulatory burdens, on the basis of their

size beyond the minimal size

determined to be less than a significant

competitive force in the market.

Many current Federal orders also

provide regulatory exemption for a plant

operated by a state or Federal

government agency. For example, some

states have dairy farm and plant

operations that provide milk for their

prison populations. As recommended,

regulatory exemption would be

continued under the consolidated

orders unless pool plant status is

desired. Additionally, regulatory

exemption is intended to include

colleges, universities and charitable

institutions because these institutions

generally handle fluid milk products

internally and have little or no impact

in the mainstream commercial market.

However, in the event that these entities

do distribute fluid milk through

commercial channels, route sales by

such entities, including government

agencies, would be monitored to

determine if Federal regulations should

apply. Under this proposed rule, it is

expected that 18 distributing plants

would be identified as exempt based on

their institutional status.

Producer-handlers

Also exempt from full regulation

would be those entities that operate as

both a producer and a handler. A

primary basis for exempting producerhandlers from the pricing and pooling

provisions of a milk order is that these

entities are customarily small

businesses that operate essentially in a

self-sufficient manner. During August

1997, 111 producer-handlers submitted

reports under the Federal milk

marketing order program.

Basic Formula Price Options

A number of options for determining

a basic formula price were considered

and analyzed in the process of

developing the proposed basic formula

price (BFP). In addition to the proposed

method of pricing components based on

their value in manufactured products,

other options examined, by both the

Agricultural Marketing Service’s Dairy

Division Basic Formula Price

Replacement Committee and by the

University Study Committee (USC), led

by Dr. Ronald D. Knutson of Texas

A & M University, were: economic

formulas, futures markets, cost of

production, competitive pay pricing,

and pricing differentials only.

Descriptions of the two Committees’

analyses, and results of their work are

included in ‘‘A Preliminary Report on

Alternatives to the Basic Formula

Price,’’ published in April 1997 by the

Basic Formula Price Committee, Dairy

Division, AMS; and the following

reports from the Agricultural and Food

Policy Center, Texas A&M University

System:

‘‘An Economic Evaluation of Basic

Formula Price (BFP) Alternatives,’’

AFPC Working Paper 97–2, June 1997.

‘‘Evaluation of ‘Final’ Four Basic

Formula Price Options,’’ AFPC Working

Paper 97–9, August 1997.15

The primary criterion used by the

Dairy Division BFP Committee was that

any replacement BFP option reflect the

supply of and demand for milk used in

manufactured dairy products. At the

same time, one of the USC’s critical

criteria for a replacement BFP was that

it reliably reflect market conditions for

all manufactured products.

In trying to determine the most

appropriate replacement for the current

BFP, which uses a survey of prices paid

by manufacturing plants for non-Grade

A milk updated by a product price

formula, the goal of both groups was a

market-based alternative. The BFP

Committee measured the extent to

which each pricing option met its

primary goal by tracking the options

against the current BFP for a period of

prior months, on the basis of the

assumption that the current BFP

successfully reflects the supply and

demand for milk used in manufactured

products. The USC Committee used an

econometric procedure to test the ability

of the alternatives they considered to

reflect supply and demand.

To the extent the goal of identifying

a BFP that reflects the value of milk

used in manufactured products is

capable of attainment, all market

participants would be affected by the

BFP replacement in the same manner as

if they were operating in a free market,

with no external impacts caused by

regulation. To the extent the goal is

achieved, then, there would be no

uneven impact on market participants

on the basis of size. All market

participants, (handlers, producers and

consumers), would be affected in the

same manner as if there were no

regulation. However, the existence of

minimum order pricing serves to assure

that small handlers pay no more for

their milk than larger entities (unless

the market allows higher prices to be

exacted from small buyers), and that

small producers receive the same

minimum uniform price for the milk or

components of milk they produce as

large producers. Consumers can be

assured that the prices generally

charged for dairy products are prices

that reflect, as closely as possible, the

forces of supply and demand in the

market.

Of the options considered and

analyzed, both groups studying the

issue determined that the option of

pricing components of milk according to

their value in manufactured products, as

reflected by the sales prices of those

products, best approximates the

intersection of supply and demand for

milk used in manufactured dairy

products.

Manufacturing Allowances

Make allowances or manufacturing

allowances, one of the factors

incorporated in the formulas for

determining component values, may

reflect more closely the manufacturing

costs of large firms than those of small

firms. These manufacturing costs would

be used to adjust the sales prices of

dairy products to the value of milk

purchased to make the products. To the

extent these allowances fail to reflect

the full cost of manufacturing, they may

require handlers to pay more for milk

than they can realize from the sale of

their products. On the other hand, if the

manufacturing allowances more than

cover the cost of manufacturing,

handlers may be assured of extra

margins.

Although it may appear that the use

of make allowances in the computation
4820 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

of component prices would advantage

large processors because of possible

economies of scale, these economies

exist regardless of whether they are

recognized in price computations. If the

assumption is made that economies of

scale exist in dairy plants and that large

plants are more efficient than small

plants, a manufacturing allowance that

fully covers a small handler’s cost of

making products would merely increase

the profit margin of its larger

competitors. At the same time,

producers unfairly would be required to

subsidize the manufacturing costs of

handlers who use their milk, and

consumers would pay more for their

dairy products than the costs of

production and processing would

justify.

An attempt has been made, using

Cornell University studies of

manufacturing costs at a number of

manufacturing plants distributed

around the U.S., to arrive at

economically defensible make

allowances. Since it is difficult to

distinguish the differential effects of

market-based component pricing on

small and large firms engaged in

manufacturing dairy products, reliance

would be placed on industry

participants to comment on these facets

of the proposed BFP replacement.

Impact of Multiple Component Pricing

Provisions on Small Entities

Seven of the eleven proposed orders

provide for milk to be paid for on the

basis of its components (multiple

component pricing, or MCP). Five of the

seven MCP orders also provide for milk

values to be adjusted according to the

somatic cell count of producer milk.

The equipment needed for testing milk

for its component content can be very

expensive to purchase, and requires

highly-skilled personnel to maintain

and operate. The cost of infra-red

analyzers ranges from just under

$100,000 to $200,000. The infra-red

machines that are used by most

laboratories would test for total solids

and somatic cells at the same time the

butterfat and protein tests are done.

No new report forms are needed

under multiple component pricing;

however, some additional reporting is

necessary to enable handlers’ values of

milk to be determined on the basis of

components, and to assure that

producers are paid correctly. For the

market administrators to compute the

producer price differential, handlers

would need to supply additional

information on their currently-required

monthly reports of receipts and

utilization. In addition to the product

pounds and butterfat currently reported,

handlers would be required to report

pounds of protein, pounds of other

solids, and, in 5 of the orders, somatic

cell information. This data would be

required from each handler for all

producer receipts, including milk

diverted by the handler, receipts from

cooperatives as 9(c) handlers (that is,

the cooperative acts as a handler); and,

in some cases, receipts of bulk milk

received by transfer or diversion.

Since producers would be receiving

payments based on the component

levels of their milk, the payroll reports

that handlers supply to producers must

reflect the basis for such payment.

Therefore the handler would be

required to supply the producer not

only with the information currently

supplied, but also, (a) the pounds of

butterfat, the pounds of protein, and the

pounds of other solids contained in the

producer’s milk, as well as the

producer’s average somatic cell count,

and (b) the minimum rates that are

required for payment for each pricing

factor and, if a different rate is paid, the

effective rate also. Many handlers

already report this additional

information. It should be noted that

handlers already are required to report

information relative to pounds of

production, butterfat and rates of

payment for butterfat and

hundredweight of milk to the

appropriate Market Administrator.

Of over 74,000 producers whose milk

was pooled in December 1996 under 23

of the current orders that would be part

of consolidated orders providing for

multiple component pricing, the milk of

52,500 of these producers was pooled

under 13 current orders that have MCP.

Handlers in these markets already have

incurred the initial costs of testing milk

for its component content, and have

made the needed transition to reporting

the component contents of milk receipts

on their handler reports to the market

administrators, and on their reports of

what they have paid producers.

Of the remaining 21,750 producers

who would be affected by MCP

provisions under a Federal order

(including an estimated 20,650

producers qualifying as small

businesses), the milk of approximately

13,000, or 60 percent, currently is

received by handlers who test or have

the capability of testing for multiple

components and, in many cases,

somatic cells. Many of these handlers

also report component results to the

producers with their payments. Almost

all of the producers whose milk

currently is not being tested or paid for

on the basis of components are located

in the New England and New York-New

Jersey marketing areas, which would be

consolidated with the Middle Atlantic

area into the proposed Northeast order.

Accommodation has been made to

ameliorate handlers’ expenses of testing

producer milk for component content

As component pricing plans have

been adopted under a number of the

present Federal milk orders since 1988,

the component testing needed to

implement these pricing plans has been

performed by the market administrators

responsible for the administration of the

orders involved for handlers who have

not been equipped to make all of the

determinations required under the

amended orders. It has been made clear

in the decisions under which these

plans have been adopted that handlers

who would find it unduly burdensome

to obtain the equipment and personnel

needed to accomplish the required

testing may rely on the market

administrators to verify or establish the

tests under which producers are paid.

As noted above, however, many

handlers not now subject to MCP

provisions under Federal orders have

nevertheless already undertaken

multiple component testing and

payment programs.

Pricing Options

Several pricing options, as discussed

below, were considered as replacements

for the current Class I price structure.

Five of the options were determined to

have a negative impact on small

businesses, albeit slight or significant.

These options included relative use

differentials, flat differentials, modified

flat differentials, demand based

differentials, and a decoupled baseline

Class I price with adjustors. In addition

to the impacts on small businesses,

these options were not considered

viable based on additional qualitative

analysis contained in the findings and

conclusions of the proposed rule.

Relative Use Differentials

The use of relative use differentials

based on Class I utilizations was

considered as an option for replacing

the Class I price structure. Using this

concept, the relative use Class I

differential would equal $1.60 per

hundredweight plus the relative use

ratio times $1.00. A 25 percent limit

would be applied so the new differential

would not exceed 125 percent of the

current differential nor fall to less than

75 percent of the current differential. A

percentage limit was placed on the

differential changes to temper

adjustments based on market supply

and demand conditions.

The advantages of the system are that

it allows Class I differentials to adapt to
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4821

supply and demand conditions within a

given marketing area based on changes

in the utilization. However, because the

differentials would be allowed to

change independently from neighboring

areas, serious problems arise with orderto-order alignment.

The next table illustrates the Class I

differentials under the proposed

consolidated orders. These differentials

are not location-specific within the

applicable orders. For purposes of this

analysis and to provide a basis for

comparison within the proposed

consolidated orders, a weighted average

Class I differential has been calculated

for each order, based on October 1995

data. This weighted average differential

is computed by multiplying the

percentage of Class I milk in each of the

current orders that comprise the

consolidated order by the applicable

current order differential and adding the

resulting amounts. This weighted

average differential is not location

specific for the consolidated order.

RELATIVE USE CLASS I DIFFERENTIALS IN PROPOSED ORDERS

[Based on October 1995 Data]

Proposed order 1

Relative use

ratio 2

(percent)

+ $1.60 =

class I diff.

($/cwt)

Weighted average diff.

($/cwt) 3

Maximum diff.

range

(75%–125%)

New diff

($/cwt)

Change in diff.

($/cwt)

Northeast ................................................... 0.92 2.52 3.14 2.35–3.93 2.52 ¥0.62

Appalachian .............................................. 4.60 6.20 2.79 2.09–3.49 3.49 0.70

Southeast .................................................. 5.76 7.36 3.04 2.28–3.80 3.80 0.76

Florida ....................................................... 7.54 9.14 3.89 2.92–4.86 4.86 0.97

Mideast ...................................................... 1.26 2.86 1.91 1.43–2.39 2.39 0.48

Central ....................................................... 0.95 2.55 2.52 1.89–3.15 2.55 0.03

Up. Midwest .............................................. 0.53 2.13 1.32 0.99–1.65 1.65 0.33

Southwest ................................................. 0.93 2.53 3.01 2.26–3.76 2.53 ¥0.48

AZ-Las Vegas ........................................... 1.04 2.64 2.46 1.85–3.08 2.64 0.18

Western ..................................................... 0.42 2.02 1.84 1.38–2.30 2.02 0.18

Pacific NW ................................................ 0.55 2.15 1.90 1.43–2.38 2.15 0.25

1Based on the 11 proposed orders contained in this proposed rule.

2 Relative use ratio = Class I ÷all other uses. 3Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each current order multiplied by the applicable current order differential.

The review of this option indicates

that differentials would probably have a

minimal impact on small businesses,

both processors and producers. For a

majority of the Federal order system,

producers and processors would

experience Class I price increases.

However, due to offsetting factors

impacts would be reduced.

Class I differentials are estimated to

increase from $0.00 to $0.48 in the

Central, Mideast, and Midwestern

regions. Currently, over-order charges

are significantly higher and would

largely absorb these differential

increases. Impacts on small producers

and processors would be minimal.

The Northeastern marketing area

could be affected significantly by the

adoption of a relative use differential

because of the decrease in Class I prices

and because this area has a high

concentration of small businesses, both

producers and processors. There are

approximately 18,860 small producers

and 280 small processors located in this

region. Processors would pay on average

$0.62 less for Class I milk as compared

to the current system. Producers would

likely turn to over-order charges to try

to make up for their lost revenue. If this

were to occur, then small processors

and producers would be placed at a

competitive disadvantage to large

businesses because often the small

businesses do not maintain the

resources needed to effectively negotiate

for supplies of milk. However,

historically this region has had

difficulty maintaining a large over-order

premium structure and assumptions are

that this would continue. If so, then all

producer income would decrease

slightly possibly impacting the market’s

milk supplies.

Large increases in Class I differentials

would occur in the orders located in the

Southeast. There are approximately

4,000 small producers and 30 small

handlers in the Florida and Southeast

areas. Class I handlers would experience

increased competition from lower cost

handlers in nearby markets. This may

have a greater impact on small

processors because of their ability to

compete based on available resources.

Although higher differentials would be

returned to producers through the

Federal order uniform price, overall

producers in the Southeast markets

would probably not experience any

significant gains from these increased

differentials due to reduced over-order

premiums being charged. However, this

would benefit small producers who may

not be able to negotiate as effectively for

over-order prices.

The Southwest market is the other

market to experience decreases in

differentials. Approximately 1,400 small

producers and 30 small handlers would

be impacted by the decrease in Class I

prices. Over-order charges currently are

relatively small in this market and an

attempt to increase the charges would

likely occur. However, producer groups

have had the same difficulty as the

Northeast in maintaining an over-order

structure. A $0.48 drop in the average

differential in the Southwestern market

would surely be felt by producers and

accelerate the exodus of producers from

the East Texas supply area, most likely

smaller producers who may not have

significant resources to adapt to the

lowered prices or who would not be

able to negotiate for higher over-order

prices. Producers in New Mexico and

West Texas would also be affected, but

the impact may not be as severe.

Processors in this region may benefit

from the decrease in Federal order

prices. However, if there is an increase

in the over-order prices that the

processors must pay, then the amount

gained from the decrease would be

lessened. In fact, if over-order pricing is

implemented then small processors may

be at a disadvantage because they may

not be able to compete for milk beyond

the reduction in Class I prices.

In the Western regions, Class I

differentials are expected to increase

slightly. Over-order charges in these

markets are not as great as in the

Midwestern markets and would

probably be unable to totally absorb the

Class I price increase. Producer pay
4822 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

16Table 35—1996 Annual Average Announced

Cooperative Class I Prices in Selected Cities, Dairy

Market Statistics, 1996 Annual Summary, USDA,

AMS.

prices and Class I handler costs would

increase slightly. All producers would

benefit from the price increase,

including about 690 small producers.

However, about 50 small processors

may be at a disadvantage. Small

processors may not have the additional

revenue necessary to adapt to the $0.18

to $0.25 per hundredweight increase in

Class I prices.

Because of the limited effect of overall

Class I differential changes within

individual orders, relative use

differentials would have a minimal

effect on small businesses, both

producers and processors. Areas that

have decreases in Class I differentials

would have a minimal negative impact

on producer pay prices. Over 20,000

producers, or about 95 percent of all

producers, in these regions are

categorized as small businesses. On the

other hand, handlers in areas with larger

increases in the Class I differentials

would experience increased

competition from lower cost regions.

Location advantages of some small

handlers would disappear while others

emerge. Handler equity in these

competing markets could erode placing

some small handlers under greater risk.

Approximately 300 handlers in the

Northeast and Southwest markets are

categorized as small handlers, about half

of the total number of handlers.

However, the adoption of a relative

use differential could have a significant

impact on small businesses, both

producers and processors that are

located in adjacent orders. Because

Class I prices would be able to change

independently from each other,

significant Class I price variances may

begin to exist. As Class I utilization

changes, these changes may be

significant. This lack of alignment

between bordering orders would

increase competition in areas where

Class I price differences are significant

having a greater impact on small

businesses.

Flat Differentials

The use of flat differentials was

considered as an option for replacing

the Class I price structure. Under this

system, all Class I differentials would be

established at $1.60 regardless of the

location. Establishing the differentials at

an equal level throughout the United

States does not recognize the location

value associated with milk. Because this

value would not be reflected in the

minimum price under the Federal order

program, flat differentials could affect

small businesses, as shown by the

following table.

FLAT CLASS I DIFFERENTIALS IN PROPOSED ORDERS

(Based on October 1995 Data)

Suggested consolidated order 1

Flat

differential

($/cwt)

Weighted

average

differential

($/cwt) 2

Change

($/cwt)

Northeast ...................................................................................................................................... 1.60 3.14 ¥1.54

Appalachian .................................................................................................................................. 1.60 2.79 ¥1.19

Southeast ..................................................................................................................................... 1.60 3.04 ¥1.44

Florida ........................................................................................................................................... 1.60 3.89 ¥2.29

Mideast ......................................................................................................................................... 1.60 1.91 ¥0.31

Central .......................................................................................................................................... 1.60 2.52 ¥0.92

Upper Midwest ............................................................................................................................. 1.60 1.32 0.28

Southwest ..................................................................................................................................... 1.60 3.01 ¥1.41

AZ-Las Vegas ............................................................................................................................... 1.60 2.46 ¥0.86

Western ........................................................................................................................................ 1.60 1.84 ¥0.24

Pacific NW .................................................................................................................................... 1.60 1.90 ¥0.30

1Based on the 11 proposed orders contained in this proposed rule.

2Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each current order multiplied by the applicable current order differential.

The review of this option indicates

that flat differentials could change the

competitive relationship between large

and small processors and producers.

Large processors could have a

competitive advantage over small

processors in negotiating with

producers for supplies of milk at prices

above the established minimum price.

Likewise, large producers could have a

better bargaining position when

competing with small producers to

supply a processor.

In all areas of the United States, with

the exception of the Upper Midwest,

producers and processors would

experience significant decreases in the

Class I price. The largest decrease would

occur in the Florida order with the Class

I price decreasing $2.29 per

hundredweight. This would result in

approximately a $2.06 decrease in the

uniform price paid to producers.

Although over-order pricing has been

effective in Florida, it is unlikely that

the over-order prices would be able to

offset this total decrease. Data regarding

over-order pricing are not published but

an indication of the level is provided by

comparing the Federal order Class I

milk price to the announced

cooperatives Class I price. In Miami,

Florida, during 1996, the cooperatives

announced price averaged $2.25 per

hundredweight higher than the

Southeastern Florida Federal order

Class I price.16

Not only could producers suffer from

a loss in the value of the Class I price

reflected under the order, but inequity

among processors could occur in the

marketplace. More of the value of milk

would be negotiated above the Federal

order minimum. Because this value is

outside of the regulatory minimum

price, there is little that would ensure

that processors are paying similar prices

for milk. This could impact small

processors more than larger processors

because of their lack of resources

needed to negotiate and obtain needed

supplies of milk.

The results of implementing flat Class

I pricing would be the same throughout

the United States where decreases

occur. Areas where flat differentials

would have the greatest impact are

located in the Northeast, Southeast,

Southwest, and Central areas.

Approximately 34,400 small producers

and 480 small handlers are located in

these regions of the United States.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4823

17Table 35—1996 Annual Average Announced

Cooperative Class I Prices in Selected Cities, Dairy

Market Statistics, 1996 Annual Summary, USDA,

AMS.

18The 70 percent figure was merely selected for

illustrative purposes and no analysis has been

conducted to determine if this is an appropriate

percentage.

The Upper Midwest would

experience a slight increase in Class I

prices if a $1.60 flat differential were

implemented. The Class I price would

increase by $0.19 per hundredweight

which would result in about a $0.04

increase in the uniform price. Although

there are a substantial number of small

producers located in this region,

approximately 28,400, this increase

would not impact the price that

producers in this area receive for their

milk. Over-order pricing is predominant

in this region. Next to Florida, the

Upper Midwest region has the highest

announced cooperative Class I prices,

between $1.19 to $1.79 17 higher than

the Federal order Class I price. Because

the over-order prices are substantial in

this area, the $0.19 increase in Class I

prices would likely be offset by a slight

decrease in over-order prices, thus the

180 small handlers and the 28,400 small

producers would likely not see any

increase in overall prices.

Although the use of flat differentials

would require no additional reporting,

recordkeeping, or compliance

requirements it is not being considered

as a viable replacement for the current

Class I price surface because, in

addition to other reasons addressed in

the proposed rule, of the impact that flat

differentials could have on a substantial

number of small businesses both

producers and processors. Flat

differentials of $1.60 per hundredweight

would negatively impact more than

52,000 total small businesses.

Modified Flat Differentials

The use of modified flat differentials

was considered as an option for

replacing the Class I price structure.

This option is based on the flat Class I

price concept modified by the relative

use price concept. Under this system, an

equal differential would be established

in all orders and then, in orders that

were determined to be deficit based on

a Class I utilization percentage, an

additional value would be added to the

flat differential. Deficit orders were

deemed to have a Class I utilization

greater than 70 percent. If Class I use

exceeds 70 percent, the Class I

differential in an order would be $2.00

+ $0.075* (Class I use percent—70

percent). This option assumes that

markets with Class I use equal to or

below 70 percent have an adequate

reserve supply of milk to meet fluid

needs and that markets with Class I use

about 70 percent require additional milk

supplies to meet fluid demand.18

As with the relative use option

(Option 2), the estimated Class I

differentials presented in the table are

not entirely location-specific within the

consolidated order. To provide a basis

for comparison, a weighted average

differential has been calculated based

on current differentials for the

consolidated orders using October 1995

data, as shown in the following table.

These differentials are also not locationspecific.

MODIFIED FLAT CLASS I DIFFERENTIALS IN PROPOSED ORDERS

[Based on October 1995 Data]

Proposed order 1 Class I use

(percent)

Mod. flat

diff.

($/cwt)

Weighted

avg diff.2

($/cwt)

Change

($/cwt)

Northeast .......................................................................................................... 47.9 2.00 3.14 ¥1.14

Appalachian ...................................................................................................... 81.5 2.86 2.79 0.07

Southeast .......................................................................................................... 85.2 3.07 3.04 0.03

Florida ............................................................................................................... 88.3 3.37 3.89 ¥0.52

Mideast ............................................................................................................. 55.8 2.00 1.91 0.09

Central .............................................................................................................. 48.8 2.00 2.52 ¥0.52

Upper Midwest .................................................................................................. 34.5 2.00 1.32 0.68

Southwest ......................................................................................................... 48.1 2.00 3.01 ¥1.01

AZ-Las Vegas ................................................................................................... 48.9 2.00 2.46 ¥0.46

Western ............................................................................................................ 29.6 2.00 1.84 0.16

Pacific NW ........................................................................................................ 35.6 2.00 1.90 0.10

1Based on the eleven proposed orders contained in this proposed rule.

2Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each current order multiplied by the applicable current order differential.

Like flat differentials, modified flat

differentials do not recognize location

values associated with milk. Because

this value would not be reflected in the

minimum price under the Federal order

program, modified flat differentials

could have a dramatic effect on small

businesses because modified flat

differentials would change the

competitive relationship between large

and small processors and producers.

Just as with flat differentials, large

processors could maintain a competitive

advantage over small processors in

negotiating with producers for supplies

of milk at prices above the established

minimum price. Likewise, large

producers might retain strong

bargaining positions when competing

with small producers to supply a

processor.

Under this modified flat differential,

only three orders would meet the

necessary requirement to have a

differential established above the $2.00

flat portion, Appalachian, Southeast,

and Florida. Basically, this system

would be equivalent to adopting a flat

Class I pricing system in most of the

United States. Although in this example

the impacts appear to be different, with

five of the proposed orders reflecting

differential increases, this is only

because the flat portion of the Class I

differential is established at $2.00

instead of $1.60.

As with the flat differential, the Upper

Midwest producers and processors

would experience Federal order Class I

price increases. In this example, the

estimated price would increase by $0.59

which would return approximately

$0.12 to the producers in a higher

uniform price. The largest decrease

would occur in the Southwest and

Northeast orders with a Class I price

decrease of $1.01 and $1.13,

respectively. The use of a modifier to

the flat differential based on the Class I

utilization would help to mitigate the

price decreases in the Southeast orders.
4824 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

19US Dairy Sector Simulator model developed

and run by Cornell University to solve for the geographical spatial relationships of milk for

particular uses of milk, primarily fluid.

With the use of the modifier, the three

Southeast orders would not all

experience decreases in Class I prices.

The Appalachian order would have a

$0.07 increase while the Florida order

and the Southeast order would lose

$0.52 and $0.01, respectively.

Ultimately about 4,000 producers in the

Southeast and Florida areas would

experience a decline in the Class I price

received under Federal orders, while

nearly 4,200 producers in the

Appalachian area would find their Class

I price increasing.

The competitive position among

processors could become altered under

modified Class I differentials. More of

the value of milk would be negotiated

above the Federal order minimum.

Because this value is outside of the

regulatory minimum price, nothing

would ensure that processors are paying

similar prices for milk. This could

impact small processors more than

larger processors if the smaller

processors lack the resources needed to

negotiate and obtain needed supplies of

milk. In addition, processors in areas

where the modifier becomes effective

would be placed at a disadvantage

because the regulated minimum price

would be allowed to fluctuate and their

minimum costs would not be the same

as those with the flat differential or

where the Class I price is allowed to

adjust. The use of $2.00 per

hundredweight modified flat

differentials would require no

additional reporting, recordkeeping, or

compliance requirements. However, up

to 34,000 small businesses could be

impacted by this proposal.

Demand Based Differentials

The use of demand based differentials

was also considered as an option for the

Class I price structure. Under this

system, an equal differential would be

applied to all orders, and in defined

demand centers, an additional

component would be added to reflect

the costs of transporting milk from

reserve supply areas to demand centers.

This option would increase the

regulatory burden on all businesses,

both small and large, through additional

reporting, recordkeeping, and

compliance requirements. Small

processors could be disadvantaged

under this option.

This proposal involves establishing a

fluid supply area for each market from

which milk production around the

major bottler locations is procured and

a reserve supply area would be

established that would be outside the

fluid supply area from which milk

production is sometimes supplied to

fluid handlers in the major fluid bottling

locations. The Class I differential for the

reserve area under this proposal would

be set at $1.00 per hundredweight. For

fluid supply areas, the differential

would be $1.00 plus transportation costs

from the reserve area to the fluid

demand area. Monies paid by Class I

handlers through the second part of the

Class I differential would be used to

fund the order’s system of

transportation credits and balancing

payments. These transportation credits

and balancing payments would be

provided to organizations that supply

the order’s fluid market.

To encourage movement of the

nearest milk supply for fluid use, two

restrictions would be needed. First, a

handler’s total transportation credits

would be limited to the variable amount

paid in by the handler for

transportation. Second, a handler’s total

transportation credit would not exceed

80 percent of the handler’s

transportation bill on each Class I

shipment or 2.8 cents per

hundredweight per 10 miles (28 cents

per 100 miles), whichever is less. Any

residual left after paying transportation

credits would be added to the $1.00

differential and paid to all producers in

the pool.

The following table contains a few

examples of differentials that would

apply to specific locations. These

differentials are based on the farthest

distance that milk for fluid use is

transported, using the USDSS 19 model

to solve for each consumption point

individually as a guide for establishing

the differentials.

DEMAND-BASED CLASS I DIFFERENTIALS FOR SELECTED CITIES

Selected location

Current

differential

($/cwt)

Demandbased

differential

($/cwt)

Change

($/cwt)

Miami, FL ...................................................................................................................................... 4.18 3.88 ¥0.30

Tampa, FL .................................................................................................................................... 3.88 2.05 ¥1.83

Orlando, FL .................................................................................................................................. 3.88 3.08 ¥0.80

New Orleans, LA .......................................................................................................................... 3.65 1.28 ¥2.37

Atlanta, GA ................................................................................................................................... 3.08 2.38 ¥0.70

New York City, NY ....................................................................................................................... 3.14 1.80 ¥1.34

Chicago, IL ................................................................................................................................... 1.40 1.49 ¥0.09

Minneapolis, MN ........................................................................................................................... 1.20 1.11 ¥0.09

Phoenix, AZ .................................................................................................................................. 2.52 1.00 ¥1.52

Dallas, TX ..................................................................................................................................... 3.16 1.40 ¥1.76

Denver, CO .................................................................................................................................. 2.73 1.19 ¥1.54

Portland, OR ................................................................................................................................. 1.90 1.13 ¥0.77

Seattle, WA .................................................................................................................................. 1.90 1.31 ¥0.59

Boise, ID ....................................................................................................................................... 1.50 1.06 ¥0.44

The review of this option from a

producer viewpoint reveals that a

demand based differential system is

comparable to a flat differential option.

Producers would only be ensured that

the $1.00 portion of the differential

would be returned through the blend

price. Ultimately, this option could

result in income losses for all producers,

both large and small. Although

additional money is generated by the

demand based differential above the

$1.00, this additional money would be

used to fund transportation costs

associated with servicing the Class I

market. The differentials are established

at a lower level that would negatively

impact all 82,900 producers because of

the decrease in the actual value of Class

I revenue that is reflected in the Federal

order minimum price. Thus, the

disadvantages that producers, especially

small producers, might experience

under a flat or modified flat differential
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4825

20Economic Research Service multi-regional

model of the dairy industry.

system are applicable to demand based

differentials.

Like the two previous options, small

handlers also could be disadvantaged,

because less of the actual value of Class

I milk is reflected under the regulated

price which may lead to both processors

and producer inequity. The potential

negative effects discussed under flat

differentials and modified flat

differentials also apply to demand based

differentials. In addition, the adoption

of demand-based differentials would

result in a significant increase in

reporting, recordkeeping, and

compliance activities which would

impact all 1,450 handlers, but is likely

to be a greater burden on small

handlers. To ensure reimbursement for

a portion or all of a processors handling

charges, complete and detailed

transportation records must be kept.

New forms would be required for

submission, along with copies of all

transportation invoices. The additional

information could require more

personnel, training, and technology to

automatically keep track of such

information. While the costs associated

with this degree of recordkeeping are

not available, they could be significant

enough to disadvantage small

businesses.

Because the use of demand-based

differentials could result in a significant

increase in regulatory burdens to all

handlers as well as inequity among

producers and processors, demandbased differentials are not considered a

viable alternative.

Decoupled Baseline Class I Price with

Adjustors

The use of a decoupled baseline Class

I price with adjustors was considered as

an option for replacing the Class I price

structure. Under this system, the Class

I price would be decoupled from the

basic formula price, or the Class I price

mover, and a base price would be

established at a specified level.

Adjustments to this base price would be

made utilizing a supply/demand

adjustor and possibly a cost of

production indicator.

Under this option for Class I purposes

the base price would be floored at

$13.63 per hundredweight, the

November 1995 to October 1996 average

BFP. This price level would be used to

establish Class I prices using current

differentials. A supply/demand adjustor

of $0.12 per hundredweight for each 2

percent change in the rolling average

utilization would be used to change

prices in each of the orders to reflect

long-term trends. For example, a Class

I utilization change from 44 percent to

46 percent in a market would result in

a $0.12 per hundredweight gain in the

market’s Class I differential. Once the

utilization level changes, the new

utilization rate becomes the base for

future changes. Thus, if a market falls

from 44 percent to 42 percent, the new

base for comparing a 2-percentage point

change up or down is 42 percent.

In addition to the supply/demand

adjustor, a cost of production indicator

would be developed whereby Class I

prices would be increased in a timely

manner when input costs to dairy

farmers are increasing. One such

economic indicator might be feed costs.

While one such adjustor was developed

and submitted, it was received too late

to be included in this analysis.

The following table illustrates the

initial Class I differentials under the

proposed consolidated orders. These

differentials are not location-specific

within the applicable orders. For

purposes of this analysis and to provide

a basis for comparison within the

proposed consolidated orders, a

weighted average Class I differential has

been calculated for each order based on

October 1995 data. This weighted

average differential is computed by

multiplying the percentage of Class I

milk in each of the current orders that

comprise the consolidated order by the

applicable current order differential and

adding the resulting amounts. The

weighted average differential is not

location-specific for the consolidated

order.

Initially the differentials would be the

same. However, as this option impacts

production (supply) and use (demand),

there would be a change in the

utilization percentage, thereby causing

the differentials to vary.

INITIAL CLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON 1995 DATA UNDER DECOUPLED BASELINE CLASS I

PRICE WITH ADJUSTORS SYSTEM

Proposed order

Weighted

average differential

($/cwt) 1

Initial class I

differential

($/cwt)

Change in

differential

($/cwt)

Northeast ...................................................................................................................................... 3.14 3.14 0.00

Appalachian .................................................................................................................................. 2.79 2.79 0.00

Southeast ..................................................................................................................................... 3.04 3.04 0.00

Florida ........................................................................................................................................... 3.89 3.89 0.00

Mideast ......................................................................................................................................... 1.91 1.91 0.00

Central .......................................................................................................................................... 2.52 2.52 0.00

Up Midwest ................................................................................................................................... 1.32 1.32 0.00

Southwest ..................................................................................................................................... 3.01 3.01 0.00

AZ-Las Vegas ............................................................................................................................... 2.46 2.46 0.00

Western ........................................................................................................................................ 1.84 1.84 0.00

Pacific NW .................................................................................................................................... 1.90 1.90 0.00

1Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each current order multiplied by the applicable current order differential.

The review of this option indicates

that the decoupled baseline Class I price

with adjustors would create some

disruption in inter-market price

alignment because Class I differentials

would be allowed to adjust

independently from each other and may

have a serious impact on producers and

processors, particularly small producers

and processors. If Class I differentials

are allowed to adjust frequently, price

alignments established between and

among markets would disappear

causing inequity among competing

handlers. It is this inequity amongst

handlers that would have a significant

impact on a small business’s ability to

compete in the marketplace.

Analysis completed by the multiregional ERS model 20 indicates that the

increase in prices experienced would
4826 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

21USDSS results using May and October 1996

data.

not be sustainable. The results of the

model analysis indicate that the higher

floored Class I prices would impact the

all milk price and after 3 years,

producers would begin experiencing a

decrease in the revenue initially

generated by this option. This would

occur because the higher blend prices

(caused by higher Class I prices) would

stimulate milk production which would

then lead to lower manufacturing prices.

Because it is the blend price that is paid

to producers, the increase in the Class

I prices would not be enough to offset

the decrease in prices of the other

classes of use and the changes in

utilization which would affect the

differential levels.

Initially Class I differentials would

not change however, Class I prices

would increase because of the inclusion

of a higher floor price. With the use of

a floor, the variability in Class I prices

would be moderated. However, the use

of the floor price may impact the 79,600

smaller producers differently than the

8,400 larger producers because the

smaller producers may not have the

necessary financial resources to endure

such a transition.

The Proposed Class I Price Options

The options proposed in this rule are

a result of extensive review of the

current marketing structure and other

pertinent information. Extensive

outreach, as explained previously,

resulted in substantial input from the

public. After gathering the necessary

information, two options were

developed and are advanced in this

proposed regulation as viable Class I

price structures.

Currently, the Class I price structure

recognizes that milk has value by

location. By recognizing that milk has

value by location, small businesses are

placed more on the same competitive

footing as large businesses in the

minimum prices they pay for milk. The

use of either location-specific

differentials or relative-value

differentials would provide the

necessary recognition of the location

value of milk but at different levels.

Location-Specific Differentials (Option

1A)

This option would establish a

nationally coordinated system of

location-specific Class I price

differentials reflecting the relative

economic value of milk by location. An

important feature of the option is

including location adjustments that

geographically align minimum Class I

milk prices paid by fluid milk

processors nationwide regardless of

defined milk marketing area boundaries

or order pooling provisions. A basic

premise of this option is that the value

of milk varies according to location

across the United States.

The level of the location-specific

differentials proposed in this regulation

are such that small businesses would

experience minimal impacts if the

regulations were implemented. The

differentials are based on economic

model results,21 current marketing

conditions, and the costs of obtaining

alternative supplies of milk. Since a

price is established for every county

under this option, the following table

sets forth examples of adjusted

differentials at selected cities. Map 2

and General Provisions § 1000.52, as

contained in the discussion on price

structure, set forth the location adjusted

differentials in every county.

COMPARATIVE LOCATION-SPECIFIC CLASS I DIFFERENTIALS AT SELECTED CITIES

City

Class I differential

Difference

Current Loc.-specific

diff

Dollars Per Hundredweight

New York City, NY ....................................................................................................................... 3.14 3.15 .01

Charlotte, NC ................................................................................................................................ 3.08 3.10 .02

Atlanta, GA ................................................................................................................................... 3.08 3.10 .02

Tampa, FL .................................................................................................................................... 3.88 4.00 .12

Cleveland, OH .............................................................................................................................. 2.00 2.00 .00

Kansas City, MO .......................................................................................................................... 1.92 2.00 .08

Minneapolis, MN ........................................................................................................................... 1.20 1.70 .50

Chicago, IL ................................................................................................................................... 1.40 1.80 .40

Dallas, TX ..................................................................................................................................... 3.16 3.00 (.16)

Salt Lake City, UT ........................................................................................................................ 1.90 1.90 .00

Phoenix, AZ .................................................................................................................................. 2.52 2.35 (.17)

Seattle, WA .................................................................................................................................. 1.90 1.90 .00

Other than in the southwestern

portions of the United States, this

proposed option would have little

impact on most producers both large

and small. Likewise, processors should

not experience any substantial changes

in their abilities to compete for milk

supplies. In fact, producers and

processors should experience

improvements because location-specific

differentials provide improvements in

areas under the current system that are

not as well aligned. In addition

processors would experience

improvements in competing for milk

because the price is established for each

county regardless of where the milk is

pooled. Because more of the actual

value of Class I milk is reflected in the

minimum regulated price, both small

producers and processors can be

assured of maintaining their ability to

compete for a supply of milk.

A review of the six year average

quantitative analysis conducted using

the ERS model, assuming

implementation of the consolidated

orders, four classes of use, BFP as

proposed, and using location-specific

differentials would result in a decrease

in Class I utilization but an increase of

$0.03 in the all-milk price. Overall, this

pricing option would result in $55

million increase in cash receipts.

The use of location-specific

differentials would require no

additional reporting, recordkeeping, or

compliance requirements.

Relative-Value Specific Differentials

(Option 1B).

A nationally coordinated system of

relative-value specific Class I price

differentials and adjustments that

recognizes several low pricing areas is

the second of two options proposed.

These differentials rely on a least cost
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4827

optimal solution from the USDSS

Cornell model to develop a Class I price

structure that is based on the most

efficient assembly and shipment of milk

and dairy products to meet all market

demands for milk and its products. This

option relies more on the market and

the negotiating ability of processors and

producers to generate higher prices

when needed to provide the necessary

incentive to move milk in order to

satisfy demand.

Relative-value specific differentials

are designed to move the dairy industry

into more market-oriented environment

by reducing reliance on Federal

regulations in establishing actual Class

I milk prices. By lowering the

differentials in most of the United

States, marketing practices would have

a greater impact on Class I values in the

form of over-order prices and only the

producers who perform for the market

would benefit. Hence, the adoption of

relative-value differentials would move

the dairy industry to rely on the

negotiating abilities of both dairy

farmers and processors to determine

actual Class I values. Less efficient small

businesses could be disadvantaged

because of the lack of resources and

knowledge necessary to effectively

negotiate and maintain necessary price

levels. Map 3 and General Provisions

§ 1000.52, as contained in the proposed

rule, set forth the differentials in every

county. The following table sets forth

adjusted differentials at selected cities.

COMPARATIVE RELATIVE VALUE-SPECIFIC CLASS I DIFFERENTIALS AT SELECTED CITIES

City Current diff. Rel. valuespecific diff. Difference

Dollars Per Hundredweight

New York City, NY ....................................................................................................................... 3.14 2.07 (1.07)

Charlotte, NC ................................................................................................................................ 3.08 1.89 (1.19)

Atlanta, GA ................................................................................................................................... 3.08 2.46 (0.62)

Tampa Bay, FL ............................................................................................................................. 3.88 3.81 (0.07)

Cleveland, OH .............................................................................................................................. 2.00 1.54 (0.46)

Kansas City, MO .......................................................................................................................... 1.92 1.45 (0.47)

Minneapolis, MN ........................................................................................................................... 1.20 1.20 0.00

Chicago, IL ................................................................................................................................... 1.40 1.65 0.25

Dallas, TX ..................................................................................................................................... 3.16 1.68 (1.48)

Salt Lake City, UT ........................................................................................................................ 1.90 1.08 (0.82)

Phoenix, AZ .................................................................................................................................. 2.52 1.14 (1.38)

Seattle, WA .................................................................................................................................. 1.90 1.00 (0.90)

The level of the relative value-specific

differentials proposed in this rule are

such that without a phase-in and a

transitional program, small businesses,

particularly producers, would

experience significant economic

impacts. Reviewing the change in Class

I differentials on an individual order

basis reveals that, with the exception of

producers located in the Upper Midwest

region, all producers would likely face

reduced income due to lower minimum

Class I prices if relative value-specific

differentials were implemented

immediately. Producers located in the

Northeast and Southwest would

experience the greatest decrease.

However, with the use of a phase-in

together with one of the proposed

transitional program alternatives, the

impacts on small businesses could be

mitigated during the transition period.

The use of a transition program

alternative would also allow both

producers and processors the

opportunity to adapt their marketing

practices to adjust to a new level of

Class I differentials. At the conclusion

of the transition period, small

businesses should have adjusted to

lower regulated Class I differentials and

be able to compete in a more marketoriented environment.

Three possible alternatives are

presented for consideration of phasing

in relative value-specific differentials to

minimize the market disruption that

may initially occur. Each utilizes the

difference between the current

differentials and the final relative valuespecific differentials as the basis of the

phase-in. This difference is then

reduced by 20 percent during each

phase-in year until the final relative

value-specific differential price is

achieved. The phase-in would begin in

1999 and be completed by 2003. The

base differentials resulting from this

transitional phase-in are set forth in the

following table. The first alternative

would be to phase-in to these

differentials.

RELATIVE VALUE-SPECIFIC BASE DIFFERENTIALS FOR USE IN PHASE-IN PROGRAM OPTIONS

City Current

Relative Value-Specific Base Differentials 1

1999 2000 2001 2002 2003

Dollars Per Hundredweight

New York City ................................................................... 3.14 2.93 2.71 2.50 2.28 2.07

Charlotte ............................................................................ 3.08 2.84 2.60 2.37 2.13 1.89

Atlanta ............................................................................... 3.08 2.96 2.83 2.71 2.58 2.46

Tampa Bay ........................................................................ 3.88 3.87 3.85 3.84 3.82 3.81

Cleveland .......................................................................... 2.00 1.91 1.82 1.72 1.63 1.54

Kansas City ....................................................................... 1.92 1.83 1.73 1.64 1.54 1.45

Minneapolis ....................................................................... 1.20 1.20 1.20 1.20 1.20 1.20

Chicago ............................................................................. 1.40 1.45 1.50 1.55 1.60 1.65

Dallas ................................................................................ 3.16 2.86 2.57 2.27 1.98 1.68

Salt Lake City .................................................................... 1.90 1.74 1.57 1.41 1.24 1.08
4828 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

RELATIVE VALUE-SPECIFIC BASE DIFFERENTIALS FOR USE IN PHASE-IN PROGRAM OPTIONS—Continued

City Current

Relative Value-Specific Base Differentials 1

1999 2000 2001 2002 2003

Phoenix ............................................................................. 2.52 2.24 1.97 1.69 1.42 1.14

Seattle ............................................................................... 1.90 1.72 1.54 1.36 1.18 1.00

1Base differential obtained by taking the difference between the current differential and the final relative value-specific differential (year 2003)

and multiplying by 20 percent. This value is then subtracted from the current differential to yield the 1999 base differential. This value is then deducted from each consecutive year’s value until the relative value-specific differentials are achieved in 2003.

The second alternative for phasing-in

to the relative value-specific

differentials would consist of adding a

decreasing ‘‘transitional payment’’ to

the base differential. It would be equal

to the decrease in revenue that would

occur with the implementation of

relative value-specific differentials

during the four years of transitioning to

these differentials (1999 to 2002).

During this four-year period, it is

projected that $388.6 million would be

removed from the Federal order system

through lowered Class I differentials in

most markets. To provide the industry

an opportunity to prepare for this

change, a transitional payment would be

added to the base differential for Class

I milk. The payment would be higher in

the first year and gradually be reduced

thereafter to result in implementation of

the relative value-specific differentials

by 2003. The additional payment would

equal $0.55 per hundredweight in 1999,

$0.35 per hundredweight in 2000, $0.20

per hundredweight in 2001, and $0.10

per hundredweight in 2002. This

offsetting of revenue is designed to

temporarily reduce the impacts of

implementing relative value-specific

differentials, thus allowing producers an

opportunity to adjust their marketing

practices to adapt to more marketdetermined Class I pricing. The

following table sets forth the adjusted

Class I differentials under this revenueneutral phase-in option for selected

cities.

RELATIVE VALUE-SPECIFIC CLASS I DIFFERENTIALS WITH REVENUE NEUTRAL PHASE-IN PAYMENTS

City Current

Class I diff. with revenue neutral phase-in

1999 1 2000 2 2001 3 2002 4 2003 5

Dollars Per Hundredweight

New York City, NY ............................................................ 3.14 3.48 3.06 2.70 2.38 2.07

Charlotte, NC .................................................................... 3.08 3.39 2.95 2.57 2.23 1.89

Atlanta, GA ........................................................................ 3.08 3.51 3.18 2.91 2.68 2.46

Tampa Bay, FL ................................................................. 3.88 4.42 4.20 4.04 3.92 3.81

Cleveland, OH ................................................................... 2.00 2.46 2.17 1.92 1.73 1.54

Kansas City, MO ............................................................... 1.92 2.38 2.08 1.84 1.64 1.45

Minneapolis, MN ............................................................... 1.20 1.75 1.55 1.40 1.30 1.20

Chicago, IL ........................................................................ 1.40 2.00 1.85 1.75 1.70 1.65

Dallas, TX ......................................................................... 3.16 3.41 2.92 2.47 2.08 1.68

Salt Lake City, UT ............................................................. 1.90 2.29 1.92 1.61 1.34 1.08

Phoenix, AZ ...................................................................... 2.52 2.79 2.32 1.89 1.52 1.14

Seattle, WA ....................................................................... 1.90 2.27 1.89 1.56 1.28 1.00

1 1999 applicable base differential from the previous table plus $0.55.

2 2000 applicable base differential from the previous table plus $0.35.

3 2001 applicable base differential from previous table plus $0.20.

4 2002 applicable base differential from the previous table plus $0.10.

5Final relative value-specific differentials.

The use of a revenue-neutral phase-in

program would decrease the amount of

cash receipts removed from the Federal

order system from $388.6 million during

the four-year phase-in to a gain of $47.8

million with the offsetting

compensation implementation and then

effective relative-value differentials. The

decrease in the all-milk price paid to

producers would also be reduced from

$0.04 per cwt to $0.02 per cwt for the

six-year average.

In fact, during the first year of

offsetting compensation implementation

the Class I price would increase for all

but one of the Federal orders. On

average, for all markets, the Class I price

would increase $0.39 per cwt, the allmilk price would increase an average of

$0.13 per cwt, and total cash receipts

would be increased by $193.9 million

compared with the baseline. Although

these values would be decreased by the

sixth year, with Class I prices projected

to decrease for all Federal order an

average of $0.51, the all-milk prices

projected to decrease an average of

$0.09, and total cash receipts projected

to decrease $128.5 million, all

producers would benefit from the

lessening of the impacts of moving

towards the relative-value differentials.

The third approach to phasing in the

relative value-specific differentials

would consist of adding a decreasing

‘‘transitional payment’’ to the base

differential that would enhance revenue

beyond what the Class I system would

have generated during the four years of

transitioning to the relative valuespecific differentials. During this fouryear period, it is projected that $878.4

million would be added to the Federal

order system through the revenueenhanced payment. This would result in

a net increase of $489.8 million added

to the system once the projected

decrease resulting from the relative

value-specific differentials during this

period is deducted. This additional

money would not only provide

producers with an opportunity to

prepare for and restructure their

marketing practices to adapt to more
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4829

market determined Class I pricing but

would also allow producers to obtain

the education and resources necessary

to become more effective in a more

market-oriented environment. Again,

the payment in the first year would be

the highest with reductions occurring

thereafter to result in implementation of

the relative value-specific differentials

by 2003. The additional payment would

equal $1.10 per hundredweight of Class

I in 1999, $0.70 per hundredweight in

2000, $0.40 per hundredweight in 2001,

and $0.20 per hundredweight in 2002.

The following table sets forth the

adjusted Class I differentials under this

revenue-enhancement phase-in option

for selected cities.

RELATIVE VALUE-SPECIFIC CLASS I DIFFERENTIALS WITH REVENUE ENHANCEMENT PHASE-IN PAYMENTS

City Current

Class I diff. with revenue enhancement

1999 1 2000 2 2001 3 2002 4 2003 5

Dollars Per Hundredweight

New York City, NY ............................................................ 3.14 4.03 3.41 2.90 2.48 2.07

Charlotte, NC .................................................................... 3.08 3.94 3.30 2.77 2.33 1.89

Atlanta, GA ........................................................................ 3.08 4.06 3.53 3.11 2.78 2.46

Tampa Bay, FL ................................................................. 3.88 4.97 4.55 4.24 4.02 3.81

Cleveland, OH ................................................................... 2.00 3.01 2.52 2.12 1.83 1.54

Kansas City, MO ............................................................... 1.92 2.93 2.43 2.04 1.74 1.45

Minneapolis, MN ............................................................... 1.20 2.30 1.90 1.60 1.40 1.20

Chicago, IL ........................................................................ 1.40 2.55 2.20 1.95 1.80 1.65

Dallas, TX ......................................................................... 3.16 3.96 3.27 2.67 2.18 1.68

Salt Lake City, UT ............................................................. 1.90 2.84 2.27 1.81 1.44 1.08

Phoenix, AZ ...................................................................... 2.52 3.34 2.67 2.09 1.62 1.14

Seattle, WA ....................................................................... 1.90 2.82 2.24 1.76 1.38 1.00

1 1999 applicable base differential from the second previous table plus $1.10.

2 2000 applicable base differential from the second previous table plus $0.70.

3 2001 applicable base differential from the second previous plus $0.40.

4 2002 applicable base differential from the second previous plus $0.20.

5Final relative value-specific differentials.

The use of a revenue-enhancement

phase-in program would increase the

amount of cash receipts within the

Federal order system by an average

$34.9 million for a six-year period that

includes implementing and then

effective relative value-specific

differentials. For the six-year average,

the all-milk price would be unchanged.

During the first year of implementation

Class I prices would increase an average

of $0.91 per cwt, all-milk prices would

increase an average of $0.30 per cwt,

and total cash receipts would increase

$425 million. Although these values

would decrease by the sixth year, with

Class I prices down an average of $0.48,

all-milk prices down $0.06, and total

cash receipts down $80.5 million, all

producers would benefit from the

lessening of the impacts of moving

towards relative value-specific

differentials that are more marketoriented and less governmentally

regulated.

Although producers would benefit

from the initial increases in the Class I

prices, this may put small businesses at

a disadvantage because the cost of the

raw product during the initial

implementation years would be higher

than the current regulated minimum

prices. In areas such as the Upper

Midwest and Southeast where overorder pricing has been effective in

establishing the actual value of Class I

milk, small processors may actually

benefit from having more of the total

cost of the milk reflected in the

minimum price. This may increase the

equity amongst the competing handlers

in these regions. There are

approximately 200 small handlers

located in these two regions. About 600

small handlers located most other

places in the United States may find

that the increase in the Class I price

could change their competitive

relationships.

No additional recordkeeping,

reporting, or compliance requirements

would be necessary to implement the

relative value-specific differentials

discussed above.

The Proposed Classification Options

The classification of milk

recommendations should not have a

significant economic impact on a

substantial number of small businesses.

This proposed rule provides uniform

milk classification provisions for the

newly consolidated milk orders. The

recommendations should improve

reporting and accounting procedures for

handlers and provide for greater market

efficiencies.

Most of the changes regarding milk

classification provisions proposed for

the newly consolidated orders would

simplify order language and remove

obsolete language.

This proposed rule contains a

modified fluid milk product definition

and recommends that certain products

be reclassified. The revised fluid milk

product definition proposed for the new

orders should provide more consistency

in determining the classification of

products. The inclusion of eggnog to the

list of fluid milk products and the

reclassification of cream cheese from

Class III to Class II will cause a nominal

increase in the cost of the finished

product. However, these changes, which

will be applicable to all handlers

regulated under the new orders, should

not have a significant impact on the

retail price of these products. Although

producers will benefit from these

products being reclassified into higher

utilization classes, the impact of the

product classification changes on the

blend price to producers will be

marginal.

Another modification includes the

reclassification of butter and whole milk

powder from Class III to Class IV. This

change merely places these marketclearing products in the new Class IV

with nonfat dry milk. The change

promotes market efficiency and should

have a minimal impact on producers’

blend prices.

One recommendation with possible

small business implications concerns

the treatment of milk used to produced

bulk sweetened condensed milk/skim

milk. Some commenters argued that the

wide price difference that sometimes

exists between the Class II price and the
4830 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Class III–A price has put manufacturers

of sweetened condensed milk at a

competitive disadvantage with

manufacturers of nonfat dry milk, which

can be substituted for bulk sweetened

condensed milk and skim milk in some

higher-valued products.

Although this proposed rule does not

recommend a reclassification for milk

used in bulk sweetened condensed

milk, it does propose a change in the

relationship between the Class II and IV

prices which should eliminate the price

disparity that now, at times, exists. As

discussed in the ‘‘Class III and Class III–

A (i.e., Class IV) Milk’’ section of this

proposed rule, the proposed new Class

II price will be equal to the Class IV

price plus a 70-cent differential. The

coupling of the Class II and Class IV

prices will largely remove the incentive

to substitute nonfat dry milk for bulk

sweetened condensed milk.

The recommendations regarding

shrinkage provisions should provide

equity among handlers, improve market

efficiencies, and facilitate accounting

procedures. This proposed rule provides

that shrinkage be assigned pro rata

based on a handler’s utilization. As

discussed in the ‘‘Shrinkage and

Overage’’ section of this proposed rule,

this modification should result in a

slight increase (i.e., one cent per cwt.)

in the blend price paid to producers.

For the reasons stated above, the milk

classification provisions proposed

herein should have little economic and

regulatory impact on small businesses.

Paperwork Reduction Act of 1995

The information collection

requirements contained in this proposed

rule previously were approved by the

Office of Management and Budget

(OMB) pursuant to the Paperwork

Reduction Act of 1995 (44 U.S.C.

chapter 35) under OMB control number

0581–0032, through May 31, 1998. A

notice of request for a three-year

extension and revision of this currently

approved information collection was

published in the December 2, 1997,

Federal Register (62 FR 63693), which

invited comments from the public

through February 2, 1998.

The amendments set forth in this

proposed rule do not contain additional

information collections that require

clearance by the OMB under the

provisions of 44 U.S.C. Chapter 35.

Following is a general description of the

reporting and recordkeeping

requirements, reasons for these

requirements and an estimate of the

annual burden on the dairy industry.

Title: Report Forms Under Federal

Milk Orders (From Milk Handlers and

Milk Marketing Cooperatives).

OMB Control Number: 0581–0032.

Expiration Date of Approval: May 31,

1998.

Type of Request: Extension and

revision of a currently approved

information collection.

Abstract: Federal Milk Marketing

Order regulations authorized under the

Agricultural Marketing Agreement Act

of 1937, as amended (7 U.S.C. 601–674),

require milk handlers to report in detail

the receipt and utilization of milk and

milk products handled at each of their

plants that are regulated by a Federal

Order. The data are needed to

administer the classified pricing system

and related requirements of each

Federal Order.

Rulemaking amendments to the

orders must be approved in referenda

conducted by the Secretary.

The terms of each of the current milk

marketing orders are found at 7 CFR

Parts 1001–1199; the terms of each of

the proposed orders in this document

are found at 7 CFR Parts 1001–1134.

The authority for requiring reports is

found at 8c (5) and (7) and 8d of the Act.

The current authority for requiring

records to be kept is found in the

general provisions at 7 CFR Part 1000.5.

In this proposed rule, this authority is

found in the general provisions at 7 CFR

Part 1000.27. The Act also provides for

milk marketing agreements, but there

are none in effect.

A Federal milk marketing order is a

regulation issued by the Secretary of

Agriculture that places certain

requirements on the handling of milk in

the area it covers. It requires that

handlers of milk for a marketing area

pay not less than certain minimum class

prices according to how the milk is

used. These prices are established under

an order on the basis of evidence

concerning the supply and demand

conditions for milk in the market. A

milk order requires that payments for

milk be pooled and paid to individual

farmers or cooperative associations of

farmers of the basis on a uniform or

average price. Thus, all eligible farmers

(producers) share in the market wide

use-values of milk by regulated

handlers.

The Report of Receipts and Utilization

and the Producer Payroll Report are

completed by regulated milk handlers

and milk marketing cooperatives and

are the principal reporting forms needed

to administer the 31 Federal milk

marketing orders.

The orders also provide for the public

dissemination of market statistics and

other information for the benefit of

producers, handlers, and consumers.

Each milk order is administered by a

market administrator who is an agent of

the Secretary of Agriculture. Part of the

market administrator’s duties are to

prescribe reports required of each

handler, and to assure that handlers

properly account for milk and milk

products, and that such handlers pay

producers and associations of producers

according to the provisions of the order.

The market administrator employs a

staff that verifies handlers’ reports by

examining records to determine that the

required payments are made to

producers. Most reports required from

handlers are submitted monthly to the

market administrator. Confidentiality of

information collection is assured

through Section 608(d) of the Act,

which imposes substantial penalties on

anyone violating these confidentiality

requirements.

The forms used by the market

administrators are required by the

respective milk orders that are

authorized by the Act. The forms are

authorized either in the general

provisions (Part 1000) or in the sections

of the respective orders. The forms are

used to establish the quantity of milk

received by handlers, the pooling status

of handlers, the class-use of the milk

used by the handler and the butterfat

content and amounts of other

components of the milk.

The frequency of performing these

recordkeeping and reporting duties

varies according to the form; the

frequency ranges from ‘‘on occasion’’ to

‘‘annually’’ but ‘‘monthly’’ is perhaps

most common. In general, most of the

information that handlers report to the

market administrator is readily available

from normally maintained business

records. Thus, the burden on handlers

to complete these recordkeeping and

reporting requirements is expected to be

minimal. In addition, assistance in

completing forms is readily available

from market administrator offices.

Regarding the use of improved

information technology to reduce the

reporting and recordkeeping burden, the

information requested is the minimum

necessary to carry out the program.

Since the type of information required

to be collected and the certification and

reporting of that information is required,

no other alternative to the mode of

information collection has been found.

However, where possible, reported

information is accepted using computer

tapes or diskettes as alternatives to

submitting the requested information on

these report forms. Comments are

requested to help assess the number of

handlers using computers, word

processors and other electronic

equipment to create and store

documents, as well as the extent to
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4831

which the Internet is used to exchange

information.

We are confident that the information

we collect does not duplicate

information already available. Dairy

Programs has an ongoing relationship

with many organizations in the dairy

industry that also respond to other

governmental agencies. Thus, we are

aware of the reports dairy industry

organizations are submitting to other

government agencies.

Information collection requirements

have been reduced to the minimum

requirements of the order, thus

minimizing the burden on all

handlers—those considered to be small

as well as large entities. Forms require

only a minimal amount of information

which can be supplied without data

processing equipment or a trained

statistical staff. The primary source of

data used to complete the forms is

routinely used in all business

transactions. Thus, the information

collection and reporting burden is

relatively small. Requiring the same

reporting requirements for all handlers

does not significantly disadvantage any

handler that is smaller than industry

average.

If the collection of this information

were conducted less frequently, data

needed to keep the Secretary informed

concerning industry operations would

not be available. Timing and frequency

of the various reports are such to meet

the needs of the industry and yet

minimize the burden of the reporting

public.

The collection of the required

information is conducted in a manner

consistent with guidelines in 5 CFR

1320.6. The orders require that the

market administrator compute monthly

minimum prices to producers based on

monthly information. Without monthly

information, the market administrator,

for example, would not have the

information to compute each monthly

price, nor to know if handlers were

paying producers on dates prescribed in

the order, such as the advance payment

for milk received the first 15 days of the

month and the final payment which is

payable after the end of the month. The

Act imposes penalties for order

violations, such as the failure to pay

producers not later than prescribed

dates. The orders require payments to

and from the producer-settlement fund

to be made monthly. Also, class prices

are based on the monthly Basic Formula

price series.

Annual Reporting and Recordkeeping

Burden

Estimate of Burden: Public reporting

burden for this collection of information

is estimated to average 0.87 hours per

response.

Respondents: Milk Handlers and Milk

Marketing Cooperatives.

Estimated Number of Respondents:

772.

Estimated Number of Responses per

Respondent: 35.

Estimated Total Annual Burden on

Respondents: 23,858 hours.

Estimated annual cost to respondents

for report preparation: $276,514 (23,858

hours at $11.59 per hour). Although

hourly rates vary among handlers in

various localities, the wage paid to

clerical workers engaged in report

preparation is estimated to be

comparable to about a grade GS–7, step

1.

It is important to note that the burden

being reported is an estimate of the

amount of time that would be required

of current program participants, as was

published in the Notice of Request for

Extension, referenced in the

introductory text of this section.

It is expected that this proposed rule

would have little impact on the

reporting and recordkeeping burden on

handlers regulated under the Federal

milk marketing order program. In fact,

as a result of the consolidation of

Federal orders from 31 to 11 as

proposed, an overall reduction in

reporting and recordkeeping

requirements may occur due to greater

uniformity in forms used and fewer

‘‘special’’ forms that currently apply to

one or a few orders.

Non-substantial changes would be

necessary on the required reports and

records to correctly identify the new

Federal market order (e.g. the current—

and separate—reports for the Upper

Florida, Tampa Bay and Southeastern

Florida marketing areas would be

combined into one report for the Florida

marketing area).

Request for Public Input

Comments on the Executive Order

12866 analysis, the initial regulatory

flexibility analysis, and the paperwork

reduction analysis are requested.

Specifically, interested parties are

invited to submit comments on the

regulatory and informational impacts of

this proposed rule on small businesses.

Comments are requested within 60 days

of publication of this proposed rule in

the Federal Register. Comments should

be mailed to USDA/AMS/Dairy

Programs, Order Formulation Branch,

Room 2968, South Building, P.O. Box

96456, Washington, D.C. 20090–6456.

Preliminary Statement

The material issues in this proposed

rule relate to:

1. Consolidation of marketing areas.

2. Basic formula price replacement and other

class price issues.

3. Class I price structure.

4. Classification of milk and related issues.

5. Provisions applicable to all orders.

6. Regional issues:

a. Northeast Region.

b. Southeast Region.

c. Midwest Region.

d. Western Region.

7. Miscellaneous and administrative matters.

a. Consolidation of the marketing service,

administrative expense, and producersettlement funds.

b. Consolidation of the transportation

credit balancing funds.

c. Proposed general findings.

II. Discussion of Material Issues and

Proposed Amendments to the Orders

A discussion and explanation of the

material issues and proposals contained

in this rule are as follows:

1. Consolidation of Marketing Areas

Subtitle D, Chapter 1 of the 1996 Farm

Bill, entitled ‘‘Consolidation and Reform

of Federal Milk Marketing Orders,’’

requires, among other things, that the

Federal milk marketing orders be

limited to not less than 10 and not more

than 14. Over 400 public comments

have been received in response to

requests from USDA for public input on

the subject of order consolidation. Two

preliminary reports on order

consolidation have been issued by the

Agricultural Marketing Service’s Dairy

Division. The initial Preliminary Report

on Order Consolidation was issued in

December 1996, and the Revised

Preliminary Report was issued in May

1997. The December 1996 Report

suggested that the 32 Federal milk

marketing orders then in existence be

consolidated to 10, and the May 1997

Report suggested 11. All comments

received by the Department have been

considered in the development of this

proposed rule.

Although the Farm Bill specifically

provides for the inclusion of California

as a separate Federal milk order, the

provision is contingent upon petition

and approval by California producers.

Interest in a Federal milk order has been

expressed by some California producers,

but the degree of interest expressed and

the input provided by the producers has

not been adequate to proceed with a

proposed order for California.

The preliminary reports concerning

order consolidation and this proposal

were prepared using data gathered about

receipts and distribution of fluid milk

products by all known distributing
4832 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

plants located in the 47 contiguous

states, not including the State of

California. Data describing the sources

and disposition of fluid milk products

for the month of October 1995 was used

to compile the initial Preliminary

Report. In response to comments and

questions about certain marketing area

boundaries and changes in marketing

conditions in some of the markets after

publication of the initial Preliminary

Report, data concerning these markets

was updated to January 1997, and more

detailed information was gathered

regarding the geographic distribution of

route sales by individual handlers and

their specific sources of producer milk.

Specifically, such information was

gathered for all or parts of the initiallysuggested Northeast, Appalachian,

Southeast, Mideast, Central, and

Western marketing areas.

The eleven marketing areas suggested

in the Revised Preliminary Report on

Order Consolidation have, in some

cases, been modified for this proposed

rule. Several of the suggested marketing

areas were the subjects of numerous

comments containing information that

indicated that the boundaries of those

areas should be re-evaluated. As a result

of the comments received, marketing

data was further examined and analyzed

for some of the suggested consolidated

marketing areas to determine the most

appropriate configurations of the

consolidated areas to be included in this

proposed rule. The result of the

examination and analysis was to modify

significantly from the Revised

Preliminary Report the marketing areas

of the proposed Northeast, Mideast,

Upper Midwest, Central, and Southeast

orders, and to make minor

modifications to the marketing area of

the proposed Appalachian order.

As in the case of data referring to the

operations of less than three handlers or

producers in the initial and Revised

Preliminary Consolidation Reports,

some of the data used to arrive at the

proposed consolidated areas is

restricted from use by the public

because it refers to individual fluid milk

distributing plants and the origins of

producer milk supply for those plants.

However, the basis for the proposed

marketing area boundaries is described

as specifically as possible without

divulging such proprietary information.

Seven primary criteria were used in

determining which markets exhibit a

sufficient degree of association in terms

of sales, procurement, and structural

relationships to warrant consolidation.

These are the same criteria which were

used in the two reports on order

consolidation issued by the Dairy

Division (November 1996 and May

1997). The criteria are as follows:

1. Overlapping Route Disposition

The movement of packaged milk

between Federal orders indicates that

plants from more than one Federal order

are in competition with each other for

Class I sales. In addition, a degree of

overlap that results in the regulatory

status of plants shifting between orders

creates disorderly conditions in

changing price relationships between

competing handlers and neighboring

producers. This criterion is considered

to be the most important.

2. Overlapping Areas of Milk Supply

This criterion applies principally to

areas in which major proportions of the

milk supply are shared between more

than one order. The competitive factors

affecting the cost of a handler’s milk

supply are influenced by the location of

the supply. The pooling of milk

produced within the same procurement

area under the same order facilitates the

uniform pricing of producer milk.

Consideration of the criterion of

overlapping procurement areas does not

mean that all areas having overlapping

areas of milk procurement should be

consolidated. An area that supplies a

minor proportion of an adjoining area’s

milk supply with a minor proportion of

its own total milk production while

handlers located in the area are engaged

in minimal competition with handlers

located in the adjoining area likely do

not have a strong enough association

with the adjoining area to require

consolidation.

For a number of the proposed

consolidated areas it would be very

difficult, if not impossible to find a

boundary across which significant

quantities of milk are not procured for

other marketing areas. In such cases,

analysis was done to determine where

the minimal amount of route disposition

overlap between areas occurred, and the

criterion of overlapping route

disposition generally was given greater

weight than overlapping areas of milk

supply. Some analysis also was done to

determine whether milk pooled on

adjacent markets reflects actual

movements of milk between markets, or

whether the variations in amounts

pooled under a given order may indicate

that some milk is pooled to take

advantage of price differences rather

than because it is needed for Class I use

in the other market.

3. Number of Handlers Within a Market

Formation of larger-size markets is a

stabilizing factor. Shifts of milk and/or

plants between markets becomes less of

a disruptive factor in larger markets.

Also, the existence of Federal order

markets with handlers too few in

number to allow meaningful statistics to

be published without disclosing

proprietary information should be

avoided.

4. Natural Boundaries

Natural boundaries and barriers such

as mountains and deserts often inhibit

the movement of milk between areas,

and generally reflect a lack of

population (limiting the range of the

consumption area) and lack of milk

production. Therefore, they have an

effect on the placement of marketing

area boundaries. In addition, for the

purposes of market consolidation, large

unregulated areas and political

boundaries also are considered a type of

natural barrier.

5. Cooperative Association Service

Areas

While not one of the first criteria used

to determine marketing areas,

cooperative membership often may be

an indication of market association.

Therefore, data concerning cooperative

membership can provide additional

support for combining certain marketing

areas.

6. Features or Regulatory Provisions

Common to Existing Orders

Markets that already have similar

regulatory provisions that recognize

similar marketing conditions may have

a head start on the consolidation

process. With calculation of the basic

formula price replacement on the basis

of components, however, this criterion

becomes less important. The

consolidation of markets having

different payment plans will be more

dependent on whether the basic formula

component pricing plan is appropriate

for a given consolidated market, or

whether it would be more appropriate to

adopt a pricing plan using

hundredweight pricing derived from

component prices.

7. Milk Utilization in Common Dairy

Products

Utilization of milk in similar

manufactured products (cheese vs.

butter-powder) was also considered to

be an important criterion in determining

how to consolidate the existing orders.

Comments on Consolidation Criteria

Most of the comments received

relative to order consolidation criteria

agreed that overlapping route

disposition and milk procurement are

the most important criteria to consider

in the consolidation process. In
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4833

addition, Class I use percentages and

regulation on the basis of handler

location were noted as criteria to

consider. To some extent, the

consolidated marketing areas included

in this proposed rule do combine

markets with similar Class I utilization

rates rather than markets that would

result in Class I use percentages being

more uniform between markets. This

result occurs because adjoining markets,

where most of the sales and

procurement competition takes place

between handlers regulated under

different orders, tend to have similar

utilization rates rather than because the

criterion is one that should be used to

determine appropriate consolidations.

Also, Class I utilization rates are a

function of how much milk is pooled on

an order with a given amount of Class

I use. Differences in rates, to the extent

they result in differences in blend prices

paid to producers, provide an incentive

for milk to move from markets with

lower Class I utilization percentages to

markets with higher Class I use.

Regulation of processors on the basis

of their location rather than their sales

areas has largely been incorporated in

the proposed orders by a provision that

would pool a handler under the order

for the area in which the handler is

located unless more than 50 percent of

the handler’s Class I route dispositions

are distributed in another order area.

This provision should help to assure

that the order under which a

distributing plant is pooled will change

from month to month, and that a plant

operator is subject to the same

provisions, such as producer pay prices,

as are its primary competitors.

The proposed orders also include a

provision that locks plants processing

primarily ultra-high temperature (UHT)

milk into regulation under the order for

the area in which the plant is located.

Such plants often have widely dispersed

route sales into a number of order areas,

with sporadic deliveries to different

areas. Without some type of lock-in

provision, a UHT plant may be pooled

in several different orders in as many

months. At the same time, the plant’s

milk supply generally is procured from

a given group of producers located in

the same area as the UHT plant. Having

the plant pooled under a succession of

different orders with widely varying

blend prices creates a disorderly

condition for the producers involved.

On the basis of the distributing plant

pooling standards included for all

eleven orders in this proposed rule,

there are only two distributing plants

that would be fully regulated under an

order other than the ones in which they

are located. These plants are the

Superbrand Dairy Products distributing

plant in Greenville, South Carolina; and

the Ryan Milk Company plant in

Murray, Kentucky. The Superbrand

plant likely will qualify for pooling

under the proposed Southeast order,

and the Ryan Milk Company plant, due

to the nature of its extended shelf-life

products, may qualify under any of

several orders, depending on its

dispositions in any particular month.

Additional lock-in provisions are

incorporated in both of these cases to

assure that the plants are pooled in the

area in which they compete for a

producer milk supply and, in the case

of the Ryan plant, that it will be pooled

consistently under one order.

Several comments advocated that all

of a state’s territory should be included

in one Federal order to assure that all

producers in a state are paid on an

equitable basis, or to make it easier to

maintain state statistical data. One of

the primary reasons for Federal milk

orders is that milk marketing occurs

readily across state boundaries, making

state milk marketing regulation more

difficult to enforce. It is important that

Federal milk marketing areas continue

to recognize the free interstate

movement of milk to and from milk

plants. There are cases where natural

boundaries such as mountains or rivers

may result in part of a state having a

closer marketing relationship with an

adjoining state than with other areas of

the same state.

The initial Preliminary Report on

Order Consolidation stated that the

Farm Bill requirement to consolidate

existing marketing areas does not

specify expansion of regulation to

previously non-Federally regulated

areas where such expansion would have

the effect of regulating handlers not

currently regulated. However, on the

basis of data, views and arguments filed

by interested persons in response to the

initial Preliminary Report requesting

that currently non-Federally regulated

areas be added to some consolidated

marketing areas, the Revised

Preliminary Report suggested that such

areas be added to several of the

consolidated areas. Handlers who

would be affected by the expansion of

Federal order areas into currently nonFederally regulated areas were notified

of the possible change in their status,

and encouraged to comment.

Handlers located in Pennsylvania

Milk Marketing Board (PMMB) areas 2,

3, and 6 are regulated under the State of

Pennsylvania if they do not have

enough sales in any Federal order area

to meet an order’s pooling standards. (If

such plants do meet Federal order

pooling standards, the State of

Pennsylvania continues to enforce some

of its regulations in addition to Federal

order regulations). As State-regulated

handlers, they must pay a Class I price

for milk used in fluid products, often

higher than the Federal order price

would be. Inclusion of the

Pennsylvania-regulated handlers in the

consolidated marketing area, as in the

case of including Maine or Virginia,

would have little effect on handlers’

costs of Class I milk (or might reduce

them), while reducing producer returns.

Based on the comments received in

response to the Revised Preliminary

Report on Order Consolidation it has

been determined that consolidation of

the existing orders does not necessitate

expansion of the consolidated orders

into areas in which handlers are subject

to minimum Class I pricing under State

regulation, especially when the states’

Class I prices exceed or equal those that

would be established under Federal

milk order regulation. Such regulation

would have the effect of reducing

returns to producers already included

under State regulation without

significantly affecting prices paid by

handlers who compete with Federallyregulated handlers.

In order to avoid extending Federal

regulation to handlers whose primary

sales areas are outside current Federal

order marketing areas, but who already

are subject to similar minimum uniform

pricing under State regulation, the inarea Class I disposition percentage

portion of the pool distributing plant

definition is proposed to be 25 percent

for the Northeast order and 30 percent

for the Mideast order, instead of the 10

or 15 percent used in the other nine

consolidated order areas. The higher

level of in-area sales required for pool

status under these proposed orders will

allow State-regulated plants to operate

at their current level of sales within

Federal order areas without being

subject to full Federal order regulation.

As in both the initial and revised

preliminary reports, ‘‘pockets’’ of

unregulated areas within and between

current order areas are included in the

proposed consolidated marketing areas.

The addition of currently-unregulated

areas to Federal milk order areas can

benefit regulated handlers by

eliminating the necessity of reporting

sales outside the Federal order

marketing area for the purpose of

determining pool qualification. Where

such areas can be added to a

consolidated order area without having

the effect of causing the regulation of

any currently-unregulated handler, they

are proposed to be added.
4834 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Cornell University Study

In addition to AMS’ analysis of the

receipt and distribution data in the

development of this proposal,

researchers at Cornell University also

provided input on potential

consolidated marketing areas. This

input was part of Cornell’s partnership

agreement with AMS to provide

alternative analyses on Federal order

reform issues. These researchers used an

econometric model (the Cornell U.S.

Dairy Sector Simulator, or USDSS), to

determine 10–14 optimal marketing

areas. Cornell’s first options for 10–14

marketing areas were presented at an

October 1996 invitational workshop for

dairy economists and policy analysts

held in Atlanta, Georgia. Based on

USDSS model results, these options

would result in minimum cost flows of

milk using the known concentrations of

milk production and population,

without considering the location of milk

plants. The marketing area maps that

were circulated using these first results

were those referenced by interested

persons who cited the Cornell results in

their comments on the initial

Preliminary Report on Order

Consolidation.

A second set of options was presented

by Cornell researchers in spring 1997.

These options were generated with a

further-developed USDSS model. In

updating the model, the researchers

enhanced the inputs to its model as a

means of better reflecting the actual

structure of the national market for fluid

milk products. These model updates

allowed for determination of the

minimum cost flows of: milk,

intermediate and final products from

producers to plants; from plants to

plants; and from plants to consumers on

the basis of the locations of milk

supplies, dairy product processing

plants, and consumers. The enhanced

model is intended to provide for

geographic market definition on the

basis of a resulting set of optimal,

efficient simulated flows of milk and

dairy products between locations.

Although the USDSS model considers

important factors such as milk supply,

processing, and demand locations and

transportation constraints in

determining the optimal consolidated

marketing areas, it does not include

several other important circumstances

that influence dairy industry and

Federal order participants or the

movement of milk which must be

considered in this reform process. The

USDSS model does not recognize that

large areas, such as California, Virginia,

Maine, Montana, large portions of

Pennsylvania, and Wyoming, currently

are not included in Federal milk order

regulation, and does not recognize the

Farm Bill requirement that, if included

as a Federal order, the State of

California be brought in as one order

confined to the borders of California.

Although the USDSS model

incorporates highway mileage between

milk production areas and milk plants,

and between milk plants and

consumers, it does not recognize

features such as mountain ranges that

affect hauling costs and may inhibit

milk from moving. By attempting to

maximize efficiencies in milk

marketing, the model also does not

recognize the existence of competing

handlers operating plants in the same

city or having the extent of handlers’

route dispositions influenced by the

existence of plants operated by the same

handler in other locations. In addition,

the model does not recognize that

movements of producer milk often are

determined by supply contracts between

cooperatives and handlers or by the

location of a handler’s nonmember

supply.

AMS is unaware of any other analyses

performed to determine or suggest

consolidated marketing areas.

As noted before, AMS’ analysis

focused primarily on distributing plant

receipts and distribution information for

October 1995, with more current

information used as needed for further

analysis. The data gathered by the Dairy

Division from Federal Milk Market

Administrators reflects actual

movements of milk, both from

production areas to processing plants,

and from processing plants to

consumption areas. This proposal

considers this data, the seven criteria

described fully above, and the factors

not recognized in the USDSS model.

Use of the USDSS may be an excellent

way of determining where processing

plants should be located to maximize

the efficiencies of milk assembly and

distribution, but is a less accurate means

of determining where existing handlers

actually compete for milk supplies and

sales. The consolidated marketing area

options presented by Cornell are not

adopted because the USDSS model does

not adequately reflect issues or factors

that strongly affect which current

marketing areas are most closely related.

For this reason, this proposed rule is

based on data reflecting actual

distribution and procurement by fluid

milk processing plants.

Proposed Marketing Areas

Following are maps of the current

marketing areas and the 11 proposed

marketing areas, followed by brief

descriptions of the proposed areas (with

those modified from the Revised

Preliminary Report, and the

modifications, marked by *) and the

major reasons for consolidation. A more

detailed description of each proposed

consolidated order follows this

summary.

At the end of the Order Consolidation

portion of the proposed rule is

appended a list of distributing plants

associated with each proposed

marketing area, with each plant’s

expected regulatory status.

BILLING CODE 3410–02–P
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4835
4836 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

BILLING CODE 3410–02–C
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4837

Proposed Eleven Marketing Areas

* 1. Northeast—current marketing

areas of the New England, New YorkNew Jersey and Middle Atlantic Federal

milk orders, with the addition of: the

contiguous unregulated areas of New

Hampshire, northern New York and

Vermont; the non-Federally regulated

portions of Massachusetts; and the

Western New York State order area.

*The areas previously suggested to be

included in the expanded Northeast

order area (the southern tier of 3

western New York counties and

Pennsylvania Milk Marketing Board

Areas 2 and 3) have not been included

in the proposed Northeast marketing

area. The handlers who would be added

to those currently fully regulated under

the three separate orders either have a

sufficient percentage of their route

disposition within the consolidated

marketing area to meet the proposed

pooling requirements or are those

located in the area proposed to be

added.

Reasons for consolidation include the

existence of overlapping sales and

procurement areas between New

England and New York-New Jersey and

between New York-New Jersey and

Middle Atlantic. An important measure

of association is evidenced by industry

efforts to study and pursue

consolidation of the three Federal orders

prior to the 1996 Farm Bill.

* 2. Appalachian—current marketing

areas of the Carolina and LouisvilleLexington-Evansville (minus Logan

County, Kentucky) Federal milk orders

plus the recently-terminated Tennessee

Valley area, with the addition of * 21

currently-unregulated counties in

Indiana and Kentucky. Five Kentucky

counties that were part of the former

Paducah order area and previously were

suggested to be added to the

Appalachian order area have been

proposed for addition to the Southeast

order instead.

Overlapping sales and procurement

areas between these marketing areas are

major factors for proposing this

consolidation.

3. Florida—current marketing areas of

the Upper Florida, ampa Bay, and

Southeastern Florida Federal milk

orders.

Natural boundary limitations and

overlapping sales and procurement

areas among the three orders are major

reasons for consolidation, as well as a

measure of association evidenced by

cooperative association proposals to

consolidate these three marketing areas.

Further, the cooperative associations in

this area have worked together for a

number of years to accommodate

needed movements of milk between the

three Florida Federal orders.

* 4. Southeast—current marketing

area of the Southeast Federal milk order,

plus 1 county from the LouisvilleLexington-Evansville Federal milk order

marketing area; * plus 11 northwest

Arkansas counties and 22 entire and 1

partial Missouri county that currently

are part of the Southwest Plains

marketing area; * plus 6 Missouri

counties that currently are part of the

Southern Illinois-Eastern Missouri

marketing area; * plus 16 currently

unregulated southeast Missouri counties

(including 4 that were part of the former

Paducah marketing area); plus 20

currently-unregulated Kentucky

counties (* including 5 from the former

Paducah marketing area that previously

had been suggested for inclusion with

the Appalachian area).

Major reasons for this consolidation

include sales and procurement area

overlaps between the Southeast order

and these counties. The proposed

addition of the Kentucky portion of the

former Paducah, Kentucky, order area to

the Southeast is in the nature of a finetuning adjustment in order boundaries.

The addition of the Arkansas and

Missouri counties recognizes a number

of industry comments.

* 5. Mideast—current marketing areas

of the Ohio Valley, Eastern OhioWestern Pennsylvania, Southern

Michigan and Indiana Federal milk

orders, plus Zone 2 of the Michigan

Upper Peninsula Federal milk order,

and currently-unregulated counties in

Michigan, Indiana and Ohio. *The

current Pennsylvania Milk Marketing

Board Area 6 and the two most western

of the southern tier of counties in New

York are not included in the proposed

Mideast marketing area.

Major criteria for this proposed

consolidation include the overlap of

fluid sales in the Ohio Valley marketing

area by handlers from the other areas

proposed to be consolidated. With the

consolidation, most route disposition by

handlers located within the suggested

Mideast order would be within the

marketing area. Also, nearly all milk

produced within the area would be

pooled under the consolidated order.

The portion of the Michigan Upper

Peninsula marketing area proposed to be

included in the Mideast consolidated

area has sales and milk procurement

areas in common with the Southern

Michigan area and has minimal

association with the western end of the

current Michigan Upper Peninsula

marketing area.

* 6. Upper Midwest—current

marketing areas of the Chicago Regional,

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

Michigan Upper Peninsula Federal milk

orders, and unregulated portions of

Wisconsin. The * Iowa, * Eastern South

Dakota and * Nebraska-Western Iowa

Federal order areas suggested to be

added to this consolidated area in the

revised report are proposed instead to

be included in the Central consolidated

area.

Major consolidation criteria include

an overlapping procurement area

between the Chicago Regional and

Upper Midwest orders and overlapping

procurement and route disposition area

between the western end of the

Michigan Upper Peninsula order and

the Chicago Regional order. A number

of the same cooperative associations

market member milk throughout the

proposed area.

The overlapping of procurement

between the Chicago Regional and

Upper Midwest order areas and the

Iowa, Eastern South Dakota and

Nebraska-Western Iowa order areas is, it

was pointed out in comments received

in response to the Revised Preliminary

Report, due largely to milk pooled on

the more southern orders when

advantageous because of price

differences. As a result, the volume of

milk pooled on the Iowa, Eastern South

Dakota and Nebraska-Western Iowa

orders from Minnesota and Wisconsin

fluctuates greatly, without any

discernable relationship to amounts of

milk needed from those areas at plants

in the more southern areas.

The other consolidation criteria

mentioned in the Revised Preliminary

Report as reasons for consolidating the

Iowa, Eastern South Dakota and

Nebraska-Western Iowa order areas with

the Chicago Regional and Upper

Midwest areas also are applicable to the

combination of these areas with the

consolidated Central area.

* 7. Central—current marketing areas

of the Southern Illinois-Eastern

Missouri, Central Illinois, Greater

Kansas City, Southwest Plains, Eastern

Colorado, * Nebraska-Western Iowa,

* Eastern South Dakota and * Iowa

Federal milk orders, minus * 11

northwest Arkansas counties and 22

entire and 1 partial Missouri county that

are part of the current Southwest Plains

marketing area, minus * 6 Missouri

counties that are part of the current

Southern Illinois-Eastern Missouri

marketing area, plus * 54 currentlyunregulated counties in Kansas,

Missouri, Illinois, Iowa, Nebraska and

Colorado, * plus 14 counties in central

Missouri that are not considered to be

part of the distribution area of an

unregulated handler in central Missouri.

This configuration would leave 25

unregulated counties in central Missouri
4838 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

that are intended to delineate the

distribution area of Central Dairy at

Jefferson City, Missouri.

Major criteria on which this proposed

consolidation is based include

overlapping route disposition and

procurement between the current

orders. The proposed consolidation

would result in a concentration of both

the sales and supplies of milk within

the consolidated marketing area. The

proposed consolidation would combine

several relatively small orders and

provide for the release of market data

without revealing proprietary

information. In addition, many of the

producers in these areas share

membership in several common

cooperatives.

8. Southwest—current marketing

areas of Texas and New Mexico-West

Texas Federal milk orders, with the

addition of two currently-unregulated

northeast Texas counties and 47

currently-unregulated counties in

southwest Texas.

Major criteria supporting this

proposed consolidation include sales

and procurement area overlaps and

common cooperative association

membership between the Texas and

New Mexico-West Texas marketing

areas, and similar marketing concerns

with respect to trade with Mexico for

both orders. Addition of the currentlyunregulated Texas counties will result

in the regulation of no additional

handlers, and will reduce handlers’

recordkeeping and reporting burden and

the market administrator’s

administrative costs.

9. Arizona-Las Vegas—current

marketing area of Central Arizona, plus

the Clark County, Nevada, portion of the

current Great Basin marketing area, plus

eight currently-unregulated Arizona

counties.

The major criterion on which the

proposed consolidation is based is sales

overlap between the sole Las Vegas,

Nevada, handler and handlers regulated

under the Central Arizona order in both

Clark County, Nevada, and unregulated

portions of northern Arizona. The Grand

Canyon and sparsely populated areas in

the northwest part of Arizona, and the

sparsely populated desert region of

eastern Arizona constitute natural

barriers between this and adjacent

marketing areas. In addition, significant

volumes of bulk and packaged milk are

exchanged between the Arizona-Las

Vegas area and Southern California.

10. Western—current marketing areas

of the Western Colorado, Southwestern

Idaho-Eastern Oregon, and Great Basin

Federal milk orders, minus Clark

County, Nevada. The major criteria on

which the proposed consolidation is

based include overlapping sales

between Southwestern Idaho-Eastern

Oregon and Great Basin, as well as a

significant overlap in procurement for

the two orders in five Idaho counties.

The two orders also have similar

multiple component pricing plans. The

Western Colorado order is included

because it is a small market where data

cannot be released without revealing

confidential information unless

combined with data pertaining to

another marketing area, and has at least

as great a relationship with the adjacent

Great Basin market as with any other.

Collection of detailed data for

individual handlers indicates that the

strength of earlier relationships between

the former Great Basin and Lake Mead

orders that justified their 1988 merger

have dwindled significantly, with the

Las Vegas area now more closely related

to southern California and competing

most heavily with Central Arizona

handlers.

11. Pacific Northwest—current

marketing area of the Pacific Northwest

Federal milk order plus 1 currentlyunregulated county in Oregon. The

degree of association with other

marketing areas is insufficient to

warrant consolidation.

TABLE 1.—MARKET INFORMATION: POPULATION, UTILIZATION, PRODUCER MILK AND WEIGHTED AVERAGE UTILIZATION

VALUE (WAUV) IN PROPOSED MARKETING AREAS

Market Population 1

(millions)

Class I

utilization 2

(percent)

Producer

milk 2

(1000 lbs.)

WAUV2,3

(per cwt)

Northeast .......................................................................................................... 51.3 47.7 2,031,976 $13.47

Appalachian ...................................................................................................... 17.1 82.2 440,965 13.97

Florida ............................................................................................................... 13.8 88.3 204,541 15.05

Southeast .......................................................................................................... 26.7 85.2 486,301 14.24

Mideast ............................................................................................................. 31.0 55.8 1,050,656 12.92

Upper Midwest .................................................................................................. 18.5 34.5 1,034,318 12.60

Central .............................................................................................................. 21.0 48.8 859,405 12.95

Southwest ......................................................................................................... 20.9 48.1 680,232 13.39

Arizona-Las Vegas ........................................................................................... 5.5 48.9 181,075 13.26

Western ............................................................................................................ 3.3 29.6 293,714 12.78

Pacific Northwest .............................................................................................. 8.8 35.6 493,207 12.44

Total ....................................................................................................... 216.0 N/A 7,756,390 N/A

1Based on July 1, 1996 estimates.

2Based on October 1995 information, for plants which would be fully regulated under assumptions used in this report.

3 Not a blend price—shown solely for the purpose of showing impact of consolidation on utilization.

TABLE 2.—MARKET INFORMATION: NUMBER OF PLANTS IN PROPOSED MARKETING AREAS

Market

Distributing plants 1

Manufacturing

and supply

plants Fully regulated 3

(FR) Exempt 2 FR smallbusinesses

Northeast .......................................................................................................... 79 17 42 106

Appalachian ...................................................................................................... 29 1 13 13

Florida ............................................................................................................... 15 2 3 4

Southeast .......................................................................................................... 36 1 20 37

Mideast ............................................................................................................. 56 2 36 59

Upper Midwest .................................................................................................. 29 1 15 301
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4839

TABLE 2.—MARKET INFORMATION: NUMBER OF PLANTS IN PROPOSED MARKETING AREAS—Continued

Market

Distributing plants 1

Manufacturing

and supply

plants Fully regulated 3

(FR) Exempt 2 FR smallbusinesses

Central .............................................................................................................. 34 2 8 83

Southwest ......................................................................................................... 23 3 7 17

Arizona-Las Vegas ........................................................................................... 5 1 2 3

Western ............................................................................................................ 11 3 6 19

Pacific Northwest .............................................................................................. 20 3 12 27

Total ....................................................................................................... 337 36 164 669

1Based on October 1995 information. Excludes: (1) out-of-business plants through May 1997; and (2) new plants since October 1995.

2Exempt based on size (less than 150,000 lbs. route distribution per month).

3Based on May 1997 information.

Descriptions of Proposed Consolidated

Marketing Areas

Each of the proposed consolidated

order areas is described in the text

following this introduction. The criteria

which were used to determine which

areas should be consolidated are

explained in detail. For each proposed

area, the following information is

included:

Geography. The political units (states,

counties, and portions of counties)

included in each area, the topography,

and the climatic conditions are

described for the purpose of delineating

the territory to be incorporated in each

proposed marketing area and describing

its characteristics pertaining to milk

production and consumption. This

information was derived principally

from Microsoft Encarta 96

Encyclopedia, and augmented by

several U.S. atlases.

Population. The total population of

each area and its distribution within the

area is included for the purpose of

identifying where milk is consumed.

July 1, 1996, population estimates were

obtained from ‘‘CO–96–8 Estimates of

the Population of Counties and

Demographic Population Change,’’

Population Estimates Division of the

U.S. Bureau of the Census.

Metropolitan Statistical Area (MSA)

information is provided by the United

States Office of Management and Budget

(OMB), which defines metropolitan

areas according to published standards

that are applied to Census Bureau data.

To be described as an MSA, an area (one

or more counties) must include at least

one city with 50,000 or more

inhabitants, or a Census Bureau-defined

urbanized area (of at least 50,000

inhabitants) and a total metropolitan

population of at least 100,000 (75,000 in

New England). Areas with more than 1

million population may be described as

‘‘consolidated metropolitan statistical

areas’’ (CMSAs) made up of component

parts designated as primary

metropolitan statistical areas (PMSAs).

For purposes of the marketing area

descriptions in this proposed rule, the

term ‘‘MSA’’ also includes CMSAs and

PMSAs.

Per capita consumption. Available

data pertaining to per capita

consumption is discussed to help

describe how much milk is needed to

supply the fluid needs of the population

of each proposed marketing area. Per

capita consumption numbers were

estimated by state using data from a

report on ‘‘Per Capita Sales of Fluid

Milk Products in Federal Order

Markets,’’ published in the December

1992 issue of Federal Milk Order Market

Statistics, #391, issued May 1993.

Production. A description of the

amount and sources of milk production

for the market is included for the

purpose of identifying the supply area

for each proposed marketing area.

Production data by state and county for

each Federal milk order was compiled

from information collected by the

offices administering the current

Federal milk orders (market

administrators’ offices).

Distributing plants-route disposition.

For each marketing area the number and

types of distributing plants are

included, with the locations of plants by

population centers, to identify where

milk must be delivered. This

information was collected by market

administrators’ offices.

Utilization. The utilization

percentages of the current individual

orders and the effect of consolidation on

the proposed consolidated orders are

described for each proposed marketing

area, with an estimate of the effect of

consolidation on each current

individual order’s blend price. The

current utilization data is published

each month for each Federal milk order

market. Pool data was used to calculate

the effects of consolidation on

utilization.

Other plants. The presence of

manufacturing and supply plants in and

near the proposed order areas, and the

products processed at these plants, are

described for each proposed

consolidated area. This information was

collected by market administrators’

offices.

Cooperative Associations. The

number of cooperative associations

pooling member milk under each of the

current individual orders included in

each consolidated area, and the number

that pool milk in more than one of the

areas. This information was obtained

from market administrators’ offices.

Criteria for Consolidation. The extent

to which the criteria used in identifying

markets to be consolidated are

supported by the marketing conditions

present in each of the proposed

consolidated areas is discussed.

Discussion of comments and

alternatives. Comments filed in

response to the two preliminary reports

on consolidation and alternatives to the

proposed consolidation are summarized

and discussed for each proposed

consolidated area.

Northeast

The proposed consolidated Northeast

marketing area is comprised of the

current New England, New York-New

Jersey, and Middle Atlantic Federal

milk order marketing areas (Orders 1, 2,

and 4), with currently-unregulated areas

in western and northern New York and

northern Vermont and New Hampshire

added. The entire areas of the States of

Connecticut (8 counties), Delaware (3

counties), Massachusetts (14 counties),

New Hampshire (10 counties), New

Jersey (21 counties), Rhode Island (5

counties), and Vermont (14 counties)

would be contained within the

proposed Northeast order area. In

addition, the District of Columbia, 21

counties and the City of Baltimore in

Maryland, 54 complete and 2 partial

counties and New York City in New
4840 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

York, the 15 Pennsylvania counties

currently included in the Middle

Atlantic marketing area, and 4 counties

and 5 cities in Virginia would be

included in the consolidated order.

There are 169 complete and 2 partial

counties and 8 cities, including the

District of Columbia, in the proposed

Northeast marketing area.

Geography

The proposed Northeast marketing

area extends from the Canadian border

on the north, south to northern Virginia,

eastern Maryland and Delaware, with its

eastern edge along the western border of

Maine at the northern end of the

marketing area, and along the Atlantic

Ocean for the remainder. The total

northeast-southwest extent of the

marketing area is approximately 600

miles. The marketing area extends

westward to Lake Ontario and Lake Erie

in New York State (about 450 miles east

to west), goes only as far west as the

northern part of New Jersey (about 60

miles), and expands westward again

across the eastern half of southern

Pennsylvania, taking in a small part of

northeast Virginia, eastern Maryland,

and Delaware (about 230 miles east to

west). There would be a large Stateregulated area in Pennsylvania just to

the west of the Northeast marketing

area; and most of the State of Virginia

to the south of the marketing area also

is regulated under a State order. The

proposed Northeast marketing area is

contiguous to no other proposed

consolidated marketing areas, but parts

of it, in western New York State and

south central Pennsylvania, are very

close to the proposed Mideast area.

The northern and northwestern parts

of the Northeast area are large areas of

coniferous forests that are somewhat

mountainous. To the south and

southeast of the forested areas are areas

where dairy farming predominates as

the primary type of agriculture. In fact,

for 4 of the 10 states that are contained

within the proposed Northeast

marketing area (New Hampshire, New

York, Pennsylvania and Vermont) dairy

products were the number 1 agricultural

commodity in terms of cash receipts

during 1996. Principally along the

Atlantic coastline is a flatter area where

other agricultural activities, including

greenhouse and nursery, fruit, truck and

mixed farming, take place. A nearcontinuous strip along the east coast of

the area, from northeast Massachusetts

southwest to the Baltimore area, is a

major industrial area and is heavily

populated.

Population

According to July 1, 1996, population

estimates, the total population in the

proposed consolidated Northeast

marketing area is 51.3 million. The area

is very densely populated, especially

along a coastal strip extending from

Boston, Massachusetts, in the northeast

to Washington, D.C., in the southwest.

In this proposed marketing area of

approximately 170 counties, 103 are

included within Metropolitan Statistical

Areas (MSAs). The 22 Metropolitan

Statistical Areas in the proposed

Northeast marketing area account for

91.7 percent of the total market area

population.

Over half of the marketing area

population is located in 6

interconnected MSAs in 48 counties,

extending from central New Jersey to

southern New Hampshire. The six

MSAs are: Springfield, Massachusetts;

Boston-Worcester-Lawrence,

Massachusetts/New Hampshire/Maine/

Connecticut; Providence-Fall RiverWarwick, Rhode Island/Massachusetts;

New London-Norwich, Connecticut/

Rhode Island; Hartford, Connecticut;

and New York-N. New Jersey-Long

Island, New York/New Jersey/

Connecticut/Pennsylvania. The

population in this northeastern portion

of the marketing area is concentrated

most heavily at its northern and

southern ends—the New York City area

has a population of approximately 20

million, and the Boston area’s

population is approximately 5.5 million.

Two of the other MSAs, Hartford and

Providence, each have over 1 million

population. Although each of these six

MSAs is described as a separate area in

the population data, many of the

counties involved are divided between

separate MSAs.

Just southwest of the New York City

MSA is the Philadelphia-WilmingtonAtlantic City, Pennsylvania/New Jersey/

Delaware/Maryland MSA, with a

population of 6 million. Some counties

of these two MSAs are adjacent.

Southwest of the Philadelphia MSA and

separated from it by only one county is

the Washington, DC/Baltimore,

Maryland/northern Virginia MSA, with

a population in the proposed marketing

area of 5.7 million.

Of the 14 other MSAs in the proposed

marketing area, 8 are located in New

York State, with an average population

of nearly 600,000 each. Two are located

in Pennsylvania, with populations of .6

and .45 million. One MSA in Vermont,

1 in Delaware, and 2 in Massachusetts

have average populations of 160,000.

Fluid Per Capita Consumption

Fluid per capita consumption

estimates vary within the Northeast

from 16.7 pounds per month in the

more southern parts of the region to 20

pounds per month in New England.

These rates would result in a weighted

average of 18 pounds per month, and an

estimated total fluid milk consumption

rate of 920 million pounds per month

for the Northeast marketing area.

Approximately 730 million pounds of

this fluid milk consumption would be

required along the heavily-populated

coastal area extending from northeast

Massachusetts southwest through

Washington, D.C. and northern Virginia.

Northeast handlers distributed 883.7

million pounds within the proposed

marketing area during October 1995.

Sales within the proposed marketing

area by handlers that would be

regulated by other orders totaled 9.3

million pounds, sales by partially

regulated handlers within the area were

10.8 million, and an additional .8

million pounds were distributed by

handlers who would be partially

regulated under other orders. Sales in

the marketing area by exempt and

government plants, and by producerhandlers totaled 6.2 million pounds.

Milk Production

In December 1996, over 19,000

producers from 13 states pooled 1.9

billion pounds of milk on the three

orders comprising the proposed

Northeast order. With the addition of

the Western New York State milk order

and several currently-unregulated

handlers, it is probable that the

Northeast pool regularly will exceed 2

billion pounds of milk per month.

Eleven of the 13 states supplying milk

to the three Federal order pools are at

least partly in the marketing area, and

83 percent of the producer milk pooled

under the three orders in December

1996 came from just 3 states—New York

(41.5 percent), Pennsylvania (31.7

percent), and Vermont (10 percent).

Over 10 million pounds of milk was

produced in each of fifty-eight counties:

1 county in northeast Connecticut, 3 in

the most northwestern of the Maryland

portion of the marketing area, 31 spread

over most of New York, 1 on the

western edge of northern Virginia, and

22 in southeast to south central

Pennsylvania and in the eastern part of

the northern tier of Pennsylvania

counties, with an additional

Pennsylvania county, Lancaster,

accounting for over 150 million pounds

of milk. Eighty percent of the markets’

total producer milk was produced

within the proposed marketing area. In
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4841

addition, of the 81.1 million pounds

pooled under the Western New York

State milk order, over 90 percent was

produced within the proposed

marketing area.

Less than 40 percent of the milk

production for the consolidated market

was produced within 100 miles of the

heavily populated coastal corridor.

Although the Northeast area contains

two out of the top five milk-producing

states in the U.S. (New York and

Pennsylvania), the population of the

proposed marketing area is 20 million

more than the next most-populated

proposed consolidated area (the Mideast

area, with 31 million people). The

Northeast, therefore, is a very significant

milk production area with a very high

demand for fluid milk and dairy

products.

Distributing Plants—Route Disposition

Using distributing plant lists included

in both the Preliminary and Revised

Preliminary Reports, with the pooling

standards used in the Revised

Preliminary Report adjusted to 25

percent of route dispositions as in-area

sales (as discussed previously in

Comments on Consolidation), and

updated for known plant closures

through May 1997, 156 distributing

plants would be expected to be

associated with the Northeast marketing

area. The plants associated would

include 79 fully regulated distributing

plants (64 currently fully regulated, 10

currently partially regulated, and 5

currently unregulated), 15 partially

regulated (3 currently fully regulated, 11

currently partially regulated and 1

currently unregulated), 17 exempt

plants having less than 150,000 pounds

of total route disposition per month (2

currently fully regulated, 4 currently

partially regulated, 2 currently exempt

based on size, and 9 currently

unregulated), 43 producer-handlers (42

currently producer-handlers and 1

currently unregulated), and 2 exempt

plants based on institutional status (1

currently unregulated and 1 currently

exempt based on institutional status).

Since October 1995, 10 distributing

plants (3 in New York, 3 in

Massachusetts, 3 in Pennsylvania, and 1

in Connecticut), have gone out of

business.

Over half (88) of the Northeast

distributing plants which were

identified as being in business in

October 1995 were located in the 8

Northeast MSAs that have over a

million people each. This number

includes 49 (or two-thirds) of the pool

distributing plants. Under the proposed

consolidation, it is anticipated that there

would be 12 pool distributing plants in

the Boston-Worcester-Lawrence area, 10

in the Philadelphia-WilmingtonAtlantic City area, and 11 in the New

York-Northern New Jersey-Long Island

area. The Hartford, Connecticut, area

would have 3 pool distributing plants,

Providence-Fall River-Warwick would

have 3, and the Washington-Baltimore

area would have 6 pool distributing

plants. Three pool distributing plants

would be located in the Buffalo-Niagara

Falls area, and 1 in the Rochester, New

York, area.

Of the remaining 70 distributing

plants, 14 pool distributing plants were

located in other MSAs as follows: 8 in

New York; 5 in Pennsylvania; and 1 in

Massachusetts. Thirty-nine of the

remaining distributing plants, including

11 pool distributing plants, were not

located in MSAs.

For the proposed Northeast order, the

in-area route disposition standard has

been adjusted to 25 percent of total

route dispositions from the 15-percent

standard that was common to all of the

suggested consolidated areas in the

Revised Preliminary Report. This

adjustment has been made to assure that

State-regulated plants in Virginia and

Pennsylvania that have sales in the

proposed marketing area will not be

pooled under Federal order regulation.

Utilization

According to October 1995 pool

statistics for handlers who would be

fully regulated under this Northeast

order, the Class I utilization percentages

for the New England, New York-New

Jersey, and Middle Atlantic markets

were 51, 44, and 53 percent,

respectively. Based on calculated

weighted average use values for (1) the

current order with current use of milk,

and (2) the current order with projected

use of milk in the consolidated

Northeast order, the potential impact of

this proposed rule on producers who

supply the current market areas is

estimated to be: New England, a 3-cent

per cwt decrease (from $13.52 to

$13.49); New York-New Jersey, a 3-cent

per cwt increase (from $13.45 to

$13.48); and Middle Atlantic, a 4-cent

per cwt decrease (from $13.44 to

$13.40). The weighted average use value

for the consolidated Northeast order

market is estimated to be $13.47 per

cwt. For December 1996, combined

Class I utilization for Orders 1, 2 and 4

was 44.4 percent based on 852.7 million

pounds of producer milk used in Class

I out of 1.919 billion total producer milk

pounds.

The Northeast area is one of two

proposed consolidated marketing areas

that would have a significantly higherthan-average percentage of its milk used

in Class II. Currently, all three of the

orders have Class II utilization between

15 and 20 percent. When the markets

are combined the average for the

consolidated market will be

approximately 17 percent.

Other Plants

Located within the proposed

consolidated Northeast marketing area

during May 1997 were 106 supply or

manufacturing plants: 13 in Vermont (4

in the Burlington area), 1 in New

Hampshire and 10 in Massachusetts (all

in the Boston-Worcester-Lawrence area),

1 in Rhode Island (in the ProvidenceFall River-Warwick area), 7 in

Connecticut (3 in the Hartford area and

4 in the New York-Northern New JerseyLong Island area), 12 in New Jersey (all

in the New York-Northern New JerseyLong Island area), 2 in Delaware (one in

the Philadelphia-Wilmington-Atlantic

City area), 7 in Maryland (four in the

Washington-Baltimore area), 13 in

Pennsylvania (5 in the PhiladelphiaWilmington-Atlantic City area), and 40

in New York (9 in the New YorkNorthern New Jersey-Long Island area, 6

in the Buffalo-Niagara Falls area and 2

in the Rochester area).

Seventeen of the 106 plants are pool

plants. Of these pool plants, 9 are

manufacturing plants—1 manufactures

primarily Class II products, 5

manufacture primarily powder, 2

manufacture primarily cheese and 1

manufactures primarily other products.

There are 8 pool supply plants—1 has

no primary product, but ships only to

distributing plants; 5 are supply plants

that manufacture primarily Class II

products, and 2 supply plants

manufacture primarily cheese. Of the

remaining 89 nonpool plants in the

Northeast marketing area, 82 are

manufacturing plants—41 manufacture

primarily Class II products, 1

manufactures primarily butter, 1

manufactures primarily powder, 37

manufacture primarily cheese and 2

manufacture primarily other products.

Seven of the remaining nonpool plants

are supply plants—2 are supply plants

that manufacture primarily Class II

products and 5 are supply plants that

manufacture primarily cheese.

A pool supply plant that

manufactures primarily cheese and a

nonpool cheese manufacturing plant are

located in the currently-unregulated

portions of Steuben County that are

proposed to be added to the

consolidated Northeast marketing area.

There are also four supply or

manufacturing plants in the unregulated

area of New York—one in the

unregulated county of Chautauqua, one

in the unregulated portion of
4842 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Cattaraugus County, and two in the

unregulated portion of Allegany County.

One is a pool supply plant

manufacturing primarily Class II

products, and the remaining three are

nonpool manufacturing plants—two

manufacture primarily cheese and one

manufactures primarily Class II

products.

Cooperative Associations

During December 1995, 43

cooperative associations pooled their

members’ milk on the three Northeast

orders. Three of the cooperatives pooled

milk on all three orders, 2 pooled milk

on both the New England and New

York-New Jersey orders, and 2 others

pooled milk on both the New York-New

Jersey and Middle Atlantic orders.

Sixty-eight percent of the milk pooled in

the Northeast is cooperative association

milk, with 79.3 percent of Federal Order

1 milk, 50.5 percent of Federal Order 2

milk, and 91.8 percent of Federal Order

4 milk pooled by cooperatives.

The 5 cooperatives that market milk

only under Order 1 account for 25.5

percent of the milk marketed under that

order by cooperative associations, and

20.2 percent of total milk marketed

under Order 1. In Order 2, only 28

percent of cooperative association milk

is marketed by the 27 co-ops that market

milk only under Order 2. Milk marketed

by these 27 cooperatives represent 14.1

percent of the total milk pooled for

December 1995. Four cooperative

associations marketed 45.4 percent of

the milk marketed by cooperatives

under Order 4. This amount of milk

represented 41.7 percent of total milk

pooled under Order 4 in December

1995.

Criteria for Consolidation

The current New England, New YorkNew Jersey, and Middle Atlantic

Federal milk order marketing areas

(Orders 1, 2, and 4) should be

consolidated because of the

interrelationship between Orders 1 and

2 and between Orders 2 and 4 regarding

route disposition and milk supply.

Ninety-four percent of fluid milk

disposition by handlers who would be

fully regulated under the consolidated

order is distributed within the proposed

marketing area. Fully regulated handlers

account for 97 percent of the fluid milk

products distributed within the

proposed marketing area. The

utilization of the three markets is

similar, and several cooperative

associations market their members’ milk

in all three markets. The three markets

are surrounded by unregulated areas to

the west and south, the Atlantic ocean

to the east, and Canada to the north. The

adjoining Maine State milk order also

serves as somewhat of a barrier to milk

marketing in the northeast by limiting

the association of non-Maine milk with

the Maine pool.

The merger of these markets has been

previously proposed by interested

parties. A committee comprised chiefly

of Northeast region cooperatives was

formed over two years ago to study a

merger of the three Federal orders. In

support of a Northeast consolidation,

the committee and other interested

parties, including handlers and

regulatory agencies, have noted:

overlapping sales and procurement

areas; a trend toward consolidation of

cooperative processors and handlers in

the region (leaving the remaining

handlers with larger distributing areas

and volumes); and regulation of plants

by an order in which they are not

located. The proponents of

consolidation have indicated that

consolidation would tend to solve some

of the presently existing inequities and

would lead to greater efficiency for

handlers and order administration.

Discussion of Comments and

Alternatives

A large number of comments,

primarily from producers and producer

groups, supported expansion of the

Northeast consolidated marketing area

into non-federally regulated areas.

Comments supported the suggestions in

the Revised Preliminary Report on

Order Consolidation that would have

extended federal order marketing areas

to non-federally regulated areas which

are part of the same milksheds and fluid

milk markets, arguing that the

surrounding federal order pool(s) are

carrying the necessary surplus for the

Class I sales distributed by nonregulated handlers.

Comments favoring expansion into

the non-federally regulated Northeast

tended to include the unregulated areas

of Pennsylvania, and sometimes the

unregulated counties in Maryland and

West Virginia. Among the comments

supporting regulation of the entire state

of Pennsylvania, there were differing

opinions on whether the Pennsylvania

Milk Marketing Board (PMMB) area 6

should be in the Northeast or the

Mideast. Comments on behalf of the

Association of Dairy Cooperatives in the

Northeast (ADCNE), for example,

supported including PMMB Area 6 in

the Northeast. These comments also

supported expansion to include

Allegany and Garrett counties in

western Maryland. Comments from the

Pennsylvania State Grange supported

regulating the entire state, but including

all of it in the Northeast area.

Several comments suggested

including currently-unregulated

portions of Massachusetts in the

Northeast marketing area. According to

comments from a cooperative

association, the ‘‘corridor’’ in

Massachusetts that was suggested to

remain unregulated has raised questions

from handlers and producers regarding

equity, since the handler within the

corridor competes with regulated

handlers. This association also stated

that the wide dispersion of the towns

suggested to remain unregulated would

cause added expense to handlers in

reporting Class I sales inside and

outside the marketing area of the

Northeast order. The Massachusetts

Farm Bureau Federation, Inc.,

comments favored regulating all areas in

the Federal order to protect

Massachusetts dairy producers from the

unfair marketing conditions created by

current ‘‘pass-through’’ provisions of the

New York-New Jersey order. In

addition, a comment filed by the

Commissioner of the Massachusetts

Department of Food and Agriculture

favored including all of Massachusetts

in the consolidated order, stating that

inclusion of the currently-unregulated

‘‘corridor’’ would not disadvantage any

handlers currently located there. The

letter stated that the dairy farmers of

Massachusetts will be best served with

uniform regulation, which would also

foster fair competition.

A comment filed by the State of

Vermont favored inclusion of the

currently-unregulated portions of that

State in the consolidated area on the

basis that expansion creates cost equity

between processors.

Maine has been and continues under

this proposal to be excluded from

Federal order regulation. Although

limited support was expressed for

Maine’s inclusion in the Northeast

consolidated order, approximately 5

comments supporting Maine’s exclusion

from Federal orders have been received.

Comments filed by the Maine Milk

Commission stated that Maine

successfully regulates prices, resulting

in Maine producers receiving higher

prices than farmers whose milk is

pooled under Federal orders. The

comments further stated that consumer

prices in Maine are lower than those in

New England’s states and counties. The

American, New York and New Jersey

Farm Bureaus all supported Maine’s

exclusion.

Over 115 comments, including

petitions with numerous signatures,

opposed expansion into Pennsylvania.

Some of the comments cited the

enjoyment by Pennsylvania producers

of price stability for the more than 50
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4843

years during which the PMMB has been

regulating milk marketing within the

state. Comments from producers stated

a desire to avoid additional government

regulations and fees. Comments stated

that the PMMB individual handler pools

result in greater returns to producers,

and producer returns would decline if

handlers are required to pay the

additional fluid value into the

marketwide pool to subsidize cheese/

powder plants.

As stated in the introduction to the

consolidation discussion, it has been

determined that consolidation of the

existing orders does not necessitate

expansion of the consolidated orders

into areas in which handlers are subject

to minimum Class I pricing under State

regulation, especially when the states’

Class I prices exceed those that would

be established under Federal milk order

regulation. Handlers located in PMMB

areas 2, 3, and 6 are regulated under the

State of Pennsylvania if they do not

have enough sales in any Federal order

area to meet an order’s pooling

standards. When such plants do meet

Federal order pooling standards, the

State of Pennsylvania continues to

enforce some of its regulations in

addition to Federal order regulations. As

State-regulated handlers, they must pay

a Class I price for milk used in fluid

products that often is higher than the

Federal order price would be. Inclusion

of the Pennsylvania-regulated handlers

in the consolidated marketing area, as in

the case of including Maine, would have

little effect on handlers’ costs of Class I

milk (or might reduce them), while

reducing producer returns. In view of

these situations, it appears that stable

and orderly marketing conditions can be

maintained without extending full

Federal regulation to State-regulated

handlers.

Regulated plants competing for Class

I sales with unregulated distributing

plants in northern Vermont and New

York would be subject to a competitive

disadvantage if the currentlyunregulated handlers are not included

within the consolidated marketing area.

This result would occur because the

‘‘pass-through’’ provision of the current

New York-New Jersey order, which

exempts from minimum pricing a

volume of milk equivalent to a regulated

handler’s sales in unregulated areas in

competition with unregulated handlers,

is not proposed for inclusion in the

consolidated Northeast order. Inclusion

of the currently unregulated areas of

northern New York and Vermont in the

consolidated Northeast order area will

assure that distributing plant operators

that currently are fully regulated would

be placed on an equal competitive

footing with handlers currently

unregulated, while having no negative

effect on the producers who would be

affected.

The ‘‘corridor’’ cited in Massachusetts

should be included in the consolidated

order area, partly because the sole

handler who would be affected by the

regulation of that area has gone out of

business. Inclusion of the area at this

time would not have the negative effect

of imposing regulation on a small

handler, as was feared earlier, but

would lighten handlers’ reporting

burden and the market administrator’s

administrative burden in keeping

separate data on sales in this small

unregulated area. In addition, the

offshore Massachusetts counties of

Dukes and Nantucket should be added

to the marketing area. The only entity

currently operating in those counties (a

producer-handler on Martha’s Vineyard)

would be exempt from the pooling and

pricing provisions of the order by virtue

of its status as a producer-handler and

by having fewer than 150,000 pounds of

route disposition per month. Mainland

handlers distributing milk in these two

counties would find their reporting

burden eased if these counties become

part of the marketing area.

The Western New York State order

area is proposed to be added to the

consolidated Northeast area because the

persons regulated under that order have

so requested. Regarding New York State,

only the southern tier of western New

York counties should not be included in

the consolidated area because their

addition would make more likely the

full regulation of PMMB-regulated

distributing plants with sales in that

small area of New York (1 full county

and 2 partial counties).

Appalachian

The proposed Appalachian marketing

area is comprised of the current

Carolina (Order 5) and LouisvilleLexington-Evansville (Order 46)

marketing areas (less one Kentucky

county that is included in the proposed

Southeast marketing area) as well as 64

counties and 2 cities formerly

comprising the marketing area of the

recently-terminated Tennessee Valley

Federal Order (Order 11) and currentlyunregulated counties in Indiana and

Kentucky. There are 297 counties and 2

cities in this proposed marketing area.

Geography

The Appalachian market is described

geographically as follows: 7 unregulated

Georgia counties (formerly part of Order

11), 20 Indiana counties (17 currently in

Order 46 and 3 currently unregulated),

81 Kentucky counties (47 currently in

Order 46, 16 formerly part of Order 11,

and 18 currently unregulated), all North

Carolina and South Carolina counties

(100 and 46, respectively, and all

currently in Order 5), 33 Tennessee

counties (formerly part of Order 11), 8

counties and 2 cities in Virginia

(formerly part of Order 11), and 2 West

Virginia counties (formerly part of Order

11).

The proposed Appalachian market

reaches from the Atlantic coastline

westward to southern Indiana and

western Kentucky’s border with Illinois.

It is surrounded by Illinois on the west,

Indiana, northeastern Kentucky, West

Virginia and Virginia to the north, the

Atlantic ocean on the east, and Georgia,

Alabama, western Tennessee and

southwestern Kentucky to the south.

Measuring the extreme dimensions, this

market extends about 625 miles from its

northwest corner in Indiana to its

southeastern corner on the South

Carolina-Georgia border, about 300

miles south-to-north from the South

Carolina-Georgia border to the North

Carolina-Virginia border, about 500

miles west-to-east from the

Appalachian-Southeast markets’ border

in Tennessee to eastern North Carolina,

and about 375 miles west-to-east from

the Illinois-Indiana border to West

Virginia and Virginia.

The Appalachian market is

contiguous to 3 proposed consolidated

marketing areas: the Southeast area to

the southwest and south, the Central

area to the west and the Mideast area to

the north. Unregulated counties in West

Virginia and State-regulated area in

Virginia also border this market to the

north. North and South Carolina have

almost 500 miles of coastline on the

Atlantic Ocean.

In terms of physical geography,

similarities exist across the states or

areas included in this market. Southern

Indiana and central Kentucky are in the

Interior Low Plateau region where

valleys and steep hillsides are typical.

In this market, the Appalachian or

Cumberland and Alleghany Plateaus are

found in West Virginia, Virginia,

Kentucky, Tennessee and northwestern

Georgia on the western edge of the

Appalachian Mountains. Eastern

Tennessee and both western North and

South Carolina are in the Blue Ridge

region, which is part of the Appalachian

Mountain range. Moving eastward

toward the Atlantic Ocean, the central

part of the Carolinas are in the Piedmont

Plateau, with the Atlantic Coastal Plain

covering approximately the remaining

eastern half of both these states.

Climatic types in this region vary

somewhat. Humid subtropical climates

typical in most of North and South
4844 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Carolina, as well as Virginia (which is

affected by elevation differences) and

southern Indiana. Humid continental

climates are typical for northwestern

Georgia, western North and South

Carolina and southern West Virginia.

Temperate climates are common in

eastern Tennessee and central

Kentucky.

Much of the proposed Appalachian

area does not provide a hospitable

climate or topography for dairy farming.

As an agricultural pursuit, dairy farming

is far down the list in the area,

accounting for an average of less than

five percent of all receipts from farm

commodities for the states involved.

Crops such as tobacco, corn and

soybeans, and other livestock

commodities such as cattle/calves,

turkeys and broiler chickens are more

prevalent in this region.

Population

According to July 1, 1996, population

estimates, the total population in the

proposed marketing area is 17.1 million.

There are 24 Metropolitan Statistical

Areas (MSAs) within the proposed

marketing area, containing 62.3 percent

of the area’s population. The largest 17

contain 50 percent of the population of

the market. Charlotte, North Carolina, is

the largest MSA in the marketing area

with a population of 1.3 million.

Charlotte is located near the South

Carolina border about at the mid point

of the North and South Carolina border,

and about 250 miles west of the Atlantic

coast. Less than 100 miles to the north

lies the second-largest MSA of

Greensboro-Winston-Salem-High Point,

North Carolina, with a population of 1.1

million. About 50 miles east of

Greensboro is the third-largest MSA,

Raleigh-Durham-Chapel Hill, with one

million people. The Raleigh MSA abuts

the Greensboro MSA. An additional four

North Carolina MSAs are among the

largest of the 17 MSAs containing 50

percent of the population of the

proposed marketing area, for a

combined population of one million.

North Carolina is the most populous

state in the proposed marketing area

with 7.3 million; over half the

population of North Carolina is located

in these seven MSAs.

South Carolina is the second-most

populous state in the proposed

consolidated area, with 3.7 million

people. The Carolinas contain two

thirds of the proposed market’s

population. Greenville is the largest

MSA in the state with a population of

900,000. Greenville is located in the

northwest corner of the state.

Charleston, the second-largest MSA in

South Carolina, with half a million

people, is approximately at the

midpoint of South Carolina’s coast.

The Tennessee portion of the

proposed Appalachian market has a

population of 2 million, with three

MSA’s that are included in the largest

17 in the market. These three areas

contain 1.6 million, or over 80 percent

of the population in that part of

Tennessee that is proposed to be part of

the Appalachian marketing area. The

largest Tennessee MSA is Knoxville,

which is in the eastern end of Tennessee

near North Carolina. Six counties make

up the Knoxville MSA with a combined

population of 650,000. The Johnson

City-Kingsport-Bristol area, the secondlargest Tennessee MSA, is located in the

northeastern tip of Tennessee along the

Virginia and North Carolina border, and

contains almost half a million people.

Chattanooga, the third-largest MSA in

Tennessee, is located on the TennesseeGeorgia border, and has a population of

446,000. The three MSAs run northeast

to southwest just west of the North

Carolina border.

The Kentucky portion of the proposed

Appalachian market contains 2.7

million people. There are two MSAs

within the state that are included in the

largest 17 in the market. The largest is

Louisville, which lies on the border

with Indiana and has a population of

one million. Lexington, the secondlargest Kentucky MSA, is located in the

center of the state and has just under

half a million people. Generally, the

Kentucky counties in the proposed

Appalachian marketing area are not

heavily populated. Only two have

populations over 100,000. They are

Jefferson county, where Louisville is

located, and Fayette county, home to

Lexington.

Indiana counties in the Appalachian

market have a population of .8 million.

Only Vanderburgh county has a

population over 100,000. Evansville, the

only MSA in the portion of Indiana

included in the Appalachian market, is

in Vanderburgh county. Evansville’s

MSA contains 289,000 and is located on

the Indiana-Kentucky border, near the

Illinois state line.

There are seven Georgia counties

within the proposed Appalachian

marketing area, with a total population

of .3 million. Three of them, Catoosa,

Dade, and Walker, are part of the

Chattanooga MSA. These three counties

have a combined population of 124,000.

The 12 Virginia counties in the

proposed Appalachian market have a

population of .3 million. Three of the

counties, Scott, Washington and Bristol

City, are part of the Johnson CityKingsport-Bristol MSA. The two West

Virginia counties within the

Appalachian market have a total

population of .1 million.

Fluid Per Capita Consumption

Estimates of fluid per capita

consumption within the proposed

Appalachian marketing area vary from

15.8 per month for South Carolina to

20.4 pounds per month for Indiana. Use

of 17 pounds per month as a weighted

average results in an estimated 291

million pounds of fluid milk

consumption for the Appalachian

marketing area. Appalachian handlers’

route disposition within the area during

January 1997 totaled 290 million

pounds, with another 18 million

distributed by producer-handlers,

partially regulated plants and other

order plants.

Milk Production

In December 1996, over 4,000

producers from 359 counties in 15 states

pooled 443.3 million pounds of

producer milk on Orders 5, 11 and 46.

Approximately 71 percent of the milk

pooled on the three orders was

produced within the proposed

consolidated marketing area.

North and South Carolina are the only

States that are located entirely within

the proposed consolidated marketing

area, and provided nearly all of their

producers’ milk to Order 5

(encompassing the entire States of North

and South Carolina), with 103.7 and 34

million pounds, respectively. Neither of

these states produces enough milk to

meet even the fluid milk requirements

of its population. Kentucky producers

pooled 101.1 million pounds on the

three orders, with 89 percent produced

within the proposed marketing area.

Tennessee producers pooled 69.9

million pounds on the three orders,

principally on Order 11, with 84 percent

produced within the proposed

marketing area. Although Virginia is

primarily outside the marketing area,

producers from 40 Virginia counties

supplied 68.5 million pounds of milk

for the FO 11 and FO 5 markets in

December 1996. Georgia producers

pooled 27.6 million pounds and Indiana

producers pooled 21 million pounds in

December, with the balance of the milk

pooled on the three orders originating in

Alabama, Connecticut, Illinois,

Maryland, Massachusetts, New Mexico,

Pennsylvania, and West Virginia.

Thirty-four counties each supplied

over 3 million pounds of milk to the

three markets consolidated in this

proposed area. One such county was

located in New Mexico, and another in

Pennsylvania. Eight were located in

Kentucky, south and southwest of

Lexington, and southeast of Louisville.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4845

Eleven were located in North Carolina

west of the Raleigh-Durham area, with

all but one located near Greensboro,

Winston-Salem, Asheville, Charlotte or

Durham. Of the two South Carolina

counties that supplied over 3 million

pounds each, one was located northwest

of Columbia, and the other northwest of

Charleston. The five Tennessee counties

that pooled over 3 million pounds of

milk on the three orders are located in

northeast and southeast Tennessee; two

in the Johnson City-Kingsport-Bristol

area and three southwest of Knoxville.

Only one of the six counties in Virginia

that supplied over 3 million pounds to

Orders 5 and 11 is located within the

marketing area. Five of the six are

located in southwest Virginia, with the

other in the northwest part of the State.

Distributing Plants—Route Distribution

Using distributing plant lists included

in both the Preliminary and Revised

Preliminary Reports and the pooling

standards used in the Revised

Preliminary Report, updated for known

plant closures through May 1997, 33

distributing plants would be expected to

be associated with the Appalachian

marketing area, including 29 fully

regulated distributing plants (28

currently fully regulated and 1 currently

partially regulated), 2 partially regulated

(both currently partially regulated), 1

exempt plant, on the basis of having less

than 150,000 pounds of total route

disposition per month (currently fully

regulated), and 1 government agency

plant (currently a government agency

plant). Four of the 33 distributing plants

expected to be associated with the

proposed area are not in the area but are

located in Virginia, including 2 fully

regulated plants (1 currently fully

regulated and 1 currently partially

regulated), and 2 partially regulated

plants (both currently partially

regulated). Since October 1995, 2

distributing plants in North Carolina

have gone out of business.

Under the proposed Appalachian

order, there would be 17 distributing

plants in the largest Appalachian MSAs

having distributing plants. There would

be 3 pool distributing plants in the

Greensboro-Winston-Salem-High Point

area. The Charleston area would have 2

pool distributing plants. The Johnson

City-Kingsport-Bristol, Tennessee, area

would have 2 pool distributing plants.

The Greenville-Spartanburg-Anderson,

South Carolina, area would have 2 pool

distributing plants. The Knoxville area

would have 1 pool distributing plant

and 1 exempt plant, with less than

150,000 pounds of total route

disposition per month. The Charlotte,

Chattanooga, Lexington, Louisville, and

Evansville areas would each have 1 pool

distributing plant. The Raleigh-Durham

area would have one government agency

plant.

Of the remaining 11 distributing

plants located in the marketing area, one

pool plant would be located in a North

Carolina MSA and one pool plant would

be located in a South Carolina MSA.

The nine remaining distributing plants,

all expected to be pool plants, would

not be located in MSAs. Four would be

in North Carolina, 3 in Kentucky, 1 in

Indiana, and 1 in Tennessee.

The 27 fully regulated plants in the

Appalachian marketing area had

distribution totaling 362 million pounds

in January 1997, with eighty percent

within the proposed marketing area.

A South Carolina plant included

above in the description of fully

regulated distributing plants—

Superbrand Dairy Products, Inc., in

Greenville (about 140 miles northeast of

Atlanta)—has a greater proportion of its

sales in the Southeast market than in the

Appalachian market. This plant

currently is locked into regulation under

the Carolina order based on its need to

procure a milk supply in the Carolina

order, although it has greater route

disposition in the Southeast. This lockin is included in the proposed

Appalachian order provisions.

Utilization

According to October 1995 pool

statistics for handlers who would be

fully regulated under this Appalachian

order, the Class I utilization percentages

for the Carolina and LouisvilleLexington-Evansville markets and the

former Tennessee Valley market were

84, 78, and 81 percent, respectively.

Based on calculated weighted average

use values for (1) the current order with

current use of milk, and (2) the current

order with projected use of milk in the

consolidated Appalachian order, the

potential impact of this proposed rule

on producers who supply the current

market areas is estimated to be:

Carolina, a 3-cent per cwt decrease

(from $14.23 to $14.20); LouisvilleLexington-Evansville , a 5-cent per cwt

increase (from $13.35 to $13.40); and

Tennessee Valley, a 2-cent per cwt

increase (from $13.92 to $13.94). The

weighted average use value for the

consolidated Appalachian order market

is estimated to be $13.97 per cwt. For

December 1996, combined Class I

utilization for Orders 5, 11 and 46 was

75.6 percent based on 335.2 pounds of

producer milk used in Class I out of

443.5 million total producer milk

pounds pooled.

Other Plants

Also located within the proposed

consolidated Appalachian marketing

area during May 1997 were 13 supply or

manufacturing plants: 4 in Kentucky (1

in the Louisville area), 5 in North

Carolina (1 in the Charlotte-GastoniaRock Hill area and one in the

Greensboro-Winston-Salem-High Point

area), 1 in Tennessee, and 3 nonpool

cheese plants in Indiana (1 in the

Lexington area and one in the Louisville

area). Three of the 13 plants are pool

plants, or have a ‘‘pool side.’’ Two of the

three pool plants (one in Kentucky and

the one in Tennessee) are ‘‘split plants,’’

that is, one side of a plant is a

manufacturing facility, and the other

side receives and ships Grade A milk,

and accounting is done separately. Of

these pool plants, the pool sides of the

2 split plants have no primary product,

shipping only to distributing plants. The

nonpool side of one of these plants

manufactures cheese, while the nonpool

side of the other manufactures powder.

The other pool plant is a supply plant

that manufactures primarily Class II

products. Of the other nonpool plants in

the proposed Appalachian marketing

area, 5 manufacture primarily cheese

and 5 manufacture primarily Class II

products.

Cooperative Associations

In December 1995, there were ten

cooperatives representing producers in

the proposed Appalachian marketing

area. One cooperative pooled milk on all

three markets. The Tennessee Valley

and Louisville-Lexington-Evansville

Federal orders had two cooperatives in

common, while the Tennessee Valley

and Carolina Federal orders had one

cooperative in common. For December

1995, 80 percent of the producer milk

pooled on the three markets was

associated with cooperatives, and 85

percent of the cooperative-marketed

milk was pooled by the four

cooperatives that marketed milk on

more than one of the three orders.

Criteria for Consolidation

Overlapping route disposition and

procurement are the primary criteria on

which this proposed consolidation is

based. There is a stronger relationship

between the three marketing areas

involved than between any one of them

and any other marketing area on the

basis of both criteria. There is also

common cooperative association

affiliation between the markets.

Discussion of Comments and

Alternatives

A comment filed on behalf of Barber

Pure Milk Company and Dairy Fresh
4846 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Corporation, both in Alabama, proposed

that the Florida orders and the Carolina

and Tennessee Valley orders be merged

with the Southeast. The commenter

stated that evidence shows the Florida

markets are vitally involved with other

areas of the Southeast in Class I sales,

obtaining milk supply, and in the

disposition of surplus milk. A number

of comments, including those filed by

Mid-America Dairymen, Inc., and

Carolina Virginia Milk Producers

Association, urged that the Appalachian

area be combined with the Southeast

order area, primarily on the basis of

milk procurement overlap in south

central Kentucky. Several commenters,

mainly producers, favored putting all of

Kentucky in one order and most

suggested adding it to the Southeast.

Comments from Trauth Dairy, a Mideast

pool plant under this proposed

consolidation, did not specifically ask

that Kentucky be put into one order, but

that Trauth (at Newport, Kentucky) be

placed in the same order (Appalachian)

as the handlers Trauth described as its

primary competition for producer milk

and for retail sales in the marketplace.

As discussed under the description of

the proposed consolidated Florida

market, overlapping milk distribution

and procurement involving the three

current Florida markets is much greater

within the Florida markets than

between any of the Florida markets and

any other market. As stated in the

description of consolidation criteria,

areas that supply a minor proportion of

an adjoining area’s milk supply with a

minor proportion of their own total milk

production while handlers located in

the area are engaged in minimal

competition with handlers located in

the adjoining area do not necessarily

have a strong enough association with

the adjoining area to be consolidated

with it. It is impossible to find a

boundary across which significant

quantities of milk are not procured for

other marketing areas.

Consolidation of the Carolina and

Tennessee Valley markets with the

Southeast is not proposed because of the

minor degree of overlapping route

disposition and producer milk between

these areas. Less than one-tenth of the

milk produced in the Kentucky counties

proposed to be in the Appalachian area

would be pooled under the Southeast

order, and approximately one-fifth of

the production from the Kentucky

portion of the Southeast area would be

pooled under the Appalachian order.

With the exception of two

Appalachian handlers who account for

two-thirds of the disposition by

Appalachian handlers in the Southeast

order area, only a minor proportion of

the route disposition of Appalachian

handlers is distributed in the proposed

Southeast area. In total, Appalachian

handlers distribute 11 percent of their

route dispositions in the Southeast area,

while Southeast handlers distribute less

than 3 percent of their route

dispositions in the Appalachian area.

There would be very little basis for

splitting the current Order 46 area

(Louisville-Lexington-Evansville) to

include northern Kentucky with the

proposed Appalachian area. Only 3

percent of Appalachian handlers’ route

disposition is distributed within the

Ohio Valley order area, while less than

one million pounds of Class I sales

moves from the Ohio Valley area into

the Order 46 area.

Florida

The proposed Florida marketing area

is comprised of the three current

Federal order marketing areas contained

wholly in the state of Florida: Upper

Florida (Order 6), Tampa Bay (Order 12)

and Southeastern Florida (Order 13).

There are 63 counties in this proposed

area (40 in Order 6, 13 in Order 12, and

10 in Order 13).

Geography

The proposed Florida marketing area

is described geographically as all

counties in the State of Florida, with the

exception of the four westernmost

counties in the Florida Panhandle. This

proposed marketing area is a large

peninsula, ranging from about 140 miles

in width in the north to about 50 miles

in width in the south, that extends

south from the southeast U.S. about 400

miles between the Atlantic Ocean and

the Gulf of Mexico. Also included in the

Florida market is approximately 150

miles of the Panhandle, a narrow strip

of land extending west along the Gulf of

Mexico from the northern part of the

peninsula. The water surrounding most

of Florida’s peninsula constitutes a

natural boundary, as east-to-west travel

is limited.

Almost all of Florida has a humid

subtropical climate. The southern end of

the state and the islands south of the

peninsula have a tropical wet and dry

climate. In general, the state’s climate

can and does affect levels of milk

production negatively. Seasonal

variation in production for this market

typically is greater than for most other

U.S. regions. The importance of dairy

farming as an agricultural pursuit in

Florida is relatively minor (7 percent of

total receipts from agricultural

commodities), with several crops

contributing more total receipts to the

State’s income. However, no livestock

commodity is as important in Florida as

dairy farming.

Population

According to July 1, 1996, population

estimates, the total population in the

proposed Florida marketing area is 13.8

million. Ninety-three percent of the

population of the marketing area is

located in Metropolitan Statistical Areas

(MSAs). The two largest MSAs are

Miami-Fort Lauderdale (Miami) on the

eastern side of the southern end of the

peninsula, and Tampa-St. PetersburgClearwater (Tampa) midway on the

western side of the peninsula. Broward

and Dade Counties comprise the Miami

population center (currently in Order

13) with a population of 3.5 million.

The Tampa population center (currently

in Order 12) is comprised of Hernando,

Hillsborough, Pasco and Pinellas

counties with a population of 2.2

million. The six counties in these two

population centers represent about 41

percent of the total marketing area

population.

Fluid Per Capita Consumption

Florida customarily is considered a

deficit milk production state. For much

of the year, milk needs to be imported

from other states in order to meet the

demand for fluid consumption. Based

on the population figure of 13.8 million

and an estimated per capita fluid milk

consumption rate of 17 pounds of fluid

milk per month, total fluid milk

consumption in the Florida marketing

area is estimated at 234.6 million

pounds per month.

During October 1995, 205 million

pounds of milk were disposed of in the

proposed marketing area by all Florida

distributing plants. Plants located

outside the marketing area (mostly from

the Southeast market [Order 7]) had

route disposition within Florida of 20

million pounds. The discrepancy

between the actual total route

disposition of 225 million pounds and

the estimated consumption level of

234.6 million pounds may be explained

by the older than average population in

Florida.

Milk Production

In December 1996, 222 million

pounds of milk produced in Florida

were pooled in four Federal orders; 98.5

percent of this milk was pooled on the

three current Florida orders. About 370

producers located in Florida (96 percent

of all Florida producers having

association with Federal orders) had

producer milk pooled on at least one of

the three Florida markets. A small

number of Florida producers had

producer milk associated with Order 7,
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4847

while more than 100 Georgia producers

had producer milk associated with the

Florida markets. Additionally, 34

million pounds of Georgia milk was

pooled on the three Florida markets; 85

percent of this milk went to Order 12.

There are 44 counties in Florida that

pooled milk in at least one of the three

current Florida orders. Seven of these

counties produced 62.6 percent of the

milk pooled.

Three counties (Gilchrist, Lafayette

and Suwannee, about 75 miles west of

Jacksonville) had 53.9 million pounds of

producer milk. For these three counties,

85.5 percent of the December 1996

producer milk was pooled on the Tampa

Bay order, which is located

approximately 150 miles southeast of

the counties.

More than 80 percent of Clay County’s

producer milk was pooled in Order 6.

This county is in the Jacksonville MSA,

which is the largest population center in

Order 6.

About 20 million pounds of producer

milk came from Hillsborough and

Highland Counties, both part of the

Order 12 market. However, this milk

was pooled about evenly between

Orders 12 and 13.

Okeechobee County, located in the

Order 13 marketing area about 125 miles

northwest of the Miami area, is by far

the largest milk producing county in

Florida. The county had 54.5 million

pounds of producer milk in December

1996, almost all of which was pooled on

Order 13.

Distributing Plants—Route Distribution

Using plant lists included in both the

Preliminary and Revised Preliminary

Reports and the pooling standards used

in the Revised Preliminary Report,

updated for known plant closures

through May 1997, 15 plants would be

expected to be fully regulated under the

proposed Florida market. Five of these

plants are located in the Miami MSA

and three in the Tampa MSA. Three

plants are located in mid-Florida, one in

the Orlando area and two in the

Lakeland-Winter Haven area. Three

more are located in northeast Florida;

two in the Jacksonville area, and one in

Daytona Beach. Two plants having route

disposition of less than 150,000—one in

the Tampa MSA and the other in Citrus

County (north of Tampa and west of

Orlando)—would be exempt.

Slightly less than two-thirds of the

proposed market’s population is

contained in the MSAs where fully

regulated plants are located.

Utilization

According to October 1995 pool

statistics for handlers who would be

fully regulated under this Florida order,

the Class I utilization percentages for

the Upper Florida, Tampa Bay, and

Southeastern Florida markets were 85,

90, and 91 percent, respectively. Based

on calculated weighted average use

values for (1) the current order with

current use of milk, and (2) the current

order with projected use of milk in the

consolidated Florida order, the potential

impact of this proposed rule on

producers who supply the current

market areas is estimated to be: Upper

Florida, an 11-cent per cwt increase

(from $14.67 to $14.78); Tampa Bay, a

5-cent per cwt decrease (from $15.09 to

$15.04); and Southeastern Florida, an

11-cent per cwt decrease (from $15.42 to

$15.31). The weighted average use value

for the consolidated Florida order

market is estimated to be $15.05 per

cwt. For December 1996, combined

Class I utilization for the three Florida

markets was 83.9 percent based on

211,712,000 pounds of producer milk

used in Class I out of 252,402,000 total

producer milk pounds.

Other Plants

Also located within the Florida

marketing area are four supply or

manufacturing plants, three of which

are not associated with the current

markets’ pools. Three ice cream plants

are located in the Tampa area and one

pool supply plant is in the Jacksonville

area.

Cooperative Associations

Four cooperatives market milk in the

Florida markets, and represent nearly

100 percent of the milk marketed.

Florida Dairy Farmers Association is the

only cooperative with membership in

all three current markets. In December

1995, 60 percent of the producer milk

associated with the three markets came

from members of this cooperative.

During this same month, Tampa

Independent Dairy Farmers Association

members were affiliated with the Tampa

Bay and Southeastern Florida markets,

while Mid-America Dairymen, Inc., and

Select Milk Producers, Inc., members

had producer milk on the Tampa Bay

pool.

Criteria for Consolidation

As suggested in both the initial and

Revised Preliminary Reports on Order

Consolidation, the consolidated Florida

market should encompass the current

marketing areas of the Upper Florida,

Tampa Bay and Southeastern Florida

Federal milk orders. Natural boundary

limitations and overlapping sales and

procurement areas among the three

orders are major reasons for

consolidation, as well as a measure of

association evidenced by cooperative

association proposals to consolidate

these three marketing areas. Further, the

cooperative associations in this area

have worked together for a number of

years to accommodate needed

movements of milk between the three

Florida Federal orders, and into and out

of the area.

Discussion of Comments and

Alternatives

One comment, filed on behalf of two

Alabama handlers, suggested that the

order areas of Florida, the Carolinas and

Tennessee Valley be merged with the

Southeast. The comment stated that the

Florida markets are vitally involved

with other areas of the southeast in

Class I sales, procurement of milk

supplies, and disposition of surplus

milk. Although there is some overlap in

these functions between the Florida

markets and the Southeast order area, it

is not great enough to warrant the

combination of these three order areas,

which have a greater degree of affinity

among themselves than with any other

market, with the Southeast. Given the

closeness of the relationship between

the current Florida markets, and the

lack of any significant overlap of sales

or production with other order areas, no

alternatives other than those discussed

were considered with regard to this

area.

Southeast

The proposed Southeast marketing

area is comprised of the current

Southeast (Order 7) marketing area,

portions of the current Southwest Plains

(Order 106) marketing area in northwest

Arkansas and southern Missouri, and

six southeastern Missouri counties from

the current Southern Illinois-Eastern

Missouri (Order 32) marketing area.

Also included are 16 currently

unregulated Missouri counties, 21

currently unregulated Kentucky

counties, and 1 Kentucky county that

currently is part of the LouisvilleLexington-Evansville (Order 46)

marketing area. There are 572 whole

counties and 1 partial county (Pulaski

County, Missouri) in this proposed area.

Geography

The Southeast market is described

geographically as follows: all counties

in Alabama, Arkansas, Louisiana, and

Mississippi (67, 75, 64 and 82 counties,

respectively), 4 in Florida, 152 in

Georgia, 44 whole and 1 partial in

Missouri, 62 in Tennessee and 22 in

Kentucky (one—Logan County—

currently is in Order 46, and 21

currently are unregulated). Of these 21

counties, 14 were part of the former
4848 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Paducah, Kentucky (Order 99)

marketing area. Eleven Arkansas and 23

Missouri counties (including part of

Pulaski County) are part of the current

Order 106 marketing area. Six Missouri

counties are part of the current Order 32

marketing area. Sixteen southeastern

Missouri counties currently are

unregulated (4 of these were part of the

former Paducah Federal milk order).

The Southeast market spans the

southeastern area of the United States

from the Gulf of Mexico and the

Alabama/Georgia-Florida border north

to central Missouri, Kentucky,

Tennessee and South Carolina, and from

the Atlantic Ocean west to Texas,

Oklahoma, and Kansas. Measuring the

extreme dimensions, this market

extends about 575 miles north to south

from central Missouri to southern

Louisiana and 750 miles west to east

from Louisiana’s border with Texas to

the Atlantic Ocean coast in southern

Georgia.

The Southeast marketing area is

contiguous to 4 other proposed

consolidated marketing areas: Florida to

the southeast, the Southwest to the

west, the Central to the northwest and

the Appalachian to the northeast and

east. Georgia’s coastline on the Atlantic

Ocean is about 100 miles in length,

while western Florida, Alabama,

Mississippi and Louisiana extend about

600 miles along the Gulf of Mexico

coastline. Also contiguous to the current

Southeast market are currently

unregulated counties in Texas,

Missouri, Kentucky (and as of October

1, 1997, the Tennessee Valley [Order 11]

marketing area). The proposed

consolidated marketing areas would

encompass all of these counties into the

Southwest, Central, Appalachian or

Southeast marketing areas, with some

currently-unregulated counties in

central Missouri remaining unregulated

under this proposal.

In terms of physical geography, the

Southeast region is generally flat or

gently rolling low-lying land. Relatively

higher elevations which might

potentially form natural barriers or

obstruct easy transportation exist in

northwest Arkansas and northeast

Georgia.

Moving from the south to the north of

the Southeast market, climates range

from humid subtropical in coastal areas

to warm and humid or humid

continental to temperate in Tennessee

and Kentucky. Warm, humid summers

and mild winters are typical in the

Southeast. These types of climates can

severely limit the production level of

dairy herds in the summer.

Population

According to July 1, 1996, population

estimates, the total population in the

proposed Southeast marketing area is

26.7 million. The 42 Metropolitan

Statistical Areas (MSAs) in the proposed

market account for 62 percent of the

total marketing area population. Almost

half of the Southeast population is

located in the 17 most populous MSAs.

Eight MSAs have populations greater

than 500,000 each; their total

population is about 35 percent of the

Southeast population. Because of the

large number of MSAs in the Southeast

market and also because no large (i.e.,

greater than 500,000) population centers

are added to this market under this

proposal, only those areas with

populations greater than 500,000 are

described in greater detail.

Over 25 percent of the Southeast

market’s population is located in

Georgia, the most populous of the

Southeast market states, with 7.1

million people. Almost half of Georgia’s

population is concentrated in the

Atlanta MSA, located about 60 miles

south of the Southeast-Appalachian

marketing area boundary in the

northwest portion of the state. Atlanta is

the largest city in the Southeast market

with a population of 3.5 million.

With 4.3 million people, Alabama is

the Southeast market area’s third most

populous state. Birmingham and

Mobile, the state’s two largest MSA

regions, are among the top eight in

population in the Southeast. The

Birmingham area has a population of

about 900,000 and ranks 5th in size

among all Southeast area MSAs.

Birmingham is located about 150 miles

west of Atlanta in north central

Alabama. The Mobile area is a Gulf of

Mexico port city in southwestern

Alabama. With a population of 520,000,

Mobile is the 8th largest population

center in the Southeast market area.

Louisiana is the second most

populated state in the Southeast market

area with 4.4 million people. Two of the

Southeast’s 8 largest MSAs are located

in Louisiana—New Orleans, the second

largest MSA with 1.3 million people

and Baton Rouge, the 6th largest MSA

with almost .6 million people. New

Orleans is located in the state’s ‘‘toe’’ in

southeastern Louisiana. Baton Rouge

also is located in Louisiana’s ‘‘toe,’’

about 80 miles west of New Orleans.

Arkansas has a total population of 2.5

million—2 million from the current

Southeast marketing area and an

additional 500,000 from the Arkansas

portion of the Southwest Plains

marketing area. The Little Rock-North

Little Rock, Arkansas (Little Rock) MSA,

in the center of Arkansas, has the 7th

largest population concentration in the

Southeast market area with 550,000.

The portion of Tennessee in the

Southeast marketing area is the fourth

most populated with 3.3 million people

and is home to the third and fourth

largest MSAs in the Southeast. The

Nashville area, with a population of 1.1

million, is located in central Tennessee.

The Memphis, Tennessee/Arkansas/

Mississippi MSA, also with a

population of 1.1 million, is located

near these three states’ borders.

Other states or portions of states in

the Southeast marketing area do not

have MSAs with greater than 500,000

population. Mississippi, the Southeast’s

5th most populous state, has a total

population of 2.7 million. The Missouri,

Florida and Kentucky counties in the

Southeast market have populations of

1.3 million, 590,000 and 520,000,

respectively.

Fluid Per Capita Consumption

Fluid per capita consumption

estimates vary throughout the Southeast

market from a low of 16 pounds of fluid

milk per month in Mississippi to a high

of 19 pounds in Arkansas and Kentucky.

Multiplying the individual states’

consumption rates by their population

results in an estimated fluid milk

consumption rate of 467 million pounds

of fluid milk per month for the

Southeast marketing area. With route

distribution from the current Southeast

order handlers (not including the 3

Arkansas and Missouri plants) equaling

334 million pounds within the

Southeast marketing area, route

distribution from these handlers is

approximately 100 million pounds less

than the expected consumption.

In January 1997, Georgia had the

greatest ‘‘deficit’’—with route

distribution from Order 7 handlers

falling about 42 million pounds short of

the 122 million pounds of expected

consumption. The state’s fluid needs

were met by the route distribution of

about 44 million pounds into Georgia by

fully regulated handlers in the proposed

Appalachian and Florida markets.

Other states’ ‘‘deficits’’ generally

ranged from 4 to 11 million pounds. It

is likely that handlers regulated under

other Federal orders had distribution

into the Southeast area. Alabama is the

only state in which the amount of route

distribution by Order 7 handlers is

about the same as the expected

consumption level.

Milk Production

In January 1997, 4,180 producers from

388 counties pooled 477.4 million

pounds of producer milk on the current
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4849

Southeast market. Over 85 percent of

the Southeast’s producer milk came

from Southeast market area counties. Of

the 388 counties, 19 pooled over 5

million pounds each, accounting for 39

percent of Order 7’s producer milk. Of

these 19 counties, 2 Texas counties are

located outside the proposed Southeast

market area. Because of the large

number of counties, only the locations

for those top 19 production counties are

described in greater detail. However, the

volume of producer milk, number of

producers (farms) and number of

counties is provided for each state

within the market area.

Almost 73 million pounds of milk

were pooled on the Southeast market

from 581 producers in 28 Louisiana

parishes in January 1997. Top

production parishes are Tangipahoa,

Washington and St. Helena, all located

in the state’s ‘‘toe,’’ north of New

Orleans and northeast of Baton Rouge,

each bordering Mississippi. Another

high production area is centered on De

Soto Parish in northwestern Louisiana.

These four parishes account for over 62

million pounds of producer milk, with

76 percent coming from Tangipahoa and

Washington parishes.

Almost 67 million pounds of milk

were pooled on the Southeast market

from 331 producers in 68 Georgia

counties in January 1997. Of this

volume, 64 million came from 312

producers in 64 Georgia counties in the

Order 7 marketing area. The balance is

associated with Georgia producers

located in the marketing area of the

recently-terminated Order 11

(Tennessee Valley). Top production

counties are Putnam, Morgan and

Macon, which pooled 27 million

pounds of producer milk on Order 7.

About 65 million pounds of milk were

pooled on the Southeast market from

580 producers in 46 Tennessee counties

in January 1997. Of this volume, 62

million came from 562 producers in 42

Tennessee counties in the Order 7

marketing area. The balance is

associated with Tennessee producers

located in the marketing area of the

recently-terminated Federal Order 11.

Two high production counties in the

state are Marshall and Lincoln, located

in south central Tennessee. These

counties contributed over 12 million

pounds of producer milk to the Order 7

pool in January 1997.

About 61 million pounds of milk were

pooled on the Southeast market from

443 producers in 48 Mississippi

counties in January 1997. Top

production counties are Walthall and

Pike, in southern Mississippi on the

state’s border with Louisiana. These two

counties adjoin the heavy milk

production area in Louisiana. The

counties contributed 15 million pounds

of producer milk to the Order 7 pool in

January 1997.

About 32 million pounds of milk were

pooled on the Southeast market from

408 producers in 19 Kentucky counties

in January 1997. Additionally, 116

producers in 15 of these counties pooled

almost 9 million pounds of producer

milk on Orders 11 and 46 (LouisvilleLexington-Evansville). Two counties,

Barren and Monroe, contributed over 13

million pounds of producer milk. These

contiguous counties are in south central

Kentucky about 80 miles northeast of

Nashville, Tennessee.

Four Missouri counties—Wright,

Texas, Laclede and Howell— pooled 33

million pounds of producer milk on

Order 7. All of these counties currently

are located in the Order 106 (Southwest

Plains) marketing area in southern

Missouri.

Other Southeast marketing area states

or areas contribute producer milk to the

Southeast marketwide pool. About 37

million pounds of milk were pooled on

the Southeast market from 205

producers in 51 Alabama counties, and

25 million pounds were pooled from

343 producers in 39 Arkansas counties.

Sixteen Florida producers from 6

counties (2 in the Southeast market

area) pooled 3.5 million pounds on

Order 7 in January 1997.

In January 1997, Order 7 producer

milk also originated in Missouri

counties not included in the Southeast

marketing area, Texas, New Mexico,

Indiana and Oklahoma. Large amounts

of milk from Missouri (21 million

pounds in addition to the 33 million

described previously) and Texas (46

million pounds—20 million from

Hopkins and Erath Counties) were

associated with the Order 7 pool. It

should be noted that milk does not need

to be physically received at a Federal

order plant regulated under the order in

which the milk is pooled.

Distributing Plants—Route Distribution

Using distributing plant lists included

in both the Preliminary and Revised

Preliminary Reports and the pooling

standards used in the Revised

Preliminary Report, updated for known

plant closures through May 1997, 47

distributing plants located in the

proposed Southeast marketing area

would be expected to be associated with

the Southeast market (including the

added territory in northwestern

Arkansas and southern Missouri). These

plants include 36 fully regulated

distributing plants, 2 partially regulated,

one exempt plant based on size, one

producer-handler, and 7 government

agency plants (including university and

state prison plants). None of these

plants’ regulatory status is expected to

change as a result of the consolidation

process. Of the 36 fully regulated plants,

18 are located in the largest eight MSA

regions. One distributing plant located

in the proposed Appalachian marketing

area that has more than half of its route

disposition within the Southeast

marketing area would be locked into

regulation under the Appalachian order.

Since October 1995, it is known that

7 distributing plants (6 fully regulated

and 1 exempt) have gone out of

business. These plants were located in

Alabama, Arkansas, Georgia, and

Missouri (1 plant each), and Mississippi

(3 plants). Also, one fully regulated

distributing plant, Centennial Dairy

Farms, Inc., in Atlanta, GA, began

packaging and distributing products in

October 1996. Information for this plant

is included in route dispositions

reported for January 1997, the month

used in this analysis.

Of the 47 distributing plants, Georgia

has 7; Louisiana, 12; Mississippi, 6;

Alabama, 7; Arkansas, 6; Tennessee, 5;

Missouri, 2; and Kentucky, 2. No

distributing plants are located in the

Florida counties included in the

Southeast market area.

In January 1997, the 34 plants fully

regulated under Order 7 at that time had

route distributions totaling 372 million

pounds. About 90 percent, or 334

million pounds, was distributed within

the Order 7 marketing area. Route

distribution volumes from the 11

nonpool distributing plants were

relatively insignificant and are not

included here. These data do not

include distribution information from

the 3 fully regulated plants in northwest

Arkansas and southern Missouri that

would be included in the proposed

Southeast pool. All 3 plants are

operated by one handler; thus this data

is proprietary information and is

restricted. These plants’ information is

included, however, in the market

information presented in the Central

market discussion.

In Georgia, three pool distributing

plants are located in the Atlanta area,

with 2 others elsewhere in the State.

Georgia also has 1 partially regulated

handler and 1 government agency (state

prison) plant.

Nine of Louisiana’s 12 distributing

plants currently are and would continue

to be fully regulated (pool plants) in this

proposed marketing area. Five of these

9 are located in either the New Orleans

or Baton Rouge areas (2 and 3,

respectively). Four other pool

distributing plants are located in

Louisiana. The remaining three plants
4850 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

are affiliated with universities or the

state prison.

Four of Mississippi’s 6 currently

operational distributing plants would be

fully regulated pool plants in the

Southeast market. Two universities also

have plants.

All seven of Alabama’s distributing

plants are fully regulated. One is located

in the Birmingham area and 2 are

located in the Mobile area. Of the

remaining four, 2 are in northern

Alabama, one is in central Alabama, and

one is in the state’s southeastern corner.

Four of Arkansas’ 6 currently

operational distributing plants are fully

regulated; two are in the Little Rock

area, and the other 2 are located in

northwest Arkansas. Also located

within Arkansas are an exempt

distributing plant and a state prison

plant. All five of Tennessee’s

distributing plants are fully regulated.

Three of the 5 are located in the

Nashville area and the remaining two

are in the Memphis area.

Two distributing plants that would be

fully regulated under the Southeast

market are located in the currently

unregulated Kentucky counties that are

proposed to be added to this marketing

area. One is located in Fulton in the

southwest corner of Kentucky on the

Tennessee border, and the other about

30 miles east of Fulton.

Two Missouri plants are located in

the counties proposed to be included in

the Southeast area. One fully regulated

plant is located in Springfield; a

partially regulated plant based on

October 1995 data, but exempt (by

virtue of having less than 150,000

pounds of route dispositions) based on

January 1997 data, is located northeast

of Springfield.

Utilization

According to January 1997 pool

statistics, the Class I utilization for the

Southeast market was about 78 percent.

Changes to this percentage are likely to

occur with the addition of 3 pool plants

or potential changes in plants’

regulatory status. It is not expected that

the addition of the plants would have a

significant impact on producer returns

in the Southeast as a result of

consolidation. For December 1996, Class

I utilization for the Southeast market

was 73.4 percent based on 339,275,000

pounds of producer milk used in Class

I out of 462,455,000 total producer milk

pounds.

Other Plants

Also located within the Southeast

marketing area during May 1997 are 37

supply or manufacturing plants: 1 in

Kentucky, 5 in Alabama (including 1 in

the Birmingham area), 5 in Arkansas

(including 1 in the Little Rock area), 7

in Georgia (including 4 in the Atlanta

area), 3 in Louisiana (including 1 in the

Baton Rouge area), 11 in Missouri, 2 in

Mississippi, and 3 in Tennessee

(including 1 each in the Memphis and

Nashville areas). Eight of the 37 plants

are pool plants. Of these pool plants, 2

primarily ship to distributing plants, 3

manufacture cheese, 1 manufactures

Class II products, 1 manufactures

powder and 1 primarily manufactures

other products. Of the Southeast

marketing area’s 28 nonpool plants, 13

manufacture primarily Class II products,

3 manufacture cheese, 10 manufacture

primarily other products, and 1 each

manufacture primarily butter and

cheese. One plant is a ‘‘split plant,’’

with one side serving as a

manufacturing facility primarily for

Class II products, while the other side

receives and ships Grade A milk.

Accounting is done separately.

Cooperative Associations

In December 1995, six cooperative

associations represented members

marketing 78 percent of the milk pooled

on the Southeast market: Mid-America

Dairymen, Inc.; Associated Milk

Producers, Inc., Southern Region;

Carolina-Virginia Milk Producers

Association, Inc.; Arkansas Dairy

Cooperative Association (ADCA);

Vanguard Milk Producers Cooperative

(VMPC); and National Farmers

Organization, Inc. ADCA and VMPC

members marketed milk only in the

Southeast Federal order, while the other

4 cooperatives’ members marketed milk

in multiple Federal orders.

Criteria for Consolidation

Retention of the Southeast marketing

area as a single area is based on

overlapping route dispositions within

the marketing area to a greater extent

than with other marketing areas.

Procurement of producer milk also

overlaps between states within the

market. The need for milk from outside

the market is primarily seasonal, and is

not as great as the volume of milk that

is pooled from other areas. There is

common cooperative association

membership within the marketing area.

The addition of northwest Arkansas

and southern Missouri to the marketing

area is primarily in response to

comments received during the public

comment period. The association that

exists between these 2 areas, the

Southeast marketing area, and the

proposed Central market should

continue to be monitored throughout

the reform process.

Discussion of Comments and

Alternatives

Several commenters, primarily

producers, favored putting Kentucky all

in one order and most suggested adding

it to the Southeast. In a comment that

was considered in the Revised

Preliminary Consolidation Report,

Georgia Milk Producers had suggested

dividing the Southeast Order on the

state line between Mississippi and

Alabama. Over 35 form letters opposed

the separation of the Southeast

marketing area between Mississippi and

Alabama. A more recent Georgia Milk

Producers comment rescinded this

position.

A comment filed on behalf of Barber

Pure Milk Company and Dairy Fresh

Corporation, both in Alabama, suggested

that the Florida orders and the Carolina

and Tennessee Valley orders be merged

with the Southeast. The comment stated

that evidence shows the Florida markets

are vitally involved with other areas of

the Southeast in Class I sales, obtaining

milk supply, and in the disposition of

surplus milk. As discussed under the

description of the proposed

consolidated Florida market, the

greatest overlap in sales distribution and

milk supply involving the Florida

markets occurs between the three

current Florida markets. A discussion of

the issue of consolidating the Carolina

and Tennessee Valley markets with the

Southeast can be found in the

description of the proposed

Appalachian market.

Approximately 10 commenters

suggested that southern Missouri and/or

northwest Arkansas should be included

in the Southeast marketing area. MidAm supported making both areas part of

the Southeast Federal order to correct

the inequity perceived by the

cooperative to be caused by southwest

Missouri manufacturing plants

balancing the Southeast without being

able to pool, and inefficient milk

movements caused by blend price

discrepancies. AMPI concurred,

suggesting that southern Missouri

historically has been a supply source for

the Southeast. The Director of the

Missouri Department of Agriculture

contended that southern Missouri has

the largest concentration of milk

production in the state and serves as the

reserve supply for southeastern markets.

The Missouri Farm Bureau Federation

also suggested including some southern

Missouri counties with the Southeast.

One producer also supported including

southern Missouri in the Southeast

Marketing Area.

It appears that a substantial amount of

the milk supply pooled under the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4851

Southeast order has been shifted from

Texas to Missouri. Between December

1996 and May 1997 the percentage of

milk pooled under the Southeast order

that was produced in Texas declined

from over 10 percent to under 7 percent.

During the same time period, the

Missouri share of the Southeast pool

increased from 10 percent to 15 percent.

This shift may reflect a change in the

relative price relationships between the

Southeast, Texas and Southwest Plains

orders, which could be subject to

change in the opposite direction in the

future. While the percentage of southern

Missouri milk pooled under the

Southeast order increased from less than

one-third to nearly one-half, less than

one-half of the volume pooled on the

Southeast order is actually delivered to

Southeast plants, with over half of the

volume being diverted to manufacturing

plants in Missouri, Illinois, Minnesota

and Wisconsin.

Production pooled under the

Southeast order from the northwest

Arkansas counties located in the current

Southwest Plains marketing area

increased from less than 10 percent of

those counties’ production in December

1996 to about 13 percent in May 1997.

Arkansas milk represented 5 percent of

the total milk pooled under the

Southeast order in December 1996, and

just under 6 percent in May 1997.

The commenters state that if the

portions of Arkansas and Missouri that

currently are in the Southwest Plains

marketing area are shifted to the

Southeast order area, the route

disposition by distributing plants

located within this area would become

in-area dispositions from Southeast pool

distributing plants. The most recent

information available shows that more

than half of the dispositions from the

three plants in question would be

within the Southeast marketing area if

the area in which they are located were

part of the Southeast area.

Several commenters also suggested

that the proposed consolidated

Appalachian order area (the current

Carolina and Louisville-LexingtonEvansville areas and the former

Tennessee Valley area) be combined

with the Southeast marketing area

because of a common procurement area

in south central Kentucky for the

Southeast and Tennessee Valley

markets, causing different blend prices

to exist. This issue is discussed in some

detail under the description of the

proposed consolidated Appalachian

market.

A number of comments from east

Texas suggested combining that portion

of Texas with the Southeast marketing

area to resolve inequities identified by

the commenters. The commenters

claimed that due to its heat, humidity

and rainfall, milk production conditions

in eastern Texas have more in common

with the Southeast than with the

Southwest area. The dry climate of

Central Texas and New Mexico permits

dairies to become much larger and

produce 10–15% more milk per cow, at

a lower cost than East Texas producers

are able to achieve. This issue is

discussed in detail under the

description of the proposed

consolidated Southwest market area.

Mideast

The proposed consolidated Mideast

marketing area is comprised of the

current Ohio Valley (Order 33), Eastern

Ohio-Western Pennsylvania (Order 36),

Southern Michigan (Order 40), part of

the Michigan Upper Peninsula (Order

44), and Indiana (Order 49) marketing

areas plus 6 currently unregulated

Indiana counties, 2 whole and 3 partial

currently unregulated Michigan

counties, and 6 whole and 3 partial

currently unregulated Ohio counties.

There would be 304 whole and 2 partial

counties in this proposed area.

Geography

The Mideast market is described

geographically as follows:

Indiana—72 counties (64 currently in

Order 49, 2 currently in Order 33, and

6 currently unregulated on the western

edge of the State, just south of the

northwest corner).

Kentucky—18 counties (all currently

in Order 33).

Michigan—77 counties. Two whole

and 3 partial counties currently are

unregulated. The rest of the area

currently is included in Orders 40, 44,

49, and 33. Of the total 83 Michigan

counties, only 6 in the western end of

the Upper Peninsula are not included in

the proposed Mideast marketing area.

Ohio—all 88 counties. Six whole and

3 partial counties currently are

unregulated. The rest of the State

currently is included in Orders 33 and

36.

Pennsylvania—12 whole and 2 partial

counties, currently in the Order 36 area.

West Virginia—37 counties; 20

currently in Order 33, 17 currently in

Order 36.

The proposed Mideast marketing area

lies directly south of the Great Lakes,

with the State of Michigan enclosed on

the east and west sides by Lakes Huron

and Michigan. On the eastern border of

the marketing area, between the

proposed Mideast and Northeast

marketing areas, is Pennsylvania Stateregulated territory and the Allegheny

and Appalachian Mountains.

The east-to-west distance across the

proposed marketing area is

approximately 450 miles, from locations

on the eastern edge of the area in

western Pennsylvania to the border of

Indiana and Illinois. Northwest to

southeast, from Marquette, Michigan, in

the Upper Peninsula to the northeast

area of Kentucky in the marketing area

is just over 800 miles. From the

northern tip of lower Michigan to

southern Indiana the more direct northsouth distance is 530 miles.

The proposed Mideast marketing area

is contiguous to 3 other proposed

consolidated marketing areas. The

proposed Central marketing area would

provide the western border of the

Mideast marketing area along the

Indiana-Illinois border, and the

proposed Appalachian area would

provide the southern boundary. The

western end of Michigan’s Upper

Peninsula, part of the proposed Upper

Midwest area, would adjoin the Mideast

portion of the Upper Peninsula.

In terms of physical geography, most

of the proposed Mideast marketing area

is at low elevations, and relatively flat.

The climate and topography are

favorable to milk production, with dairy

being the number one agricultural

commodity in terms of financial receipts

in the State of Michigan in 1996. Dairy

also ranks high in terms of financial

receipts in the rest of the area; 3rd in

Ohio and West Virginia, and 5th in

Indiana.

Population

According to July 1, 1996, population

estimates, the total population in the

proposed marketing area is 31 million.

The 34 MSAs in the proposed Mideast

marketing area include 79.2 percent of

the area’s population. Over 55 percent

of the area’s population is contained in

the 8 most populous MSAs, which each

have over 950,000 people. Two-thirds of

the population is located in the states of

Michigan and Ohio.

The Mideast area’s largest and 7th

largest of the 34 MSAs are located in

Michigan. Detroit-Ann Arbor-Flint, with

5.1 million population, is the largest

MSA, and is located in the southeast

portion of the state between Lakes

Huron and Erie. Grand RapidsMuskegon-Holland is the 7th largest

Mideast MSA, is located approximately

150 miles west-northwest of Detroit, and

has a population of 1 million. These two

MSAs contain two-thirds of the

population of Michigan. There are 5

other MSAs in Michigan. Three have

approximately 400,000 population each,

and the other two average

approximately 150,000 apiece. Eightyfour percent of the population of
4852 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Michigan is located in these 7 MSAs, all

in the lower half of southern Michigan.

Four of the 8 largest Mideast MSAs

are located in the State of Ohio. These

are: (1) Cleveland-Akron, the secondlargest, with a population of 2.9 million,

located on Lake Erie in northwestern

Ohio; (2) Cincinnati-Hamilton, OH-KYIN, the 4th largest, with a population of

1.9 million, located in the southwest

corner of Ohio; (3) Columbus, the 6th

largest, with a population of 1.4 million,

located approximately midway between

Cincinnati and Cleveland; and (4)

Dayton, the 8th largest, with a

population of .95 million.

There are 6 additional MSAs in Ohio,

2 with populations of approximately .6

million each, 1 with a population of .4

million, and 3 that average just over

150,000 each. Eighty-one percent of the

population of Ohio is located in MSAs,

most in the northern part of the State.

The third-largest MSA in the Mideast

area is Pittsburgh, Pennsylvania, with a

population of 2.4 million. Pittsburgh is

127 miles southeast of Cleveland. There

are two smaller MSAs in the

Pennsylvania portion of the proposed

Mideast marketing area, having an

average population of about 200,000

each. Eighty-seven percent of the

population of the Pennsylvania portion

of the Mideast area is located in MSAs.

Indianapolis, Indiana, is the 5th

largest MSA in the proposed Mideast

marketing area, with a population of 1.5

million. Indiana contains 9 additional

MSAs, 2 with populations of .5 and .6

million, and 7 others that average

155,000 population. All but 2 of the 9

smaller MSAs are located north of

Indianapolis. Seventy-four percent of

the population of the portion of Indiana

that is in the proposed Mideast area is

located in MSAs.

The portion of West Virginia that is

within the proposed Mideast area

contains 4 MSAs, 3 of which are located

on the West Virginia-Ohio border, along

the Ohio River. The population of these

MSAs averages just over 200,000. Fortyfive percent of the population of the

West Virginia portion of the proposed

Mideast area is located in MSAs.

Fluid Per Capita Consumption

Estimates of fluid per capita

consumption within the proposed

Mideast area vary from 18.75 pounds

per month for Michigan to 20.4 pounds

per month for Indiana. Use of 19 pounds

per month as a weighted average results

in an estimated 588 million pounds of

fluid milk consumption for the Mideast

marketing area. Mideast handlers’ route

disposition within the area during

October 1995 totaled 537 million

pounds, with another 27 million

distributed by 20 handlers fully

regulated under other orders. An

additional 1.9 million pounds was

distributed by 8 handlers that would be

partially regulated under the proposed

Mideast order, 6 handlers that would be

regulated under other consolidated

orders and 2 under the proposed

Mideast order. One million eight

hundred thousand pounds was

distributed by producer-handlers, and

less than 1 million pounds by 2

handlers that would be exempt under

this proposed rule on the basis of each

having less than 150,000 pounds of

route disposition per month.

Milk Production

In December 1996, over 12,000

producers from 376 counties in 11 states

pooled 1.1 billion pounds of milk on

Federal Orders 33, 36, 40, 44 and 49.

Over 90 percent of this producer milk

came from Mideast marketing area

counties. The States of Indiana,

Michigan, Ohio and Pennsylvania

supplied 93 percent of the milk (13%,

37.9%, 30.4% and 11.6%, respectively),

with 89 percent coming from counties

that would be in the proposed Mideast

area. Just over two-thirds of the milk

pooled under these orders was

produced in Michigan and Ohio

counties located within the proposed

consolidated marketing area.

Other states pooling milk on the

orders proposed to be consolidated in

the proposed Mideast area were Illinois

(1.4%), Kentucky (0.5%), Maryland

(0.4%), New York (2.5%), Virginia

(0.1%), West Virginia (1.0%), and

Wisconsin (1.2%). These states

contributed a total of 7.2 percent of the

milk pooled on the 5 orders.

Sixty-three of the counties that had

production pooled under the five

current orders supplied more than 5

million pounds of milk each during

December 1996. Seven of the counties

were in northern and northeast Indiana,

over 100 miles from Indianapolis; 11

were in western Pennsylvania—7 of

them within 100 miles of Pittsburgh,

and the others, including those with the

most production (10–25 million

pounds), in the northwest corner of the

state. Twenty-six Michigan counties

pooled more than 5 million pounds

each under the 5 orders, including 15

counties with more than 10 million

pounds and 2 counties with more than

25 million pounds. All of these counties

are located within 110 miles of Detroit

or Grand Rapids, the two largest MSAs

in Michigan. The heaviest milk

production area of Ohio is the northeast

quadrant of the State and within 50

miles of the Akron-Cleveland MSA,

including 6 counties supplying over 10

million pounds each during December

1996, and 1 county pooling over 40

million pounds. A smaller production

area in Ohio is located in the central

portion of the western edge of the State

within 80 miles of the Dayton MSA, and

includes two counties with over 10

million pounds production and 1

county with over 20 million. The only

population centers of the marketing area

that do not appear to have adequate

supplies of nearby milk are Indianapolis

and Cincinnati, in the southern portion

of the area.

Distributing Plants—Route Distribution

Using distributing plant lists included

in both the Preliminary and Revised

Preliminary Reports, with the pooling

standards used in the Revised

Preliminary Report adjusted to 30

percent of route dispositions as in-area

sales, updated for known plant closures

through May 1997, 78 distributing

plants would be expected to be

associated with the Mideast marketing

area, including 56 fully regulated

distributing plants (55 currently fully

regulated, and 1 currently partially

regulated), 4 partially regulated (all

currently partially regulated), 2 exempt

plants that would have less than

150,000 pounds of total route

disposition per month (both currently

fully regulated), and 16 producerhandlers (all currently producerhandlers). Four of these 78 distributing

plants would not be in the marketing

area, including 3 partially regulated

plants (all currently partially regulated)

and 1 producer-handler (currently a

producer-handler). Since October 1995,

8 distributing plants (3 in Pennsylvania,

2 in Ohio, 1 in West Virginia, 1 in

Indiana and 1 in Michigan), have gone

out of business.

There would be 43 distributing plants

in the 8 Mideast MSA’s that each have

over a million people (including

Dayton-Springfield which has .95

million). Twenty-nine of these plants

would be pool plants—6 in the

Pittsburgh area, 6 in the Detroit area, 4

each in the Grand Rapids and Cleveland

areas, 3 each in the Indianapolis and

Cincinnati areas, 2 in Columbus and 1

in Dayton. Eleven of the plants in the

large MSA areas would be producerhandlers, 2 would be exempt on the

basis of having less than 150,000

pounds of milk per month in Class I

route dispositions, and 1 partially

regulated.

Of the remaining 31 distributing

plants located in the marketing area, 19

would be located in other MSA’s as

follows: 5 pool plants and 1 producerhandler in Ohio; 5 pool plants in

Indiana; 4 pool plants in Michigan; 2
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4853

pool plants in Pennsylvania; 1 pool

plant in Kentucky; and 1 pool plant in

West Virginia. Twelve of the remaining

distributing plants would not be located

in MSA’s. Three of these pool plants

and 2 producer-handlers would be

located in Michigan, 4 pool plants

would be located in Ohio; 2 pool plants

would be located in Indiana; and 1

producer-handler would be located in

West Virginia.

There are 4 distributing plants that

would not be in the marketing area.

These would be 2 partially regulated

plants and 1 producer-handler in

Pennsylvania, and 1 partially regulated

plant in Virginia.

The in-area route disposition standard

has been adjusted to 30 percent of total

route dispositions from the 15 percent

standard that was used for all of the

suggested consolidated areas in the

Revised Preliminary Report. This

adjustment has been made to assure that

State-regulated plants in Virginia and

Pennsylvania that have sales in the

proposed marketing area would not be

pooled under Federal order regulation.

Utilization

According to October 1995 pool

statistics for handlers who would be

fully regulated under this Mideast order,

the Class I utilization percentages for

the Ohio Valley, Eastern Ohio-Western

Pennsylvania, Southern Michigan,

Michigan Upper Peninsula, and Indiana

markets were 59, 57, 48, 79, and 66

percent, respectively. Based on

calculated weighted average use values

for (1) the current order with current use

of milk, and (2) the current order with

projected use of milk in the

consolidated Mideast order, the

potential impact of this proposed rule

on producers who supply the current

market areas is estimated to be: Ohio

Valley, a 1-cent per cwt decrease (from

$13.00 to $12.99); Eastern Ohio-Western

Pennsylvania, a 10-cent per cwt

decrease (from $13.07 to $12.97);

Southern Michigan, an 8-cent per cwt

increase (from $12.75 to $12.83);

Michigan Upper Peninsula, a 20-cent

per cwt decrease (from $12.81 to

$12.61); and Indiana, a 5-cent per cwt

decrease (from $12.97 to $12.92). The

large decrease for Michigan Upper

Peninsula is because of its current

individual handler pool provisions

(very little reserve milk is pooled under

Order 44—instead, it is pooled on the

Southern Michigan order). For

December 1996, combined Class I

utilization for Orders 33, 36, 40, 44 and

49 was 52 percent based on 563.4

million pounds of producer milk used

in Class I out of 1082 million total

producer milk pounds pooled.

The Mideast is one of two proposed

consolidated marketing areas that would

have a significantly higher-than-average

percentage of its milk used in Class II.

Currently, the Southern Michigan, Ohio

Valley and Indiana markets have Class

II utilization over 20 percent. When the

markets are combined the average for

the consolidated market will be just

under 20 percent.

Other Plants

Also located within the Mideast

marketing area during May 1997 were

59 supply or manufacturing plants: 1 in

Charleston, West Virginia, 4 in

Pennsylvania, 18 in Michigan, 9 in

Indiana and 27 in Ohio. Nine of the 59

plants are pool plants. Of these pool

plants, 6 are supply plants—1

manufactures primarily Class II

products, 3 manufacture primarily

powder, and 2 have no primary product,

only shipping to distributing plants.

Three pool plants are manufacturing

plants, manufacturing primarily cheese.

Of the 50 nonpool plants in the Mideast

marketing area, one is a supply plant

that manufactures primarily cheese. The

other 49 nonpool plants are

manufacturing plants. In this area of

high Class II use, 28 of the nonpool

plants manufacture primarily Class II

products. In addition, 1 manufactures

primarily butter, 1 manufactures

primarily powder, 27 manufacture

primarily cheese, and 2 manufacture

primarily other products.

There are also two manufacturing

plants in the currently-unregulated area

of Ohio—a nonpool plant that

manufactures primarily Class II

products in the unregulated county of

Erie, Ohio and a nonpool plant that

manufactures primarily cheese in the

unregulated area of Sandusky, Ohio.

Cooperative Associations

In December 1995, 18 cooperative

associations pooled member milk under

the 5 orders proposed to be

consolidated. One of the cooperatives

pooled milk on the four principal

orders, 4 cooperatives had member milk

pooled on 3 of the orders, 2 cooperatives

pooled milk on 2 of the orders, and 11

of the cooperatives pooled milk on only

one of the orders. The percentage of

cooperative member milk pooled on

each of the orders varied from 43

percent under Order 36 to 86 percent

under Order 40. Of the total milk pooled

on the 5 orders in December 1995, 78

percent was marketed by cooperative

associations.

Criteria for Consolidation

Overlapping route disposition,

overlapping production areas, natural

boundaries, and multiple component

pricing are all criteria that support the

consolidation of these current order

areas into a consolidated Mideast

marketing area. Handlers who would be

fully regulated under the consolidated

order distribute approximately 90

percent of their route dispositions

within the proposed marketing area, and

nearly 95 percent of the milk distributed

within the marketing area is from

handlers who would be regulated under

the order.

Many of the counties from which milk

was pooled on the individual orders

supplied milk to three or four of those

orders. For instance, milk from several

of the same Michigan counties was

pooled on the Ohio Valley, Eastern

Ohio-Western Pennsylvania, Indiana

and Southern Michigan orders; milk

from a number of the same Indiana

counties was pooled on the Ohio Valley,

Southern Michigan and Indiana

counties; and milk from some of the

same Ohio counties was pooled on the

Ohio Valley, Indiana, and Southern

Michigan orders.

The Great Lakes serve as natural

boundaries on the northern edge of the

area and on the eastern and western

sides of Michigan, as do the mountains

in central Pennsylvania. All of the

orders involved in the proposed

consolidated Mideast area contain

multiple component pricing provisions.

Although the Southern Michigan

component pricing plan is not the same

as the plan common to the Indiana and

the two Ohio orders, interest in

adopting the Southern Michigan

component pricing plan has been

expressed by industry participants in

the other orders.

Discussion of Comments and

Alternatives

Comments regarding the Mideast

region have been received from

cooperatives, proprietary handlers, and

individual producers throughout the

developmental period of this

rulemaking process, but responses to the

Revised Preliminary Report on Order

Consolidation focused mostly on the

suggested addition of currently nonFederally regulated territory. Several

comments supported the addition of

Pennsylvania Milk Marketing Board

(PMMB) Area 6 to the suggested Mideast

order area, and one handler urged the

addition of currently-unregulated areas

of Maryland and West Virginia.

However, a large number of producers

whose milk currently is pooled at

PMMB-regulated fluid milk plants, and

the operators of some of those plants,

argued strenuously that including

PMMB Area 6 in the proposed Mideast
4854 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

order would reduce returns to

Pennsylvania producers unnecessarily

without reducing costs to handlers.

For the reasons discussed previously

in reference to the Northeast market,

PMMB Area 6 should not be added to

the proposed Mideast order area.

Consolidation of the existing orders

does not necessitate expansion of the

consolidated orders into areas in which

handlers are subject to minimum Class

I pricing under State regulation,

especially when the states’ Class I prices

exceed those that would be established

under Federal milk order regulation.

Handlers located in PMMB areas 2, 3,

and 6 are regulated under the State of

Pennsylvania if they do not have

enough sales in any Federal order area

to meet an order’s pooling standards. If

such plants do meet Federal order

pooling standards, the State of

Pennsylvania continues to enforce some

of its regulations in addition to Federal

order regulations. As State-regulated

handlers, they must pay a Class I price

for milk used in fluid products, often

higher than the Federal order price

would be. Inclusion of the

Pennsylvania-regulated handlers in the

consolidated marketing area would have

little effect on handlers’ costs of Class I

milk (or might reduce them), while

reducing producer returns. In view of

these situations, it appears that stable

and orderly marketing conditions can be

maintained without extending full

Federal regulation to State-regulated

handlers.

Comments from a large cooperative

association and a fluid handler urged

that southern Ohio and part of West

Virginia be included in the proposed

Appalachian order to assure that a large

distributing plant located in Winchester,

Kentucky, remains pooled under the

consolidated Appalachian order. Both

comments argued that order provisions

should specify that plants be regulated

according to their location rather than

their fluid milk distribution area. The

pooling provisions proposed herein

would assure that plants are regulated

where located unless their route

disposition within another marketing

area is over 50 percent. This provision

should assure that the plant in question

remains regulated under the proposed

Appalachian order. If a plant’s route

disposition in a marketing area other

than where it is located is over 50

percent, other handlers competing for

sales with that handler should be

assured that their competitor is paying

a like amount for its milk.

Upper Midwest

The proposed Upper Midwest

marketing area is comprised of the

current Upper Midwest (Order 68) and

Chicago Regional (Order 30) marketing

areas, with the addition of the western

portion of the Michigan Upper

Peninsula (Order 44) marketing area.

There are 205 counties in this proposed

area.

Geography

The proposed consolidated Upper

Midwest marketing area is described

geographically as follows: 16 counties in

Illinois (all currently in Order 30), 6

counties in Iowa (all currently in Order

68), 6 counties in Michigan (all

currently in Zones I and IA of Order 44),

83 counties in Minnesota (all currently

in Order 68), 16 counties in North

Dakota (all currently in Order 68), 8

counties in South Dakota (all currently

in Order 68), and 70 counties in

Wisconsin (43 currently in Order 30, 20

currently in Order 68, and 7 currently

unregulated). This market is about 600

miles east to west and about the same

distance north to south.

The area described above is

contiguous to the proposed Central

market to the south, a small corner of

the proposed Mideast market to the

southeast, and the eastern portion of

Michigan’s Upper Peninsula, also part

of the proposed Mideast market, to the

northeast. North of the Upper Midwest

market is Lake Superior and the

Canadian border, and west of the market

is a large sparsely-populated and

unregulated area. Most of the eastern

border of the marketing area is Lake

Michigan.

The proposed Upper Midwest

marketing area is generally low-lying,

with some local differences in elevation

in Wisconsin and the upper peninsula

of Michigan. Natural vegetation in the

western part of the area is tall-grass

prairie, with the eastern two-thirds of

the northern portion being broadleaf

forest, coniferous forest, and mixed

broadleaf and coniferous forest. Annual

precipitation averages 30–35 inches per

year. Most of the area experiences

summer temperatures that average about

75 degrees; the northern and western

portions average winter temperatures

are in the low ’teens, while the southern

and more eastern portions experience

average winter temperatures in the 20’s.

The far western part of the market

predominantly grows mixed field crops,

with cattle and soybeans more to the

southwest. Both Minnesota and

Wisconsin are included in the top five

milk-producing states, and dairy is the

number 1 agricultural enterprise in

Wisconsin, generating over half of the

State’s income derived from agricultural

commodities.

Population

According to July 1, 1996, population

estimates, the total population of the

proposed Upper Midwest marketing

area is approximately 18.5 million.

Using Metropolitan Statistical Areas

(MSAs), there are 3 population centers

over 1 million. The Chicago-GaryKenosha area, primarily in northeastern

Illinois, is the largest, with a 7.8 million

population in the marketing area. The

Minneapolis-St. Paul area, located

mostly in Minnesota, is next with 2.8

million; and the third-largest MSA is

Milwaukee-Racine, Wisconsin, with a

population of 1.6 million. The Chicago

area is located in the southeast corner of

the marketing area, on the west side of

the southern end of Lake Michigan, with

Milwaukee approximately 85 miles

north, also along Lake Michigan.

Minneapolis is located 400 miles

northwest of Chicago, along the

Minnesota-Wisconsin border.

Approximately two-thirds of the

population of the proposed marketing

area is within the three largest MSA’s,

with over 80 percent of the population

contained within the area’s 17 MSA’s

(with the 14 smaller MSA’s averaging

195,000 population).

Sixty percent of the population of the

market is concentrated in the Illinois

and southeast Wisconsin portion of the

marketing area. In Wisconsin, nearly 90

percent of the population is located in

the southern two-thirds of the state, and

in Minnesota 85 percent of the

population is in the southern half of the

state.

Fluid Per Capita Consumption

Based on the population figure of 18.5

million and an estimated per capita

fluid milk consumption rate of 20

pounds of fluid milk per month, total

fluid milk consumption in the proposed

Upper Midwest marketing area is

estimated at 370 million pounds per

month. Plants that would be fully

regulated distributing plants under the

Upper Midwest order had route

disposition within the market of 321.5

million pounds in October 1995. The 3

producer handlers operating in the

combined marketing areas during this

month had a combined route

disposition of .1 million pounds, 5

partially regulated handlers distributed

1.7 million pounds in the marketing

area, and an additional .1 million

pounds was distributed by unregulated

handlers. Twenty handlers fully

regulated under 10 other Federal orders,

from New York-New Jersey to Great

Basin, distributed 36.5 million pounds

in the combined marketing areas during

October 1995.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4855

Milk Production

In December 1996, 2.2 billion pounds

of milk were pooled in the proposed

Upper Midwest market from more than

27,700 producers located in 10 states

from Tennessee to Minnesota, and from

South Dakota to Michigan. However,

over 95 percent of the producer milk

was produced within the proposed

marketing area, and 93.4 percent was

produced within the states of Wisconsin

and Minnesota. As with population

density and milk plant density, most

milk production in Minnesota and

Wisconsin occurs in the southern parts

of these states. Over 82 percent of

Wisconsin milk pooled under the

combined Chicago Regional-Upper

Midwest orders in December 1996 was

produced in the southern two-thirds of

the State, while 84 percent of the

Minnesota milk pooled under the two

orders was produced in the southern

half of Minnesota.

Forty counties, 3 in Iowa, 12 in

Minnesota, and 25 in Wisconsin supply

pool milk to both the current Chicago

Regional and Upper Midwest orders.

The largest part of the common

production area is in Wisconsin, where

25 counties supply 25 percent of the

milk pooled under Order 30, and 27

percent of the milk pooled under Order

68. When data for the 40 counties is

combined, 26 percent of the Chicago

Regional pool and 39 percent of the

Upper Midwest pool is supplied by this

common production area.

Distributing Plants—Route Distribution

Using distributing plant lists included

in both the Preliminary and Revised

Preliminary Reports and the pooling

standards used in the Revised

Preliminary Report, updated for known

plant closures through May 1997, 37

distributing plants would be expected to

be associated with the Upper Midwest

marketing area, including 29 fully

regulated distributing plants (3

currently partially regulated and 26

currently pool plants), 4 partially

regulated (3 currently partially regulated

and 1 currently fully regulated), 1

unregulated (currently partially

regulated), 2 producer-handlers, and 1

exempt plant (currently unregulated,

with less than 150,000 pounds of total

route disposition per month). Since

October 1995, one distributing plant in

Wisconsin has gone out of business.

There would be 7 distributing plants

in the Chicago area (5 pool plants, 1

producer-handler, and 1 unregulated

plant). The Milwaukee-Racine area

would have 2 pool distributing plants.

There would be 7 distributing plants in

the Minneapolis-St. Paul area (6 pool

plants and 1 partially regulated plant).

Of the remaining 21 distributing plants,

14 are located in other MSAs as follows:

4 pool plants in Minnesota, 2 pool

plants in North Dakota, 1 pool plant in

Illinois, and 6 pool plants and 1

partially regulated plant in Wisconsin.

Seven of the remaining distributing

plants are not located in MSAs: 2 pool

plants in Minnesota, 2 partially

regulated plants in North Dakota, 1

producer-handler and 1 exempt plant

(less than 150,000 pounds of total route

distribution per month) in Wisconsin

and 1 pool plant in Michigan.

Utilization

According to October 1995 pool

statistics for handlers who would be

fully regulated under this Upper

Midwest order, the Class I utilization

percentages for the Chicago Regional

and Upper Midwest were 30 and 46

percent, respectively. Based on

calculated weighted average use values

for (1) the current order with current use

of milk, and (2) the current order with

projected use of milk in the

consolidated Upper Midwest order, the

potential impact of this proposed rule

on producers who supply the current

market areas is estimated to be: Chicago

Regional, no change ($12.62 in both

cases), and Upper Midwest, a 1-cent per

cwt increase (from $12.55 to $12.56).

However, a substantial amount of milk

was omitted from both pools for October

1995 because of unusual class price

relationships. Annual Class I utilization

percentages may be considered more

representative for these markets. For the

year 1996, the annual Class I utilization

percentage for the Chicago Regional

market was 20.4, with 19.6 for the

Upper Midwest. The Class I use

percentage for the Michigan Upper

Peninsula market, which has a

individual handler pool and represents

a very small portion of the producer

milk that would be expected to be

pooled under the proposed consolidated

order, was 78.3 percent. It is estimated

that the Class I use percentage for the

consolidated order would be in the

neighborhood of 20 percent.

Other Plants

Located within the proposed

consolidated Upper Midwest marketing

area during May 1997 were 301 supply

or manufacturing plants: 1 in South

Dakota, 3 in Iowa, 28 in Illinois (12 in

the Chicago area), 39 in Minnesota (over

three-quarters of which are located in

the southeastern quarter of the State),

and 230 in Wisconsin (over 90 percent

of which are scattered throughout the

southern three-quarters of the state).

One hundred five of the plants are pool

plants, or have a ‘‘pool side.’’ Eightyfive of the 105 pool plants (1 in Iowa,

4 in Illinois, 16 in Minnesota and 64 in

Wisconsin) are ‘‘split plants;’’ that is,

one side of a plant is a manufacturing

facility and the other side receives and

ships Grade A milk, and accounting is

done separately. In most cases, the

nonpool portion of such a plant is a

manufacturing operation, primarily

cheese-making. Most of the other pool

plants are pool supply plants, located

primarily in Wisconsin, that ship milk

to pool distributing plants.

The 196 nonpool plants in the

proposed Upper Midwest marketing

area are manufacturing plants—103

manufacture primarily cheese, 16

manufacture primarily Class II products,

15 manufacture primarily butter, 23

manufacture primarily milk powders,

and 39 manufacture primarily other

products.

Also associated with the Upper

Midwest order, but not within the

marketing area, are 2 pool supply plants

and 6 manufacturing plants (3

manufacturing primarily cheese, 2

making Class II products, and 1 butter

plant) in North Dakota.

Cooperative Associations

In December 1995, 67 cooperative

associations pooled member milk on the

Chicago Regional and Upper Midwest

orders, providing 83 percent of the milk

pooled under the two orders. Seventysix percent of the milk pooled under

Order 30 and 93.9 percent of the milk

pooled under Order 68 was supplied by

cooperative associations. Eight of the

cooperatives marketed milk in both

orders, accounting for nearly two-thirds

of the milk pooled in the Upper

Midwest (and 68.8 percent of the

cooperative member milk), and 42.5

percent of the milk pooled in the

Chicago Regional market (55.9 percent

of total cooperative member milk). In

the two markets, 15 cooperatives pooled

milk only under Order 30, and 44

cooperatives pooled milk only under

Order 68.

Criteria for Consolidation

As suggested in the initial Preliminary

Report on Order Consolidation, the

Chicago Regional and Upper Midwest

marketing areas should be combined,

with the addition of the western end of

Michigan’s Upper Peninsula, into a

consolidated Upper Midwest Federal

order marketing area. Although these

areas do not have a considerable degree

of overlapping fluid milk disposition,

they do have an extensive overlapping

procurement area. Handlers regulated

under both of the principal markets

distribute milk into more southern
4856 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

markets, and approximately 10 percent

of the fluid milk distributed within the

proposed area is distributed by handlers

regulated under other orders. However,

these other order areas are more closely

related to markets to the south than to

the proposed Upper Midwest order area.

On that basis, it is more appropriate to

include them in other consolidated

marketing areas.

Other aspects of the proposed

consolidation also fit the criteria set

forth. The proposed Upper Midwest

area is bounded on three sides by Lakes

Michigan and Superior, the

international border with Canada, and a

large unregulated area. A significant

portion of both markets’ milk is

supplied by the same cooperative

associations. The markets have identical

multiple component pricing plans, and

both have large reserves of milk that

normally is used in manufactured

products, primarily cheese.

Approximately 90 percent of the milk

used in manufacturing in these markets

is used to make cheese. The amount of

cheese manufactured from milk pooled

under these milk orders is enough to

supply a population 3 times greater than

that of the proposed consolidated

marketing area. Fluid milk handlers in

both markets must compete with cheese

manufacturers for a milk supply, and

marketing order provisions for both

markets must provide for attracting an

adequate supply of milk for fluid use.

Discussion of Comments and

Alternatives

Comments received before issuance of

the Revised Preliminary Report on

Order Consolidation largely favored the

consolidation of ten marketing areas—

Federal orders 30, 32, 44, 49, 50, 64, 65,

68, 76, and 79. The Revised Report

suggested the addition of 3 order areas

(Eastern South Dakota, most of

Nebraska-Western Iowa, and Iowa) to

the earlier suggestion of consolidating

the Chicago Regional and Upper

Midwest areas. The revised

configuration would have increased the

population and Class I use of the

consolidated Upper Midwest area. Any

increase in a consolidated marketing

area that would include the Chicago

Regional and Upper Midwest order

areas could not be justified on the basis

of the criteria of overlapping sales and

procurement areas beyond the addition

of the three areas suggested to be added

in the Revised Consolidation Report.

Addition of the five orders advocated by

the cementers is not supported on the

basis of any data available.

After issuance of the Revised Report

a number of objections were received,

both to the addition of only 3 more

areas, and to the inclusion of the 3

additional areas with the Upper

Midwest. Producer organizations

operating principally in the proposed

Upper Midwest consolidated area

argued that additional Class I use

should be included in the area to

enhance blend prices to producers.

Producer organizations and handlers

operating in the other 3 areas,

particularly Iowa, argued that inclusion

of those areas with the 2 upper midwest

order areas would severely affect Iowa

handlers’ ability to attract a sufficient

supply of milk, and that the milk pooled

on those orders from Minnesota and

Wisconsin is not needed to meet Iowa

handlers’ Class I needs, but is pooled on

the Iowa market to obtain the higher

blend price.

The addition to the consolidated

Upper Midwest marketing area of

marketing areas with higher Class I use

for the sole purpose of increasing the

Upper Midwest Class I utilization

percentage and Upper Midwest

producer returns is not consistent with

the criteria examined to determine

defensible order consolidations. The

numerous markets recommended by

upper midwest producer groups to be

consolidated with the Chicago Regional

and Upper Midwest order areas have

very little distribution or procurement

overlap with those areas, aside from

occasional need for reserve milk

supplies. When reserve supplies are

needed by the other markets, upper

midwest milk can be, and is, pooled on

the more southern markets and shares in

their pools. The potential gain of adding

areas recommended by upper midwest

producer groups would be much less

than the loss to producers whose milk

is pooled under orders proposed to be

consolidated in the Central, Mideast and

Appalachian marketing areas.

For example, if 9 nearby marketing

areas were combined with the Upper

Midwest and Chicago Regional areas,

the combined utilization for the 11

markets would be about 10 percentage

points higher than that for the 2

markets, and the blend price could be

expected to increase by approximately 7

cents per hundredweight. At the same

time, the percentage Class I utilization

for the other markets that would be

affected would be reduced by an average

of 26 percentage points and by as many

as 54 percentage points, resulting in an

average reduction in the blend price of

27 cents, and as much as 54 cents, per

hundredweight. These results occur

because, with the addition of 9 other

orders, the combined volume of milk

pooled under the Upper Midwest and

Chicago Regional markets would

represent nearly three-quarters of the

total that would be pooled under the 11

orders. Based on these considerations

and comments received, the extent of

the proposed Upper Midwest marketing

area should be limited to the areas of the

current Chicago Regional and Upper

Midwest marketing areas, with the

addition of the western part of the

Michigan Upper Peninsula marketing

area.

Central

The proposed Central order marketing

area consolidates the current 8 Federal

order marketing areas of Central Illinois,

most of Southern Illinois-Eastern

Missouri, most of Southwest Plains,

Greater Kansas City, Iowa, Eastern

South Dakota, Nebraska-Western Iowa,

and Eastern Colorado (Federal orders

50, 32, 106, 64, 79, 76, 65, and 137,

respectively). Moving to the proposed

Southeast marketing area are 6 Missouri

counties currently in Federal order 32

and, from Order 106, 11 northwest

Arkansas counties and 22 whole and 1

partial (Pulaski County) southern

Missouri counties. Order 106 counties

in Kansas and Oklahoma would remain

in the Central market, as suggested in

the 2 preliminary reports. In addition,

some counties in Colorado, Illinois,

Iowa, Kansas, Missouri and Nebraska

that currently are not part of any order

area would be included in the proposed

Central market. There are 565 whole

counties and 3 partial counties in this

proposed area.

Geography

The proposed Central marketing area

would include the following territory:

Colorado—33 counties in eastern

Colorado, including the 30 Colorado

counties currently in the Eastern

Colorado marketing area, and adding 3

currently-unregulated counties in the

southeast corner of the state between the

Eastern Colorado and Southwest Plains

marketing areas.

Illinois—88 counties, including the 6

counties (4 entire and 2 partial)

currently in the Iowa marketing area,

the 19 counties currently in the Central

Illinois marketing area, the 49 counties

currently in the Southern IllinoisEastern Missouri marketing area and 8

currently-unregulated adjacent counties

in southern Illinois, and 6 currentlyunregulated counties in western Illinois

located between the current Central

Illinois and Southern Illinois-Eastern

Missouri order areas and the Mississippi

River.

Iowa—93 counties and the City of

Osage in Mitchell County; including the

68 counties and the City of Osage

currently in the Iowa marketing area,

the 17 counties currently in the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4857

Nebraska-Western Iowa marketing area,

the 1 county currently in the Eastern

South Dakota marketing area, 6

currently unregulated counties in the

northwestern part of Iowa, and 1

currently unregulated county in the

southeastern corner of Iowa.

Kansas—the entire State (105

counties).

Minnesota—the 4 southwestern

Minnesota counties that currently are in

the Eastern South Dakota marketing

area.

Missouri—45 counties and 1 city,

including 6 counties and 1 city that

currently are in the Southern IllinoisEastern Missouri marketing area, the 20

counties that currently are in the Greater

Kansas City marketing area, the 5

counties that currently are in the Iowa

marketing area; and 14 currentlyunregulated counties distributed around

the center area proposed to remain

unregulated.

Nebraska—66 counties in the

southern and eastern parts of Nebraska;

omitting the 11 counties in the

panhandle that currently are part of the

Nebraska-Western Iowa marketing area,

and adding 5 currently-unregulated

counties in the southwest corner of the

State between the Nebraska-Western

Iowa and Eastern Colorado marketing

areas and 3 currently-unregulated

counties in the southeast corner of the

State between the Nebraska-Western

Iowa and Greater Kansas City marketing

areas.

Oklahoma—the entire State (77

counties).

South Dakota—the 26 eastern South

Dakota counties (including the portion

of Union County that currently is in the

Nebraska-Western Iowa marketing area)

that currently are in the Eastern South

Dakota marketing area.

Wisconsin—the 2 southwest

Wisconsin counties that currently are in

the Iowa marketing area.

The proposed Central marketing area

is adjacent to the proposed Upper

Midwest consolidated order area on the

north and northeast, the proposed

Mideast and Appalachian areas on the

east, and the northwest corner of the

Southeast order area and the proposed

Southwest area on the south. The Rocky

Mountains and some unregulated area

form a natural barrier on the west

between this proposed marketing area

and the proposed Western area. The

area north of approximately the western

third of the proposed Central area also

is unregulated. The north-south distance

covered by the area is approximately

800 miles, from Watertown, South

Dakota, to Ardmore, Oklahoma. The

east-west extent of the area, from the

Indiana-Illinois border to Denver,

Colorado, is approximately 1,000 miles.

Geographically, the Central marketing

area includes a wide range of

topography and climate types, ranging

from the foothills of the Rocky

Mountains on the west to the central

section of the Mississippi River Valley

toward the eastern part of the area.

Precipitation ranges from less than 15

inches per year in Denver, Colorado, to

more than 30 inches at St. Louis,

Missouri. Most of the area experiences

fairly hot summer temperatures, while

winter temperatures vary somewhat

more than summer, with colder winter

temperatures occurring in the northern

part of the Central area. Much of the

nation’s cornbelt is included within the

Central area, with significant wheatgrowing areas in western Kansas. The

natural vegetation ranges from short

grass prairie in eastern Colorado

through tall grass prairie in eastern

South Dakota, Nebraska, Kansas and

Oklahoma, and much of Illinois; to

broadleaf forest on both sides of the

Mississippi River.

Population

According to July 1, 1996, population

estimates, the total population in the

proposed Central marketing area is

approximately 21 million. Using

Metropolitan Statistical Areas (MSAs),

there are four population centers over 1

million. The St. Louis, Missouri/Illinois,

area is the largest, with over 2.5 million

population, and the Denver-BoulderGreeley, Colorado, area is next with

approximately 2.3 million. Kansas City,

Missouri/Kansas, has a population of

1.7 million, and Oklahoma City,

Oklahoma, is just over 1 million.

Approximately one-third of the

population of the proposed marketing

area is within these four largest MSAs,

with nearly two-thirds of the population

contained within the area’s 31 MSA’s

(with the 27 smaller MSAs averaging

230,786 population). The Colorado

portion of the proposed marketing area

has 93.6 percent of its population

concentrated in 4 MSA’s. The Missouri

portion has 89 percent.

Fluid Per Capita Consumption

Based on the population figure of 21

million and a per capita fluid milk

consumption rate of 19 pounds of fluid

milk per month (a weighted average

based on state populations in the

marketing area and fluid per capita

consumption estimates for each state),

total fluid milk consumption in the

proposed Central marketing area would

be approximately 400 million pounds

per month, including 11.7 million

pounds associated with the net

population gain of the marketing area

from the addition of previouslyunregulated territory. Plants that would

be fully regulated distributing plants in

the Central order, including 3 plants

operated by one handler that currently

are fully regulated under the Southwest

Plains order (Order 106) but are

expected to be regulated under the

proposed Southeast market pool, had

route disposition within the eight

marketing areas included in the

consolidated Central area of 384.2

million in October 1995. It is likely that

most of the milk distributed within

formerly unregulated areas by Central

order handlers would be distributed

within the consolidated Central

marketing area. The 10 producerhandlers operating in the Central market

during October 1995 had a combined

route disposition of 2.2 million pounds,

partially regulated plants and plants

that would be exempt distributed 3

million pounds in the marketing area,

and other order plants distributed 22.2

million pounds during October 1995.

Milk Production

In December 1996, 1.1 billion pounds

of milk were pooled under the orders

consolidated in the proposed Central

market (including all of the milk pooled

under Orders 32 and 106) from more

than 10,000 producers located in 21

states from Idaho to Tennessee, and

from Texas to Minnesota. Seventy-four

percent of the producer milk was

produced within the proposed

marketing area. The states contributing

the most producer milk were, in

descending order of volume, Iowa,

Missouri, Colorado, Kansas, Oklahoma

and Illinois. However, over 80 percent

of the Missouri producer milk came

from farms in counties which are

included in the proposed consolidated

Southeast marketing area. These 6 States

accounted for 71 percent of the

producer milk pooled under the eight

current orders proposed to be

consolidated. All of the states having

substantial portions of their areas in the

proposed Central market contribute

producer milk to at least two of the

current eight individual orders, with

four of the states (Iowa, Kansas,

Missouri, and Nebraska) supplying milk

to five of the order areas each.

Distributing Plants—Route Distribution

Using distributing plant lists included

in both the Preliminary and Revised

Preliminary Reports and the pooling

standards used in the Revised

Preliminary Report, updated for known

plant closures through May 1997, 54

distributing plants would be expected to

be associated with the Central marketing
4858 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

area, including 34 fully regulated

distributing plants (one currently

unregulated and the remainder

currently pool plants), 2 partially

regulated (1 currently partially regulated

and 1 currently unregulated), 2 exempt

plants (both currently are pool plants

but have less than 150,000 pounds of

total route disposition per month), 11

producer-handlers (all currently

producer-handlers), 1 unregulated

(located in the unregulated central

portion of Missouri), and 4 government

agency plants (all currently government

agency plants). Since October 1995, it is

known that 4 distributing plants (all of

which were fully regulated—2 in

Illinois, 1 in Iowa, and 1 in Oklahoma)

have gone out of business.

There would be 10 distributing plants

in the Denver area (7 pool plants and 3

partially regulated plants). The Kansas

City area would have 1 pool distributing

plant. The St. Louis area would have 5

distributing plants (4 pool plants and 1

exempt plant). There would be 1 pool

distributing plant and 1 partially

regulated plant in the Oklahoma City

area. Of the remaining 36 distributing

plants, 16 are located in other MSAs as

follows: 1 pool plant and 1 producerhandler in Colorado; 2 pool plants in

Illinois; 4 pool plants, 1 producerhandler and 1 exempt plant in Iowa; 1

pool plant in Kansas; 3 pool plants in

Nebraska; 1 producer-handler in

Oklahoma; and 1 pool plant in South

Dakota.

Twenty of the remaining distributing

plants are not located in MSAs. They

are: 1 government agency plant in

Colorado; 4 pool plants and 1

government agency plant in Illinois; 1

pool plant and 1 producer-handler in

Iowa; 1 pool plant and 1 government

agency plant in Kansas; 1 unregulated

and 2 producer-handlers in Missouri; 1

producer-handler in Nebraska; 2 pool

plants in Oklahoma; 1 partially

regulated and 1 government agency

plant in South Dakota; and 1 pool and

1 partially regulated plant in Wyoming.

Utilization

According to October 1995 pool

statistics for handlers who would be

fully regulated under this Central order,

the Class I utilization percentages for

the individual markets ranged from 42

percent for the Nebraska-Western Iowa

market to 73 percent for the Central

Illinois, Greater Kansas City and Eastern

South Dakota markets combined. Data

for these three markets are combined

because each of them has only one

handler, and individual handler

information cannot be released.

Combined utilization for the eight

markets would result in a Class I

percentage of just over 50 percent

(including the utilization of the 3 plants

that would be included in the Southeast

marketing area).

Based on calculated weighted average

use values for (1) the current order with

current use of milk, and (2) the current

order with projected use of milk in the

consolidated Central order, the potential

impact of this proposed rule on

producers who supply the current

market areas is estimated to be:

Southern Illinois-Eastern Missouri, a 12-

cent per cwt decrease (from $13.00 to

$12.88); Central Illinois, a 21-cent per

cwt decrease (from $13.03 to $12.72);

Greater Kansas City, a 34-cent per cwt

decrease (from $13.22 to $12.88);

Nebraska-Western Iowa, a 16-cent

increase (from $12.63 to $12.79); Eastern

South Dakota, a 14-cent decrease (from

$12.81 to $12.67); Iowa, a 1-cent

decrease (from $12.71 to $12.70); and

Southwest Plains, a 21-cent increase

(from $13.08 to $13.29). The weighted

average use value for the consolidated

Central order market is estimated to be

$12.95 per cwt.

Other Plants

Also located within the Central

marketing area during May 1997 were

83 supply or manufacturing plants: 7 in

Colorado (4 in the Denver area), 15 in

Illinois (2 in the Decatur area), 23 in

Iowa (2 in the Des Moines area and 1 in

the Dubuque area), 6 in Kansas, 7 in

Missouri (5 in the St. Louis area), 7 in

Nebraska, 7 in South Dakota (1 in the

Sioux Falls area), 4 in Oklahoma (1 in

the Tulsa area), and 7 in Wisconsin.

Twenty-two of the 83 plants are pool

plants, or have a ‘‘pool side.’’ Twelve of

the 22 pool plants (6 in Iowa, 1 in

Nebraska, 2 in South Dakota, and 3 in

Wisconsin) are ‘‘split plants;’’ that is,

one side of a plant is a manufacturing

facility, and the other side receives and

ships Grade A milk, and accounting is

done separately. In most cases, the

nonpool portion of such a plant is a

manufacturing operation, primarily

cheese-making. Of the pool plants, 8

have no primary product, but are only

shipping to distributing plants, and 6

are pooled manufacturing plants.

Of the 61 nonpool plants in the

proposed Central marketing area, 58 are

manufacturing plants—23 are plants

that manufacture primarily Class II

products, 3 manufacture primarily

butter, 6 manufacture primarily powder,

25 manufacture primarily cheese, and 1

manufactures primarily other products.

Also associated with the proposed

Central order, but not within the

proposed marketing area, are 2 nonpool

cheese plants and a nonpool supply

plant located in South Dakota.

Cooperative Associations

Twenty-six cooperative associations

pooled milk in December 1995 under

the eight orders proposed to be

consolidated in the proposed Central

market. Of these cooperatives, 1 pooled

milk under 6 of the orders, 1 under 5

orders, 3 cooperatives associated

producer milk with 3 orders each, and

3 others pooled milk under 2 orders

each. Eighteen of the 26 cooperatives

pooled milk under only one order, and

for 11 of these organizations that was

the Iowa order.

The percentage of cooperative milk

pooled under the eight orders was 93.6,

with a range of 80.6 percent cooperative

milk under the Southwest Plains order

to 100 percent cooperative member milk

under the Central Illinois, Greater

Kansas City and Eastern South Dakota

orders.

Criteria for Consolidation

Most of the criteria used in

determining the optimum consolidation

of order areas apply to the proposed

Central marketing area. The Federal

order markets proposed to be

consolidated in the Central area are

strongly related to each other through

overlapping route disposition. The great

majority of sales by handlers who would

be regulated under the proposed Central

order are distributed within the

proposed marketing area, and the

markets proposed to be consolidated

have a greater relationship in terms of

overlapping sales areas than with any

other markets. In addition, sales within

the currently-unregulated areas

proposed to be included in the

consolidated Central area are

overwhelmingly from handlers that

would be pooled under the proposed

Central order. Inclusion of these areas

would reduce handlers’ burden of

reporting out-of-area sales and take in

pockets of currently-unregulated

counties that occur between the current

order areas. As discussed above, the

milk procurement areas for the markets

proposed to be combined also have a

significant degree of overlap.

Some of the currently-unregulated

counties in western Illinois and central

Missouri have been added to the

proposed Central marketing area. The

omission from the proposed marketing

area of the counties in central Missouri

that are not included in the proposed

Central marketing area are based on an

estimation of the marketing area of

Central Dairy, located in Jefferson City,

Missouri. There is no intention of

causing the regulation of this handler,

but minimizing the extent of the

unregulated counties in the middle of
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4859

the proposed marketing area would help

to reduce the reporting burden on

handlers in determining which route

dispositions are inside, and which are

outside the marketing area. The

administrative burden of verifying such

reporting also would be eliminated.

Three of the current Federal order

markets (Central Illinois, Greater Kansas

City, and Eastern South Dakota)

included in this proposed consolidated

area have too few pool plants to be able

to publish market data without

revealing confidential information. In

addition to these three markets, the

number of handlers regulated under

each of the Nebraska-Western Iowa,

Iowa and Eastern Colorado orders is in

the single digits. Consolidation of these

markets will enable the market

administrator’s office to provide more

informative market data.

Discussion of Comments and

Alternatives

Although the Preliminary Report on

Order Consolidation, issued in

December 1996, suggested a Central

marketing area that resembles the area

proposed herein (but included the

northwest Arkansas and southern

Missouri counties that now are included

in the proposed Southeast area), the

Revised Preliminary Report, issued in

May 1997, suggested that the Iowa,

Nebraska-Western Iowa and Eastern

South Dakota order areas would more

appropriately be included with the

Chicago Regional and Upper Midwest

areas in a consolidated Upper Midwest

order. A number of comments received

after issuance of the Revised Report on

Order Consolidation argued that the

Iowa and the Nebraska-Western Iowa

orders should, more logically, be

consolidated with the Greater Kansas

City marketing area, as in the November

1996 report.

Among others, the Upper Midwest

Dairy Coalition, Mid-America

Dairymen, Andersen-Erickson Dairy

Company, and Swiss Valley Farms filed

comments stating that the revised

marketing areas would harm Iowa fluid

milk processors competing for sales in

Kansas City and St. Louis. The Iowa

Dairy Foods Association and the Iowa

Dairy Producers Association,

representing all Iowa dairy processors,

emphasized that Iowa must be included

within the same order area as the

Greater Kansas City, Central Illinois and

Southern Illinois-Eastern Missouri areas

because Iowa fluid processors would be

financially disadvantaged due to the

substantial competition within these

areas for packaged route disposition and

raw milk supply. Mid-America

Dairymen suggested that the only

portion of the Iowa area that might

justifiably be added to the proposed

Upper Midwest consolidated order area

would be the northeastern portion of

Iowa, containing Dubuque.

Comments from the National Farmers’

Organization, Inc., supported the

approach taken in the May 1997 Revised

Report on Order Consolidation under

which the consolidation of Iowa with

the Upper Midwest was suggested. The

comments stated that a large, integrated

contiguous milkshed area in

southwestern Wisconsin, northeast

Iowa, and southeast Minnesota serves as

a source of seasonal or year-round fluid

supplies for several marketing areas,

including Iowa. Lakeshore Federated

Dairy Cooperative comments insisted

that the revised area be expanded to

include even more area to enhance the

utilization percentage of the Upper

Midwest order.

One commenter pointed out that the

suggested consolidation was not

supported by the criteria of overlapping

sources of milk because the degree of

competition for milk supplies cannot be

judged properly on the basis of the

source of milk pooled from an area.

According to the comment, a significant

portion of the Minnesota and Wisconsin

milk pooled on the Iowa order is pooled

on the basis of where it will return the

most revenue to the supplying

producers rather than whether the milk

supply is needed in the market on

which it is pooled. The same

commenter, citing the difficulty Iowa

handlers often have experienced in

obtaining an adequate supply of milk,

went on to state that the competition for

supplies of producer milk between the

Iowa and Central Illinois markets

necessitates that these two markets be

included in the same consolidated

order.

Because of the strong objections in the

comments that opposed the addition of

the Iowa, Nebraska-Western Iowa and

Eastern South Dakota order areas to the

consolidated Upper Midwest marketing

area and the slight preponderance of

data upon which the suggestions of the

initial Preliminary Report were changed

to those of the Revised Preliminary

Report, an even closer look was taken at

destinations of route dispositions and

sources of producer milk receipts, using

data for individual handlers instead of

for the market as a whole. As with a

number of other proposed consolidated

order areas, it would be impossible to

find a boundary across which

significant quantities of milk are not

procured for other marketing areas. As

in some other cases, analysis was done

to determine where the minimal amount

of route disposition overlap between

areas occurred, with the criterion of

overlapping route disposition given

greater weight than overlapping areas of

milk supply.

For the most part, it was found that

the principal relationship in terms of

route disposition between Iowa

handlers and the proposed consolidated

Upper Midwest market is represented

by one Iowa handler. That handler’s

sales in order areas that are proposed to

comprise the Upper Midwest

consolidated order marketing area

represent a large majority of sales by

Iowa handlers in marketing areas

outside the proposed Central marketing

area. This handler has many of its sales

in the Chicago Regional marketing area.

In fact, if the eastern edge of the Iowa

marketing area were added to the

proposed consolidated Upper Midwest

order, this handler not only would have

the majority of its sales and qualify

regularly as a pool distributing plant

under the consolidated Upper Midwest

order (as it occasionally does now under

the current Chicago Regional order on

the basis of its sales in that area), but

total inter-order sales between the two

consolidated marketing areas would be

reduced. This proposed rule does not

include the division of the Iowa order,

but comments on the desirability of

such a division would be welcomed.

The other order area that

demonstrates the strongest relationship

with the proposed consolidated Upper

Midwest order is the Eastern South

Dakota area. Nearly one-fifth of the

Eastern South Dakota handler’s sales are

distributed in the current Upper

Midwest order, while a nearly equal

amount is distributed in unregulated

areas. However, route disposition in the

Eastern South Dakota order area by the

Eastern South Dakota handler and other

handlers that would be regulated under

the proposed Central order represents

the total fluid milk disposition that

would be estimated for the total

population of the Eastern South Dakota

marketing area, using an estimate of 265

pounds of fluid milk consumption per

capita. Therefore, it would not be

expected that Upper Midwest handlers

would have significant amounts of fluid

milk distributed into the Eastern South

Dakota area.

Approximately 85 percent of the total

fluid milk dispositions distributed by

handlers regulated under the three order

areas that were suggested to be included

in the Central area in the initial

Preliminary Report, and in the Upper

Midwest area in the Revised

Preliminary Report, are disposed of in

the proposed Central market. The

disposition by other Central marketing

area handlers within the proposed
4860 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Central area is somewhat greater than

the proportion for the three more

northern order areas.

The milk receipts at Iowa pool plants

from sources in Minnesota and

Wisconsin vary greatly from month to

month, leaving a strong impression that

these areas are not regular or reliable

sources of milk for the Iowa market. As

stated in the description of

consolidation criteria, not all areas

having overlapping areas of milk

procurement should be consolidated.

The volumes of Minnesota and

Wisconsin milk pooled on the Iowa

order represent a significant share of the

total milk pooled there. In the first 9

months of 1997, 6 percent of the milk

pooled on the Iowa order was from

Minnesota, and 22 percent was from

Wisconsin. However, the variation in

the volume of Minnesota milk pooled

was three times that of Iowa milk

pooled, and the variation in the volume

of Wisconsin milk was five times greater

than that of Iowa milk. Less than five

percent of either State’s total pooled

production is pooled under the Iowa

order.

A number of commenters suggested

that southern Missouri and/or northwest

Arkansas should be included in the

Southeast Marketing Order. MidAmerica Dairymen, Inc.; Associated

Milk Producers, Inc.; Carolina-Virginia

Milk Producers Association, and several

other producer groups supported

removing both areas from the current

Southwest Plains order area and making

them a part of the Southeast Federal

order. The commenters stated that the

reason for such a change would be to

correct inequities they claim are caused

by southwest Missouri manufacturing

plants balancing the Southeast without

being able to pool, and inefficient milk

movements caused by blend price

discrepancies between orders. Several

commenters added that southern

Missouri historically has been a source

of reserve milk supply for the Southeast.

This recommended change, of territory

currently in the Southwest Plains

marketing area to the proposed

Southeast marketing area instead of the

proposed Central marketing area, has

been adopted in the proposed rule and

is discussed further under the

description of the Southeast marketing

area.

Several comments supported the

position of Gillette Dairy, Rapid City,

South Dakota, that 14 counties in

Nebraska proposed to be included in the

proposed Central order area be

excluded. Five of these counties are

currently unregulated, while the other

nine are in the present NebraskaWestern Iowa Federal order. The

comments contended that excluding

Nebraska counties in which Gillette is

the majority distributor of fluid milk

would follow the Department’s intent

not to regulate currently unregulated

handlers. These 14 counties would be in

addition to the 11 western Nebraska

counties of the current NebraskaWestern Iowa order area that the two

preliminary reports had suggested be

omitted from the Central order. The 14

counties are located between the current

Nebraska-Western Iowa and Eastern

Colorado marketing areas, which are

proposed to be consolidated as part of

the proposed Central market. Handlers

regulated under both of those orders

have sales in the counties in question,

and there is no data reliably indicating

that Gillette Dairy distributes milk there,

or in what amounts relative to regulated

handlers. Therefore, these counties

continue to be included in the proposed

Central marketing area.

After considering all the comments

and other relevant information, it was

determined that the territory

encompassed in the proposed Central

marketing area best meets the criteria

used.

Southwest

The proposed Southwest marketing

area is comprised of the current Texas

(Order 126) and New Mexico-West

Texas (Order 138) marketing areas as

well as 49 currently unregulated Texas

counties. There are 290 counties in this

proposed area.

Geography

The proposed Southwest market is

described geographically as follows:

three counties in Colorado (currently in

Order 138), all New Mexico counties

(33, currently in Order 138) and all 254

Texas counties (162 currently in Order

126, 43 currently in Order 138, and 49

currently unregulated). Two currently

unregulated counties are located in

northeast Texas, while the remaining 47

are in southwest Texas.

The Southwest market spans the

south central area of the United States.

It is surrounded by Arizona on the west,

Colorado and Oklahoma on the north,

Arkansas, Louisiana and the Gulf of

Mexico in the northeast, east, and

southeast, and Mexico to the south.

Measuring the extreme dimensions, this

market extends about 800 miles north to

south from southern to northern Texas

and about 875 miles east to west from

Texas’ border with Louisiana and

Arkansas to New Mexico’s border with

Arizona.

The Southwest market is contiguous

to 3 proposed consolidated marketing

areas: Arizona-Las Vegas to the west,

Central to the north and Southeast to the

east. Unregulated counties in Colorado

also form a relatively small border in the

northwest corner of the market. Texas

has over 350 miles of coastline on the

Gulf of Mexico, while Texas and New

Mexico share about 970 miles of

boundary with northern Mexico.

In terms of physical geography,

diverse topographic relief exists in the

Southwest market area, particularly in

New Mexico (ranging from deserts to

high mountain ranges). Northwest New

Mexico is part of the Colorado Plateau,

an area of broad valleys and plains as

well as deep canyons and mesas. The

Rocky Mountains extend into the north

central area of the state. The Basin and

Range region, generally characterized by

ranges or isolated mountains

interspersed with valleys, desert basins

or high plains, is located in central and

southwestern New Mexico, as well as

western Texas. The Great Plains cover

the eastern third of New Mexico and

extend through the Texas Panhandle in

north Texas and much of central Texas.

This area is characteristically dry and

treeless and also encompasses Texas hill

country and the Edwards Plateau. The

Osage Plains covers area in Texas from

the Oklahoma-Texas border into the

south central part of the state and the

low and flat West Gulf Coastal Plain

covers the eastern two-fifths of the state.

Climates in this region also vary. The

western part of the region, including

New Mexico, southwest Texas and the

Texas Panhandle, is semi-arid to arid

with wide ranges in both daily and

annual temperatures. The southern tip

of Texas and the Gulf coast are more

humid and subtropical. For some of the

area there are few agricultural uses other

than dairy farming. Dairy products were

the 2nd and 3rd highest revenueproducing agricultural commodities in

New Mexico and Texas, respectively, in

1996, accounting for nearly one-third of

agricultural receipts in New Mexico, but

less than 10 percent in Texas.

Population

According to July 1, 1996, population

estimates, the total population in the

proposed marketing area is 20.9 million.

The 26 Metropolitan Statistical Areas

(MSAs) in the proposed Southwest

market account for about 82 percent of

the total market area population. About

54 percent of the Southwest population

is located in the 4 most populous MSAs.

Six MSAs have populations greater than

500,000; their total population is about

61 percent of the Southwest population.

Because of the large number of MSAs in

the Southwest market, only those areas

with populations greater than 500,000

are described in detail.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4861

Almost 92 percent of the Southwest

market’s population is located in Texas,

which has 19.1 million people. 23 of the

26 Southwest market MSAs are in

Texas. About 63 percent of Texas’

population is concentrated in 5 areas,

which are also the Southwest area’s top

5 population centers: the Dallas-Fort

Worth (Dallas) MSA in northeastern

Texas, with a population of 4.6 million;

the Houston-Galveston-Brazoria

(Houston) MSA in southeastern Texas

near the Gulf of Mexico, with a

population of 4.3 million; the San

Antonio MSA in south central Texas,

with a population of 1.5 million; the

Austin-San Marcos (Austin) MSA in

central Texas, with a population of 1

million; and the El Paso MSA located in

the far western corner of Texas on the

Texas-New Mexico-Mexico border, with

a population of 680,000.

New Mexico’s population is about 1.7

million. The remaining 3 of the 26

Southwest market MSAs are located in

New Mexico. About 39 percent of the

state’s population is located in the

Albuquerque area, just northwest of

central New Mexico.

In the remainder of the Southwest

marketing area, the 3 Colorado counties

have a population of about 70,000.

Fluid Per Capita Consumption

Estimates of fluid per capita

consumption vary from 17.1 pounds of

fluid milk per month per person in

Texas to 17.5 in New Mexico to 18.8 in

Colorado. Multiplying the individual

states’ consumption rate by its

population in the proposed marketing

area results in a fluid milk consumption

rate of 358 million pounds of fluid milk

per month for the proposed Southwest

marketing area. With Southwest

handlers’ (fully regulated and producerhandlers) route distribution of 322

million pounds within the Southwest

marketing area, route distribution from

these handlers is 36 million pounds less

than the expected consumption. Even

with the addition of 23 million pounds

from other Federal order handlers, the

Southwest market area had 13 million

pounds less than the expected

consumption rate during October 1995.

Production

In December 1996, 1,838 producers

from 180 counties in 8 states pooled 746

million pounds of producer milk on

Orders 126 and 138. Nearly 99 percent

of this producer milk came from

counties proposed to be included in the

proposed Southwest marketing area.

About 55 percent of the combined

market’s producer milk was provided by

producers in six counties.

About 455 million pounds of milk

were pooled on either Order 126 or 138

from 1,566 producers in 131 Texas

counties in December 1996. Three Texas

counties were among the top 6 in

volume pooled: Erath (1st), Hopkins

(4th) and Comanche (6th). Erath

County—located about 75 miles west of

Dallas—pooled 111 million pounds on

Order 126 (and an additional 10 million

pounds on 3 other Federal orders).

Hopkins County—located about 50

miles east of Dallas—pooled 52 million

pounds on Order 126 and another 12

million pounds on 2 other Federal

orders. Contiguous to and lying

southwest of Erath County, Comanche

County pooled 34 million pounds on

Order 126 and about 3 million pounds

on 2 other Federal orders.

Of the 283 million pounds of milk

pooled on either Order 126 or 138 from

179 producers in 16 New Mexico

counties, 75 percent was produced in

the following three counties, all among

the top 6 in volume pooled: Chaves

(2nd), Dona Ana (3rd) and Roosevelt

(5th). Chaves County—located about

200 miles southeast of Albuquerque—

pooled 107 million pounds on Orders

126 and 138 in December 1996 and an

additional 6 million pounds on 3 other

Federal orders. Dona Ana County,

located over 200 miles south of

Albuquerque, contiguous to El Paso

County, TX, and the U.S.-Mexico

border, pooled 64 million pounds of

producer milk on Order 138. Contiguous

to and lying northeast of Chaves County,

Roosevelt County pooled 39 million

pounds on Orders 126 and 138 and

another 3 million on another Federal

order.

In December 1996, producer milk for

Orders 126 and 138 also originated in

one of the Colorado counties in the

Southwest marketing area, and in

counties in Arkansas, Louisiana,

Mississippi, Missouri and Oklahoma.

However, the combined amount of

producer milk pooled from these areas

is less than 2 percent of the total

producer milk pooled in these Orders.

Distributing Plants—Route Distribution

Using distributing plant lists included

in both the Preliminary and Revised

Preliminary Reports and the pooling

standards used in the Revised

Preliminary Report, updated for known

plant closures and openings through

May 1997, 33 distributing plants located

in the proposed Southwest marketing

area would be expected to be associated

with the Southwest market, including

23 fully regulated distributing plants, 1

partially regulated, 3 exempt and 6

producer-handlers. With one exception,

none of these plants’ regulatory status is

expected to change as a result of the

consolidation process. Of the 23 fully

regulated plants, 17 are located in the

top six MSA regions.

Since October 1995, it is known that

5 plants (4 fully regulated and 1

producer-handler) have gone out of

business. The four fully regulated plants

were located in Corpus Christi, Lubbock

and Lufkin (all in Texas), and in Clovis,

New Mexico. The producer-handler was

located in Decatur, Texas. One fully

regulated distributing plant, Promised

Land Dairy in Floresville, Texas, began

packaging and distributing products in

March 1996. Because market analysis

for this area is based on October 1995

information, Promised Land Dairy

information is not included in route

dispositions reported; however, the

route dispositions for the nonoperational plants are included.

Of the 33 distributing plants that

would be located in the proposed

Southwest marketing area, 24 are in

Texas, and 9 are in New Mexico.

Twenty-one of the Texas plants would

be fully regulated. They are as follows:

6 in the Dallas area, 3 in the Houston

area, 2 in the San Antonio area, 1 in the

Austin area, and 3 in the El Paso area,

and 6 located throughout the state. One

of the Texas distributing plants was

associated with Order 30 (Chicago

Regional) in October 1995, and is

expected to be partially regulated in the

Southwest market. Two producerhandlers are located in Texas, one in the

El Paso area and the other in the central

part of the state.

Over half of New Mexico’s 9

distributing plants are located in the

Albuquerque area. Two fully regulated

handlers, 1 exempt plant and 2

producer-handlers are located in this

population center. Of the remaining 4

plants located in New Mexico, there are

2 exempt plants (both located in

southeastern New Mexico) and 2

producer-handlers (one located

southeast and the other northeast of

Albuquerque).

In October 1995, the fully regulated

plants in Orders 126 and 138 had route

distribution totaling 320 million

pounds. Almost 98 percent, or 313

million pounds, was distributed within

the proposed Southwest marketing area.

The nonpool handlers (i.e. producerhandlers) in the Southwest area are

larger than in most other marketing

areas; these handlers had about 9

million pounds of route distribution in

the Southwest marketing area for

October 1995. Additionally, handlers

fully regulated under other Federal

orders had about 23 million pounds of

route distribution into the Southwest

market area.
4862 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Utilization

According to October 1995 pool

statistics for handlers who would be

fully regulated under this Southwest

order, the Class I utilization percentages

for the Texas and New Mexico-West

Texas markets were 50 and 42 percent,

respectively. Based on calculated

weighted average use values for (1) the

current order with current use of milk,

and (2) the current order with projected

use of milk in the consolidated

Southwest order, the potential impact of

this proposed rule on producers who

supply the current market areas is

estimated to be: Texas, a 3-cent per cwt

decrease (from $13.49 to $13.46), and

New Mexico-West Texas, a 7-cent per

cwt increase (from $13.00 to $13.07).

The weighted average use value for the

consolidated Southwest order market is

estimated to be $13.39 per cwt. For

December 1996, combined Class I

utilization for Orders 126 and 138 was

42.7 percent based on 318,664,000

pounds of producer milk used in Class

I out of 745,890,000 total producer milk

pounds.

Other Plants

Also located within the Southwest

marketing area during May 1997 are 17

manufacturing plants: 11 in Texas (2 in

the Dallas MSA and 1 in the El Paso

MSA) and six in New Mexico. Six of the

17 plants are pool plants. All of these

pool plants are manufacturing plants—

one manufactures primarily Class II

products, two manufacture primarily

powder, two manufacture primarily

cheese and one manufactures primarily

other products. Of the 11 nonpool

plants in the Southwest marketing area,

all are manufacturing plants—one

manufactures primarily powder, four

manufacture primarily cheese, one

manufactures primarily other products

and five manufacture primarily Class II

products.

Cooperative Associations

In December 1995, three cooperative

associations marketed nearly 99 percent

of the milk pooled under the two orders

proposed to be consolidated in the

Southwest area: Associated Milk

Producers, Inc., Southern Region

(AMPI); Mid-America Dairymen, Inc.

(Mid-Am); and Select Milk Producers,

Inc. (Select). AMPI and Mid-Am

members marketed milk in both Orders

126 and 138, while Select producers

were affiliated only with Order 126.

Although all three cooperatives

marketed milk in other Federal orders as

well during this particular month,

Select producers’ milk was affiliated

with fewer Federal orders than MidAm’s and AMPI’s.

Criteria for Consolidation

Nearly all of the route disposition by

Order 126 and 138 handlers is

distributed within these two current

marketing areas, and within the

currently unregulated portions of Texas

proposed to be added. In addition,

nearly all of the milk production for the

proposed consolidated area originates

within the marketing area. Two

cooperatives market the vast majority of

cooperative milk within the proposed

area.

Discussion of Comments and

Alternatives

A number of comments from east

Texas suggested combining that portion

of Texas with the Southeast marketing

area to resolve inequities identified by

the commenters. The commenters

claimed that due to its heat, humidity

and rainfall, milk production conditions

in eastern Texas have more in common

with the Southeast than with the

Southwest area. According to the

comments, the dry climate of Central

Texas and New Mexico permits dairies

to become much larger and produce 10–

15% more milk per cow at a lower cost

than East Texas producers are able to

achieve.

Alternatives listed by the commenters

include developing pricing mechanisms

within the proposed consolidated

Southwest order that would compensate

East Texas producers at a price midway

between those of the Southeast and the

Southwest markets, or using Atlanta,

Georgia, as a price basing point with a

zone differential that would decrease

the price of milk, based on

transportation costs, from Atlanta to

Roswell,New Mexico.

There is very little overlap of either

fluid milk product disposition or

producer milk movements between the

Texas and Southeast marketing areas.

The amount of route disposition overlap

that exists is, not surprisingly, generally

found between eastern Texas and

Louisiana, and represents

approximately three percent of each

order’s total route disposition. In terms

of milk production, only 19 of the 57

counties suggested by the commenters

to become part of the Southeast order

area had milk production pooled under

theSoutheast order in either December

1996 or May 1997. All of these 19

counties were located in the

northernmost of 3 sections of Texas

proposed by commenters to be added to

the Southeast area, and less than 20

percent of the milk production from

these counties was pooled under the

Southeast order. This limited

association does not support including

east Texas in the Southeast marketing

area.

Arizona-Las Vegas

As suggested in the Revised

Preliminary Report on Order

Consolidation, the proposed ArizonaLas Vegas marketing area is comprised

of the current Central Arizona (Order

131) marketing area, one county in

Nevada which currently is in the Great

Basin (Order 139) marketing area, and

currently unregulated counties in

Arizona. There are 16 counties in this

proposed area.

Geography

The Arizona-Las Vegas market is

described geographically as follows: All

counties (15) in Arizona (6 whole and

1 partial currently are part of Order 131,

and 8 whole and 1 partial currently are

unregulated) and Clark County, Nevada,

which currently is part of the Great

Basin marketing area. The market

extends about 400 miles north to south

from Arizona’s border with Utah (and

Nevada’s southernmost county) to the

U.S.-Mexico border. The market ranges

from 300 to 375 miles east to west from

the Arizona-New Mexico border to

theArizona/southern Nevada-California

border.

The Arizona-Las Vegas marketing area

is contiguous to two proposed

consolidated marketing areas, the Great

Basin portion of the proposed Western

area to the north and the New MexicoWest Texas portion of the Southwest

area to the east. California, not currently

part of the Federal order system, lies to

the west and Mexico is south of this

marketing area.

Arizona can be divided into three

geographic regions—the Sonoran Desert,

in the southwest; the Colorado Plateau,

in the north; and the Mexican Highland,

mainly in the central and southeastern

parts of the state. With each of these

regions, three distinct climatic zones

exist: the Sonoran Desert is hot in the

summer but can experience frost in the

winter; the Colorado Plateau is hot and

dry in the summer and cold and windy

in the winter; and the Mexican

Highland receives significant

precipitation in both summer and

winter. This region is cooler in both

summer and winter than the Sonoran

Desert region.

These topographical and climatic

conditions apparently are conducive to

milk production. Dairy products

represent one of the principal

agricultural commodities (2nd and 3rd)

in the States of Arizona and Nevada,

respectively, representing 16.6 and 21.7
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4863

percent of total agricultural receipts of

the two States in 1996.

Population

Arizona is one the fastest-growing

states in the United States. According to

July 1, 1996, population estimates, the

total population in the proposed

marketing area is 5.5 million. Using

Metropolitan Statistical Areas (MSAs),

the largest population center is the

Phoenix-Mesa (Phoenix) area, located in

central Arizona approximately 125

miles north of the U.S.-Mexico border in

the Sonoran Desert region. About 250

miles to the northwest of Phoenix is the

Las Vegas, Nevada, area, the secondlargest population center in this

marketing area. The Las Vegas MSA is

comprised of three counties: Clark and

Nye counties in Nevada and Mohave

County in Arizona. Half of this market’s

population is in the Phoenix area, and

over 70 percent is accounted for when

Las Vegas is added.

Fluid Per Capita Consumption

Based on the population figure of 5.5

million and an estimated per capita

fluid milk consumption rate of 20

pounds of fluid milk per month, total

fluid milk consumption in the ArizonaLas Vegas marketing area is estimated at

110 million pounds per month. Plants

that would be fully regulated

distributing plants in the Arizona-Las

Vegas order had route disposition

within the market of approximately 96

million pounds in January 1997.

Another 3.3 million pounds of milk was

sold in the Las Vegas area, all by

handlers fully regulated under the Great

Basin Federal order (Order 139).

Milk Production

In December 1996, almost 201 million

pounds of milk was pooled in the

Central Arizona market, supplied by

over 100 producers located in fewer

than 10 counties in Arizona and

California. Over 90 percent of the

Central Arizona milk was produced

within the marketing area. Further, over

90 percent of the producer milk

produced within the Order 131 area was

produced in Maricopa County, Arizona,

where Phoenix, this market’s largest

city, also is located. With 181 million

pounds of producer milk for December

1996, Maricopa County produces almost

twice the amount of milk required to

meet the fluid milk needs of the entire

marketing area. Arizona producers did

not supply milk to any other Federal

order; however, it is known that

producer milk moves from both Arizona

and Clark County, Nevada, to southern

California. These figures do not reflect

the producer milk associated with

Anderson Dairy, the Las Vegas handler

who has been pooled on Order 139.

There is only one producer located in

Clark County, Nevada. The portion of

Anderson’s milk supply that is not

supplied by the single Clark County

producer comes from southern

California.

Distributing Plants—Route Distribution

Using distributing plant lists included

in both the Preliminary and Revised

Preliminary Reports and the pooling

standards used in the Revised

Preliminary Report, updated for known

plant closures through May 1997, 9

distributing plants would be expected to

be associated with the proposed

Arizona-Las Vegas marketing area,

including 5 fully regulated distributing

plants (all currently pool plants), 1

exempt plant and 3 producer-handlers.

Two distributing plants (1 pool plant

and 1 producer-handler, both located in

the Phoenix area) that were operating in

October 1995 are now out of business.

There are 4 distributing plants in the

Phoenix area (all pool plants). Located

in the Las Vegas MSA are one pool plant

and a producer-handler located in a

currently-unregulated Arizona county.

This producer-handler has no sales into

either the Order 131 or 139 marketing

area, but would meet the producerhandler definition upon order

consolidation and market area

expansion. Two other producerhandlers are located in the Yuma,

Arizona, MSA (located in southwestern

Arizona on the California-ArizonaMexico border). The exempt plant is

located in a currently-unregulated

Arizona county with no sales into the

current Central Arizona marketing area,

and with total route disposition of less

than 150,000 pounds. All of the plants

that are expected to be fully regulated

under this proposed order are located in

areas that contain over 70 percent of the

proposed market’s population.

Utilization

According to October 1995 pool

statistics, the Class I utilization for the

Central Arizona market was about 49

percent. Due to restricted information,

this calculation excludes receipts for the

Las Vegas handler who currently is

regulated under Order 139. Because the

degree of consolidation proposed for

this market is very minor, little change

in the Class I utilization percentage, and

thus little change in producer returns, is

expected in the Arizona-Las Vegas area

as a result of the proposed

consolidation. For December 1996, Class

I utilization for the Central Arizona

market was 41.7 percent based on the

use of 83,757,000 pounds of producer

milk in Class I out of 200,939,000 total

pounds of producer milk.

Other Plants

For May 1997, 3 supply or

manufacturing plants were located

within the Arizona-Las Vegas marketing

area: 2 in Arizona (both in the Phoenix

area) and 1 in Nevada (in the Las Vegas

area). One Arizona plant is a pool plant

operated by the cooperative,

manufacturing primarily cheese, while

the other plants are nonpool plants

manufacturing primarily Class II

products.

Cooperative Associations

For December 1995, the only

cooperative having membership in the

Arizona-Las Vegas marketing area was

United Dairymen of Arizona, which

represented approximately 90 percent of

the milk pooled under the Central

Arizona order.

Criteria for Consolidation

Market data indicate that there are

extensive sales into the Las Vegas area

by Central Arizona pool plants, and

sales by both Phoenix and Las Vegas

handlers into the unregulated areas

along the southern part of the NevadaArizona border. Rapid population

growth in the area between the two

areas has greatly increased competition

between the handlers in Phoenix and

Las Vegas. In addition, both areas

exchange significant volumes of bulk

and packaged milk with Southern

California. At the same time, the

strength of the earlier relationship

between the Las Vegas area and Utah

clearly has declined since the merger of

the Lake Mead and Great Basin order

areas in 1988, which was based on data

compiled up to 1986.

The Grand Canyon serves as a natural

barrier in northwestern Arizona

between this area and Great Basin.

Although the actual proposed order area

extends to the Utah border, the portion

of Arizona between the Grand Canyon

and Utah is very sparsely populated,

and is included in the proposed

marketing area primarily for the purpose

of simplifying the marketing area

description and easing handlers’ burden

of reporting out-of-area sales. The

Colorado River forms much of the

western boundary with California and

Nevada. A north-south strip along the

eastern edge of Arizona constituting

approximately 30 percent of the State’s

territory is very sparsely populated,

containing just over 5 percent of the

population of the proposed marketing

area. This lightly populated desert area

can be seen as another form of natural
4864 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

barrier to the movement of bulk and

packaged milk.

Discussion of Comments and

Alternatives

Two comments filed in response to

the Revised Preliminary Report on

Order Consolidation recommended that

Clark County, Nevada, be returned to

the Western marketing area, with the

Great Basin, Western Colorado and

Southeastern Idaho-Eastern Oregon

marketing areas. Anderson Dairy, the

handler located in Las Vegas, Nevada,

requested that the Western marketing

order remain as it was in the initial

Preliminary Report. Anderson stated

that its major competition comes from

southern California and northern Utah,

and that one or the other of these areas

could gain a significant advantage if

Anderson becomes an island between

these two powerful competitive areas

with different marketing systems.

Comments from Darigold also supported

the original proposed Western

marketing area. Darigold stated that

because Class I sales in Las Vegas

historically have been associated with

the Great Basin producer pool rather

than with the Phoenix market, shifting

those sales would be controversial and

should be reviewed carefully.

Comments from a California

cooperative indicated support for the

proposed Arizona-Las Vegas order. The

cooperative referenced its earlier

concern about milk moving between

southern California and both the State of

Arizona and Clark County, Nevada, on

a daily basis.

The increase in sales by Central

Arizona pool plants into the Las Vegas

area, and increased sales by both

Phoenix and Las Vegas handlers into the

unregulated area of rapidly-increasing

population along the southern part of

the Nevada-Arizona border, are factors

that have greatly increased overlapping

route distribution in these two areas. In

addition, both areas exchange

significant volumes of bulk and

packaged milk with Southern California.

The Las Vegas area’s earlier relationship

with southern Utah was based primarily

on Utah as an important milk supply

area for Las Vegas at the time of the

merger of the Lake Mead and Great

Basin order areas in 1988. That

relationship clearly has ceased to exist.

Therefore, the proposal by cementers

that the Las Vegas, Nevada, area

continue to be included in the same

marketing area with Utah does not

reflect current marketing conditions.

Western

The proposed Western marketing area

is comprised of the current Western

Colorado (Order 134), Southwestern

Idaho-Eastern Oregon (Order 135), and

Great Basin (Order 139) marketing areas,

less one Nevada county (Clark) in Order

139 that is proposed to be in the

Arizona-Las Vegas marketing area.

There are 71 counties in this proposed

area.

Geography

The Western market is described

geographically as follows: 4 counties in

western Colorado (all currently in Order

134), 28 in Idaho (18 currently in Order

135 and 10 in Order 139), 3 in eastern

Nevada (all currently in Order 139), 5 in

eastern Oregon (all currently in Order

135), all counties (29) in Utah (currently

in Order 139) and 2 in the southwest

corner of Wyoming (currently in Order

139). Measuring the extreme

dimensions, this market extends about

625 miles north to south from Oregon

and Idaho to Utah’s boundary with

Arizona, ranging from 125 miles in

Colorado to 475 miles from Idaho to the

Utah-Arizona border. Similarly, this

market’s extreme east-to-west

dimension is 650 miles from the

westernmost edge in central/eastern

Oregon to the easternmost edge in west/

central Colorado.

The proposed Western marketing area

is contiguous to three of the proposed

consolidated marketing areas, the

Pacific Northwest to the west and north

of the Oregon portion of this market,

Arizona-Las Vegas to the south and the

Southwest to the extreme southeast

corner. Non-Federally regulated

territory borders the Western market on

the west-southwest (Nevada) and the

north-northeast (Idaho and Wyoming).

To the east lie the Rocky Mountains in

central Colorado, serving as a natural

barrier between the Western market and

the Central market, whose westernmost

edge begins in eastern Colorado. The

Continental Divide lies just to the east

of the Western market.

In terms of physical geography, the

Western marketing area has several

regions: the Columbia Plateau in

southern Idaho and northeastern

Nevada, characterized by fertile soils;

the Great Basin in southeast Idaho,

nearly all of Nevada and the western

third of Utah, described by ranges and

parallel valleys; and the Colorado

Plateau in the eastern half of Utah and

western part of Colorado, characterized

by gorges in Utah and canyons, mesas

and valleys in Colorado. In general, the

Western market is quite dry, with

temperatures tending to be extreme and

affected by elevation.

Population

According to July 1, 1996, population

estimates, the total population in the

proposed marketing area is 3.3 million.

Using Metropolitan Statistical Areas

(MSAs), the largest population center is

the Salt Lake City-Ogden, Utah area

(Salt Lake City). Salt Lake City is located

in north central Utah. The Boise City,

Idaho, area (Boise), the second largest

population center in this marketing

area, is located about 300 miles to the

northwest of Salt Lake City. ProvoOrem, Utah, (Provo) the third largest

population center, lies 40 miles south of

Salt Lake City. Grand Junction,

Colorado, (Grand Junction), located

about 290 miles southeast of Salt Lake

City, is the fourth largest population

center in the Western market; but is less

than 10 percent the size of Salt Lake

City. Slightly over one-third of the

market’s population is in the Salt Lake

City area, and over 60 percent is

accounted for when Boise, Provo and

Grand Junction are added.

Fluid Per Capita Consumption

Based on the population figure of 3.3

million and an estimated per capita

fluid milk consumption rate of 23

pounds of fluid milk per month, total

fluid milk consumption in the Western

marketing area is estimated at 75.9

million pounds per month. Plants that

would have been fully regulated

distributing plants in the Western order

had route disposition within the market

of 76.5 million pounds in October 1995;

almost 75 percent of this total is from

Order 139 pool plants. The 10 producer

handlers operating during this month

had a combined route disposition of 1.7

million pounds. Additionally, 2.8

million pounds of route disposition

came from handlers outside the market.

Milk Production

In December 1996, nearly 450 million

pounds of milk was pooled in the

proposed Western market from more

than 1,000 producers located in more

than 70 counties in California, Colorado,

Idaho, Oregon and Utah. Over 95

percent of the producer milk was

produced within the marketing area.

Four counties produced 50 percent of

the milk pooled. The three top

producing counties in Idaho, Jerome,

Gooding and Twin Falls counties, are all

located in southwestern Idaho, about

130 miles southeast of Boise and 230

miles northwest of Salt Lake City.

Jerome and Gooding counties each

provided twice as much producer milk

as Twin Falls County, the third-largest

county in terms of producer milk in the

Western market. The fourth-largest
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4865

production county was Cache County in

northeastern Utah, located about 80

miles north of Salt Lake City.

The three Idaho counties provided

producer milk for both Order 135 and

Order 139 in December 1996.

Specifically, Jerome County producers

had the greatest amount of producer

milk on both Order 135 and Order 139.

Gooding and Twin Falls counties were

in the top four for volume in Order 139

and were second and third for volume

in Order 135.

Distributing Plants—Route Distribution

Using distributing plant lists included

in both the Preliminary and Revised

Preliminary Reports and the pooling

standards used in the Revised

Preliminary Report, updated for known

plant closures through May 1997, 28

distributing plants would be expected to

be associated with the Western

marketing area, including 11 fully

regulated distributing plants (all

currently pool plants), 1 partially

regulated (currently partially regulated),

3 exempt plants based on size (2

currently are pool plants but have less

than 150,000 pounds of total route

distribution and the other is currently

unregulated), 9 producer-handlers, and

4 exempt plants based on institutional

status (all were exempt as defined under

current federal orders). Since October

1995, it is known that 1 distributing

plant (a producer-handler) in Utah has

gone out of business.

There would be 11 distributing plants

in the Salt Lake City area (5 pool plants,

3 producer-handlers and 3 exempt

plants). The Boise area would have 2

pool distributing plants, the Provo area

would have 1 producer-handler and the

Grand Junction area would have 1

exempt plant. The remaining 14

distributing plants are located in

Colorado (1 plant, fully regulated);

Idaho (4 plants: 2 pool, 1 exempt, and

1 producer-handler), Nevada (2 plants,

both unregulated), and Utah (7 plants: 1

pool, 1 partial, 1 exempt, 4 producerhandlers).

Fully regulated distributing plants are

located in MSAs containing about half

of the proposed market’s population,

including the Pocatello, Idaho, MSA,

with 2.2 percent of this market’s

population.

Utilization

According to October 1995 pool

statistics, the Class I utilization

percentages for the individual markets

ranged from 18 percent for

Southwestern Idaho-Eastern Oregon to

35 percent for Great Basin. Information

for Western Colorado is restricted due to

fewer than three handlers in the market.

Based on calculated weighted average

use values for (1) the current order with

current use of milk, and (2) the current

order with projected use of milk in the

consolidated Western order, the

potential impact of this proposed rule

on producers who supply the current

market areas is estimated to be: Western

Colorado, a 59-cent per cwt decrease

(from $13.41 to $12.82); Southwestern

Idaho-Eastern Oregon, a 5-cent per cwt

increase (from $12.63 to $12.68); and

Great Basin, a 3-cent per cwt decrease

(from $12.81 to $12.79). The weighted

average use value for the consolidated

Western order market is estimated to be

$12.78 per cwt. For December 1996,

combined Class I utilization for Orders

135 and 139 (Western Colorado

information is restricted) was 19.9

percent based on 87.7 million pounds of

producer milk used in Class I out of

440.1 million total producer milk

pounds.

Other Plants

Nineteen supply or manufacturing

plants were located within the proposed

Western marketing area during May

1997: 1 in Colorado (in the Grand

Junction area), 8 in Idaho (3 in the Boise

area), 9 in Utah (2 in the Salt Lake City

area) and 1 in Wyoming. Two of the 19

plants were pool plants; both

manufacture primarily cheese. Of the 17

nonpool plants, 12 manufacture

primarily cheese and 5 manufacture

primarily soft or Class II products

(including ice cream). Of the 8 Idaho

plants, all but one manufacture cheese,

while of the 9 Utah plants, 6

manufacture cheese and 3 manufacture

soft products.

Cooperative Associations

For December 1995, four cooperatives

representing 56 percent of the milk

pooled under the three orders had

membership in the proposed Western

marketing area. Western Dairymen

Cooperative, Inc., had membership in

Western Colorado, Southwestern IdahoEastern Oregon and Great Basin; Magic

Valley Quality Milk Producers, Inc., had

membership in Orders 135 and 139;

Darigold Farms had membership in

Order 135, and Security Milk Producers’

Association had membership in Order

139.

Criteria for Consolidation

As suggested in the Revised Report on

Order Consolidation, the consolidated

Western market should be composed of

the current marketing areas of the

Western Colorado, Southwestern IdahoEastern Oregon and Great Basin markets

(minus the Clark County, Nevada,

portion of the Great Basin area). Sales

overlap exists between Southwestern

Idaho-Eastern Oregon and Great Basin,

as well as a significant overlap in

procurement for the two orders in

Idaho. The two orders also share similar

multiple component pricing plans. The

Western Colorado order has some route

disposition within the Great Basin

order, and must be included in a

consolidated order area because it is a

small market for which data cannot be

released without revealing confidential

information unless combined with the

adjacent Great Basin order.

Discussion of Comments and

Alternatives

Several comments opposed

consolidating the Southwestern IdahoEastern Oregon order area with the

Great Basin marketing area. A primary

basis for opposition to the consolidation

is the disparity in the two regions’

utilization of Class I fluid milk: the

Southwestern Idaho-Eastern Oregon

order has a very low percentage of Class

I use, while the Great Basin order’s

Class I use percentage is higher at about

35 percent, and Western Colorado’s is

higher still. Commenters fear that the

consolidation of these orders would

result in lower returns to producers who

currently are pooled under the Great

Basin and Western Colorado orders.

Some comments suggest that the

Southwestern Idaho-Eastern Oregon

marketing area should remain under a

separate order, with the Great Basin

market consolidated with markets such

as Arizona, Western Colorado, or

Eastern Colorado. One comment

supported keeping both the

Southwestern Idaho-Eastern Oregon and

Great Basin marketing areas separate

because of the differences in Class I use.

Comments filed by Western Colorado

producers and their cooperative state

that the Western Colorado area should

be combined with the Central market

because: (1) It’s data has always been

combined with that for Eastern

Colorado, (2) the Eastern Colorado blend

price to producers is higher than Great

Basin’s, (3) Colorado is a milk import

state, whereas Utah is a milk export

state, (4) the Western and Eastern

Colorado order areas operate under

quota plans, while the Great Basin area

does not, and (5) Western Colorado is a

milk surplus area ‘‘with a freight

history.’’

The effects of the proposed order

consolidation on returns to producers

pooled under the current Southeastern

Idaho-Eastern Oregon and Great Basin

marketing areas are not expected to be

substantial. However, the proposed

consolidation would reduce the blend

price to be paid to producers whose
4866 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

milk is currently pooled under the

Western Colorado order. This market

must be included in a consolidated

order because it currently has too few

pooled handlers to allow market data to

be published without revealing

confidential data. The Western area is

the most logical. The adjoining Great

Basin marketing area represents the

closest reserve supply of milk and the

closest available manufacturing outlets

for surplus production; and the largest

cooperative association in the Great

Basin area is the same cooperative

representing the Western Colorado

producers. Small amounts of packaged

fluid milk products are exchanged

between Eastern and Western Colorado

handlers, some packaged milk is

distributed on routes in the Western

Colorado area by Eastern Colorado

handlers, and bulk cream regularly

moves from Western Colorado plants to

the Eastern Colorado area. A volume of

route dispositions similar to that

distributed by Eastern Colorado

handlers in Western Colorado is

distributed by Western Colorado

handlers in the Great Basin area. In

addition, movements of bulk milk from

Western Colorado to Great Basin plants

occur in volumes about 3 times those

distributed on routes from Eastern into

Western Colorado, and from Western

Colorado into the Great Basin area. The

Rocky Mountains represent a very large

natural barrier between Western

Colorado and the more eastern

marketing areas.

Data for the Eastern and Western

Colorado orders have been reported on

a combined basis for a number of years

as a matter of administrative

convenience because of the restricted

nature of Western Colorado data, rather

than on the basis of any close affinity

between the two markets. While

Colorado may be a net import state, that

assertion does not apply to the western

portion of the State. Milk production

data for December 1996 and May 1997

show no milk from other states pooled

under the Western Colorado order.

Surplus production from the western

Colorado counties generally is shipped

to Utah manufacturing plants rather

than across the Rocky Mountains

(except for very minor volumes during

7 of 32 months in 1995–97). The issue

raised by the Western Colorado

producers of quota in the Colorado

orders is not related to Federal milk

order provisions; there are no quota

provisions in any of the Federal orders.

The quota referred to apparently is a

pooling plan operated by the producers’

cooperative, and certainly can be

continued by the cooperative

association under the proposed

consolidated orders. For the foregoing

reasons, the rationale is stronger for

including the Western Colorado

marketing area in the Western

consolidated order area than in the

Central area.

Pacific Northwest

The proposed Pacific Northwest

marketing area is comprised of the

current Pacific Northwest (Order 124)

marketing area and one currentlyunregulated county in southwest

Oregon. There are 75 counties in this

proposed area.

Geography

The proposed Pacific Northwest

market is described geographically as

follows: All counties (39) in

Washington, 30 counties in Oregon (29

currently are part of Order 124 and one,

Curry County, is unregulated) and six

counties in northwestern Idaho. The

market extends about 490 miles northto-south from Washington’s northern

border with the Canadian province of

British Columbia to Oregon’s southern

border with California and Nevada.

East-to-west, the market ranges from

about 450 miles in the northern half of

the market (covering territory from

Washington’s western boundary with

the Pacific Ocean to the eastern border

of Idaho with Montana) to about 250

miles in the southern half of the market

(covering approximately two-thirds of

Oregon from the state’s western border

with the Pacific Ocean to central

Oregon).

The proposed Pacific Northwest

marketing area is contiguous to the

proposed consolidated Western Federal

order marketing area in eastern Oregon.

The remainder of the marketing area is

surrounded by currently non-Federally

regulated areas (California and

northwestern Nevada to the south and

Montana, Idaho, and one northeastern

Oregon county to the east), political

boundaries (Canada to the north), and

the Pacific Ocean to the west.

Along the Oregon and Washington

coasts lies the Coast Range. The Cascade

Range is located further inland in both

states. Both ranges are north-south in

direction, and the Cascade Range

effectively divides both states into two

distinct climates: a year-round mild,

humid climate with abundant

precipitation predominates in the

western part of the states, and a dry

climate with little precipitation but

greater temperature extremes prevails

east of the Cascade Range. The mild

climate of the western portion results in

longer growing seasons. The Columbia

River flows south through eastern

Washington, turns west, and becomes

the western two-thirds of the border

between Oregon and Washington. The

portion of Idaho included in the current

and proposed Pacific Northwest

marketing area is within the Rocky

Mountains. This area has a generally

continental climate with the higher

elevations having long and severe

winters.

Much of the area is conducive to the

production of milk and many other

agricultural commodities. Although

dairy products ranked 2nd among

receipts of agricultural commodities in

the State of Washington in 1996, and

4th in Oregon, they accounted for only

13.8 percent and 7.9 percent,

respectively, of such receipts. Apples

(in Washington) and greenhouse/

nursery, wheat, and cattle and calves (in

Oregon) ranked ahead of dairy,

accounting for 19.8 percent and 33.8

percent, respectively, of agricultural

commodity receipts.

Population

According to July 1, 1996, population

estimates, the total population in the

proposed marketing area is 8.8 million.

Seventy-seven percent of the marketing

area population is located in

Metropolitan Statistical Areas (MSAs).

The two largest MSAs are located on the

western side of the Cascade Range. The

Seattle-Tacoma-Bremerton (Seattle)

area, with a population of 3.3 million

(37.5% of the marketing area

population), is in northwestern

Washington. Over seventy percent of the

population of the State of Washington is

located west of the Cascade Mountains,

in the western third of the State.

Another 14.5% of the State’s population

is contained in 3 MSA’s east of the

Cascades.

The Portland-Salem (Portland) area in

northwestern Oregon is located on the

Oregon-Washington border, with

Portland just south of the Columbia

River. The population of this MSA is 2.1

million, or 23.5% of the marketing area

population. Ninety percent of the

population of Oregon is concentrated in

the western one-third of the State, or in

the western half of the Oregon portion

of the marketing area.

Fluid Per Capita Consumption

Based on the population figure of 8.8

million and an estimated per capita

fluid milk consumption rate of 22

pounds of fluid milk per month, total

fluid milk consumption in the Pacific

Northwest marketing area is estimated

at 193.6 million pounds per month. For

October 1995, plants that would be fully

regulated distributing plants under the

proposed Pacific Northwest order had
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4867

route disposition within the market of

170 million pounds. In addition, the 18

producer-handlers operating during this

month had a combined route

disposition of 18 million pounds.

Additionally, slightly over 1 million

pounds of route disposition (less than

one percent of total route disposition in

the marketing area) came from handlers

outside the market. Because the

handlers associated with this market are

able to fulfill the market’s Class I or

fluid needs, and because of the

somewhat geographic isolation of the

market, maintaining the current Pacific

Northwest order as a separate market is

appropriate.

Milk Production

In December 1996, the 540 million

pounds of milk pooled in the Pacific

Northwest market were produced by

1,280 producers located in 57 counties

in California, Oregon, Idaho and

Washington. Four counties produced 50

percent of the milk pooled. Three of

these counties are in Washington State.

They are Whatcom and Skagit counties,

which are less than 100 miles north of

Seattle; and Yakima County, which is

located in central Washington about 100

miles southeast of Seattle on the eastern

side of the Cascade Range. The fourth

county is in Oregon. It is Tillamook

County, which is located on the Pacific

Ocean, about 60 miles west of the

Portland area on the western side of the

Coast Range. Less than two percent of

the milk pooled in the Pacific Northwest

was produced outside of the marketing

area, in Idaho and California. The

largest portion is from producers in two

northern California counties who

pooled 6 million pounds of milk or 89.6

percent of the pooled milk produced

outside the Pacific Northwest marketing

area.

Distributing Plants—Route Distribution

Using distributing plant lists included

in both the initial Preliminary and

Revised Preliminary Reports and the

pooling standards used in the Revised

Preliminary Report, updated for known

plant closures through May 1997, 39

distributing plants would be expected to

be associated with the Pacific Northwest

market, including 20 fully regulated

distributing plants, 1 partially regulated

plant, 3 exempt plants (below 150,000

pounds in total route disposition), and

15 producer-handlers. It is known that

4 distributing plants (1 pool plant and

3 producer handlers) have gone out of

business since the initial report.

There are 11 distributing plants

within the Portland area, including 7

pool plants, 2 exempt plants and 2

producer-handlers. The Seattle area has

4 pool plants and 7 producer-handlers.

In addition to these two main

population centers, the Spokane,

Washington, MSA, located in the

eastern area of the state near the Idaho

border with a population of 405,000, has

3 pool plants. One of these plants,

Wilcox Farms, Cheney, Washington,

began packaging and distributing

products in the spring of 1997 and is not

included in the market’s route

disposition data for October 1995, the

month used for analysis.

Of the 9 distributing plants that

would be operating in Oregon, 5 would

be fully regulated. Four are located in

western Oregon, and the fifth in central

Oregon. Of the 4 Oregon plants

anticipated to be non-pool distributing

plants, one would be partially regulated

(but currently is fully regulated), one

would be exempt, and two would be

producer-handlers. Two other producerhandlers have gone out of business

since October 1995.

Of the 6 distributing plants in

Washington that would be in operation,

one was and will continue to be a pool

plant, one would be exempt (that

currently is a pool plant), and 4 would

be producer-handlers. Two other

distributing plants (one pool plant and

one producer-handler) have gone out of

business since October 1995.

Distributing plants fully regulated

under the proposed Pacific Northwest

order are located in MSAs where 71

percent of the proposed market’s

population is concentrated.

Utilization

According to October 1995 pool

statistics, the Class I utilization

percentage for the Pacific Northwest

market was about 36 percent. Because

this market is proposed to remain

separate, expected utilization changes

due to the reform process result only

from potential changes in plants’

regulatory status; thus very little change

in producer returns under the Pacific

Northwest order is expected as a result

of consolidation. For December 1996,

Class I utilization for the Pacific

Northwest market was 32.5 percent

based on 175,712,000 pounds of

producer milk used in Class I out of

540,334,000 total producer milk

pounds.

Other Plants

Also located within the proposed

Pacific Northwest marketing area in

May 1997 were 27 supply or

manufacturing plants; 12 in Oregon (5

in the Portland area), 15 in Washington

(7 in the Seattle area) and none in Idaho.

Two of the 27 plants (both in Oregon)

are Order 124 pool supply plants, one

of which manufactures primarily

cheese, and the other nonfat dry milk.

Of the 10 nonpool manufacturing plants

located in Oregon, 8 manufacture

primarily Class II products (including

ice cream), 1 manufactures butter, and

the other makes cheese.

The 15 manufacturing/supply plants

located in the State of Washington are

all nonpool plants. Three manufacture

primarily Class II products, 3

manufacture primarily butter, 2

manufacture primarily powder, and 7

manufacture primarily cheese.

Cooperative Associations

Five cooperative associations have

members in the Pacific Northwest

market. Darigold Farms is the largest,

and the only cooperative that had

membership affiliated with another

order (Order 135) in December 1995.

Other cooperatives in this market are

Farmers Cooperative Creamery,

Tillamook County Creamery

Association, and Northwest

Independent Milk Producers

Association. These five cooperatives

pooled 78 percent of the total producer

milk pooled under the Pacific

Northwest order in December 1995.

Criteria for Consolidation

As suggested in both the initial and

Revised Preliminary Reports on Order

Consolidation, the consolidated Pacific

Northwest market should add one

currently unregulated Oregon county to

the Pacific Northwest milk order. The

degree of association of this market with

other Federal order marketing areas is

insufficient under any criteria to

warrant consolidation with any other

order areas.

Discussion of Comments and

Alternatives

Several comments on the Pacific

Northwest marketing area suggested in

the 2 preliminary reports were filed by

cooperative associations operating in

the area. Darigold, the area’s largest

cooperative, commented that there is

strong justification for the order

boundaries of the current Pacific

Northwest order area. Two other

cooperatives had earlier supported a

broader consolidation, including at least

the Southwestern Idaho-Eastern Oregon

and, perhaps, the Great Basin order

areas. However, as discussed in the two

preliminary reports on order

consolidation, there is virtually no

relationship with regard to either

overlapping route dispositions or

overlapping milk procurement between

the Pacific Northwest and Southwestern

Idaho-Eastern Oregon milk marketing

areas.
4868 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

LIST OF PLANTS AND REGULATORY STATUS

Plant name City State October 1995 order Status 1 Expected

status 1

NORTHEAST

ALDRICH DAIRY ........................................ FREDONIA ................................................ NY .................................................................... 5 3B

ARRUDA, GEORGIANNA (ESTATE OF) .. TIVERTON ................................................. RI New England ............................................. 4 4

BANGMA, LEONARD & DONALD ............. UXBRIDGE ................................................ MA New England ............................................. 4 4

BECHTEL DAIRIES, INC ........................... ROYERSFORD ......................................... PA Mid Atlantic ................................................ 1 1

BOICE BROS. DAIRY (RICHARD P.

BOICE).

KINGSTON ................................................ NY NY–NJ ....................................................... 1 1

BOOTH BROTHERS DAIRY, INC ............. BARRE ...................................................... VT New England ............................................. 2 1

BRIGGS, ROBERT A ................................. WEST MEDWAY ....................................... MA New England ............................................. 4 4

BROOKSIDE DAIRY .................................. FITCHBURG .............................................. MA New England ............................................. 4 4

BYRNE DAIRY, INC ................................... SYRACUSE ............................................... NY NY–NJ ....................................................... 1 1

CAMPHILL VILLAGE ................................. KIMBERTON ............................................. PA .................................................................... 5 3B

CHARLAP DAIRY FARMS, INC ................ HAMBURG ................................................ NY .................................................................... 5 1

CHRISTIANSEN DAIRY CO., INC ............. NO. PROVIDENCE ................................... RI New England ............................................. 1 1

CHROME DAIRY FARMS .......................... OXFORD ................................................... PA Mid Atlantic ................................................ 1 1

CIENIEWICZ, JOSEPH .............................. BERLIN ...................................................... CT New England ............................................. 4 4

CLIFFORD W. & MARIE B. MOYER ......... DUBLIN ...................................................... PA .................................................................... 5 3B

CLINTON MILK CO .................................... NEWARK ................................................... NJ NY–NJ ....................................................... 1 1

CLOVER FARMS DAIRY COMPANY ....... READING .................................................. PA NY–NJ ....................................................... 1 1

CLOVERLAND/GREEN SPRING DAIRY .. BALTIMORE .............................................. MD Mid Atlantic ................................................ 1 1

CLOVERLAND/GREEN SPRING DAIRY .. BALTIMORE .............................................. MD Mid Atlantic ................................................ 1 1

COOPER’S HILLTOP DAIRY FARM ......... ROCHDALE ............................................... MA New England ............................................. 4 4

CORBY, CHARLES .................................... PITTSFORD .............................................. NY .................................................................... 5 3B

CORNELL UNIVERSITY ............................ ITHACA ..................................................... NY .................................................................... 5 6B

CRESCENT RIDGE DAIRY, INC ............... SHARON ................................................... MA New England ............................................. 4 4

CROWLEY FOODS, INC ........................... BINGHAMTON .......................................... NY NY–NJ ....................................................... 1 1

CROWLEY FOODS, INC ........................... ALBANY .................................................... NY NY–NJ ....................................................... 1 1

CROWLEY FOODS, INC ........................... CONCORD ................................................ NH New England ............................................. 1 1

CUMBERLAND DAIRY, INC ...................... BRIDGETON ............................................. NJ Mid Atlantic ................................................ 1 2

CUMBERLAND FARMS, INC .................... EAST GREENBUSH ................................. NY NY–NJ ....................................................... 1 1

CUMBERLAND FARMS, INC .................... CANTON ................................................... MA New England ............................................. 1 1

CUMBERLAND FARMS, INC .................... FLORENCE ............................................... NJ Mid Atlantic ................................................ 1 1

DAIRY MAID DAIRY, INC .......................... FREDERICK .............................................. MD Mid Atlantic ................................................ 1 1

DAVID F. ARMSTRONG (SUNSET

DAIRY).

WHITESBORO .......................................... NY NY–NJ ....................................................... 1 1

DAVID NICHOLS ....................................... CHESTERFIELD ....................................... MA .................................................................... 3B2

DELLWOOD FOODS, INC. (TUSCAN

DAIRY FARMS, INC.).

YONKERS ................................................. NY NY–NJ ....................................................... 1 OOB

DUNAJSKI DAIRY, INC ............................. PEABODY ................................................. MA New England ............................................. 4 4

DUTCH VALLEY FOOD CO., INC ............. SUNBURY ................................................. PA Mid Atlantic ................................................ 1 1

DUTCH WAY FARM MARKET .................. MYERSTOWN ........................................... PA Mid Atlantic ................................................ 4 4

EDWARDS, CHARLES (& KURT &

KEITH—MODEL DAIRY FARM).

GLOVERSVILLE ........................................ NY NY–NJ ....................................................... 4 4

ELMHURST DAIRY, INC ........................... JAMAICA ................................................... NY NY–NJ ....................................................... 1 1

EMBASSY DAIRY, INC .............................. WALDORF ................................................. MD Mid Atlantic ................................................ 1 1

EMMONS WILLOW BROOK FARM, INC .. PEMBERTON ............................................ NJ Mid Atlantic ................................................ 4 4

FAIRDALE FARMS, INC ............................ BENNINGTON ........................................... VT New England ............................................. 2 1

FARMERS COOP. DAIRY, INC ................. HAZELTON ............................................... PA .................................................................... 5 5

FARMLAND DAIRIES, INC. &/OR

FAIRDALE MILK COMPANY, INC.

WALLINGTON ........................................... NJ NY–NJ ....................................................... 1 1

FISH FAMILY FARM, INC ......................... BOLTON .................................................... CT New England ............................................. 4 4

FREDDY HILL FARM DAIRY .................... LANSDALE ................................................ PA Mid Atlantic ................................................ 4 4

FREDRICK HINE ....................................... ORANGE ................................................... CT .................................................................... 5 3B

FRIENDSHIP DAIRIES, INC ...................... FRIENDSHIP ............................................. NY NY–NJ ....................................................... 1 2

GARELICK FARMS, INC ........................... FRANKLIN ................................................. MA New England ............................................. 1 1

GIANT FOOD, INC ..................................... LANDOVER ............................................... MD Mid Atlantic ................................................ 1 1

GRATERFORD STATE .............................. GRATERFORD .......................................... PA Mid Atlantic ................................................ 6A 6B

GUERS DY., INC ....................................... POTTSVILLE ............................................. PA Mid Atlantic ................................................ 2 2

GUIDA-SEIBERT DAIRY CO ..................... NEW BRITAIN ........................................... CT New England ............................................. 1 1

HALO FARM, INC ...................................... TRENTON ................................................. NJ Mid Atlantic ................................................ 1 1

HARBY, JOSEPH F ................................... WALTON ................................................... NY NY–NJ ....................................................... 1 OOB

HARRISBURG DAIRIES ............................ HARRISBURG ........................................... PA Mid Atlantic ................................................ 1 1

HERITAGE’S DAIRY, INC ......................... THOROFARE ............................................ NJ Mid Atlantic ................................................ 1 1

HERMANY FARMS, INC ........................... BRONX ...................................................... NY NY–NJ ....................................................... 1 1

HIGHLAWN FARM ..................................... LEE ............................................................ MA .................................................................... 5 3B

HILL FARM OF VERMONT ....................... PLAINFIELD .............................................. VT .................................................................... 5 3B

HILLCREST DAIRY, INC. (MICHAEL J.

JANAS).

MORAVIA .................................................. NY NY–NJ ....................................................... 4 4

HOGAN, FRANCIS J. (& ANDREW J. &

SEAN P.—HOGAN’S DAIRY).

HUDSON FALLS ....................................... NY NY–NJ ....................................................... 4 4

HOMESTEAD DAIRIES, INC ..................... MASSENA ................................................. NY .................................................................... 5 1

HOOVER DAIRY ........................................ SANBORN ................................................. NY .................................................................... 5 3B

HOWARD HATCH ...................................... N. HAVERHILL .......................................... NH New England ............................................. 1 1

HUDAK, RUDOLPH ................................... SHELTON .................................................. CT New England ............................................. 4 OOB

HY POINT DAIRY FARMS, INC ................ WILMINGTON ........................................... DE Mid Atlantic ................................................ 1 1

H.E.A., INC ................................................. CRANSTON ............................................... RI New England ............................................. 1 1

H.P. HOOD, INC ........................................ NEWINGTON ............................................ CT New England ............................................. 2 2

H.P. HOOD, INC ........................................ PORTLAND ............................................... ME New England ............................................. 1 1

H.P. HOOD, INC ........................................ AGAWAM .................................................. MA New England ............................................. 1 1
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4869

LIST OF PLANTS AND REGULATORY STATUS—Continued

Plant name City State October 1995 order Status 1 Expected

status 1

H.P. HOOD, INC ........................................ CHARLESTON .......................................... MA New England ............................................. 1 OOB

H.P. HOOD, INC ........................................ BURLINGTON ........................................... VT New England ............................................. 2 1

H.P. HOOD, INC ........................................ ONEIDA ..................................................... NY NY–NJ ....................................................... 2 1

KEMPS FOODS, INC ................................. LANCASTER ............................................. PA Mid Atlantic ................................................ 1 1

KOLB’S FARM STORE .............................. SPRING CITY ............................................ PA Mid Atlantic ................................................ 4 4

KREIDER DAIRY FARMS, INC ................. MANHEIM .................................................. PA NY–NJ ....................................................... 2 1

KRISCO FARMS, INC. (KRISCO FARMS) CAMPBELL HALL ..................................... NY NY–NJ ....................................................... 4 4

LAPP VALLEY FARM ................................ NEW HOLLAND ........................................ PA Mid Atlantic ................................................ 4 4

LEHIGH VALLEY DAIRIES, INC ............... FORT WASHINGTON ............................... PA Mid Atlantic ................................................ 1 OOB

LEHIGH VALLEY DAIRIES, INC ............... LANSDALE ................................................ PA NY–NJ ....................................................... 1 1

LEHIGH VALLEY DAIRIES, INC ............... SCHUYKILL HAVEN ................................. PA NY–NJ ....................................................... 2 2

LEWES DAIRY, INC .................................. LEWES ...................................................... DE Mid Atlantic ................................................ 1 1

LEWIS COUNTY DAIRY CORP ................ LOWVILLE ................................................. NY NY–NJ ....................................................... 1 1

LONGACRE’S MODERN DAIRY, INC ...... BARTO ...................................................... PA Mid Atlantic ................................................ 2 2

LUNDGREN & JONAITIS DAIRY FARMS,

INC. (WHITTIER CREAMERY CO.,

INC.).

SHREWSBURY ......................................... MA New England ............................................. 1 1

MANINO, ROSE (DARI-DELL) .................. FRANKFORT ............................................. NY NY–NJ ....................................................... 2 3B

MAPLE HILL FARMS, INC ........................ BLOOMFIELD ............................................ CT New England ............................................. 1 1

MAPLEDALE DAIRY, INC ......................... ROME ........................................................ NY NY–NJ ....................................................... 1 OOB

MAPLEHOFE DAIRY, INC ......................... QUARRYVILLE .......................................... PA Mid Atlantic ................................................ 4 4

MARCUS DAIRY, INC ............................... DANBURY ................................................. CT NY–NJ ....................................................... 1 1

MASON-DIXON FARM DAIRY .................. GETTYSBURG .......................................... PA Mid Atlantic ................................................ 1 OOB

MEADOW BROOK FARMS, INC ............... POTTSTOWN ............................................ PA Mid Atlantic ................................................ 1 1

MERCERS DAIRY, INC ............................. BOONVILLE .............................................. NY NY–NJ ....................................................... 2 3B

MERRYMEAD FARM ................................. LANSDALE ................................................ PA Mid Atlantic ................................................ 4 4

MOHAWK DAIRY (Z & R CORP.) ............. AMSTERDAM ............................................ NY NY–NJ ....................................................... 1 1

MONUMENT FARMS, INC ........................ MIDDLEBURY ........................................... VT .................................................................... 5 1

MOUNT WACHUSETT DAIRY, INC .......... W. BOYLSTON .......................................... MA New England ............................................. 1 1

MOUNTAINSIDE FARMS, INC .................. ROXBURY ................................................. NY NY–NJ ....................................................... 1 1

MUNROE, A B DAIRY, INC ....................... EAST PROVIDENCE ................................ RI New England ............................................. 1 1

NEW ENGLAND DAIRIES, INC ................. HARTFORD ............................................... CT New England ............................................. 1 1

NICASTRO, JOSEPH & CROSS (RIVERSIDE FARMS) (NICASTRO FARMS,

INC.).

FRANKFORT ............................................. NY NY–NJ ....................................................... 4 4

NIP N TUCK FARMS ................................. VINEYARD HAVEN ................................... MA .................................................................... 5 4

OAK TREE FARM DAIRY, INC ................. EAST NORTHPORT ................................. NY NY–NJ ....................................................... 1 1

OAKHURST DAIRY ................................... PORTLAND ............................................... ME New England ............................................. 2 2

OREGON DAIRY FARM MKT ................... LITITZ ........................................................ PA Mid Atlantic ................................................ 4 4

PARKER, A C & SONS, INC ..................... CLINTON ................................................... MA New England ............................................. 1 OOB

PARMALAT WEST DAIRIES, INC ............. SPRING CITY ............................................ PA Mid Atlantic ................................................ 2 3B

PATRICK MCNAMARA .............................. WEST LEBANON ...................................... NH New England ............................................. 4 4

PAYNES DAIRY ......................................... KNOXVILLE ............................................... PA .................................................................... 5 5

PEACEFUL MEADOWS ICE CREAM, INC WHITMAN .................................................. MA New England ............................................. 4 4

PEARSON, ROBERT L .............................. WEST MILLBURY ..................................... MA New England ............................................. 4 4

PECORA’S DAIRY ..................................... DRUMS ...................................................... PA .................................................................... 5 5

PEDRO, JOSEPH ...................................... FALL RIVER .............................................. MA New England ............................................. 4 4

PENNVIEW FARMS ................................... PERKASIE ................................................. PA Mid Atlantic ................................................ 4 4

PERRYDELL FARMS ................................ YORK ........................................................ PA Mid Atlantic ................................................ 4 4

PETER FLINT ............................................ CHELSEA .................................................. VT New England ............................................. 1 1

PINE VIEW ACRES, INC ........................... LANCASTER ............................................. PA Mid Atlantic ................................................ 4 4

PIONEER DAIRY, INC ............................... SOUTHWICK ............................................. MA New England ............................................. 1 1

PLEASANT VIEW FARMS DAIRY ............ ST THOMAS .............................................. PA Mid Atlantic ................................................ 4 OOB

POTOMAC FARMS DAIRY, INC ............... CUMBERLAND .......................................... MD Mid Atlantic ................................................ 2 2

PULEO’S DAIRY ........................................ SALEM ...................................................... MA New England ............................................. 1 3B

QUALITY MILK, INC .................................. WARE ........................................................ MA .................................................................... 5 1

QUEENSBORO FARM PRODUCTS, INC CANASTOTA ............................................. NY NY–NJ ....................................................... 1 2

READINGTON FARMS, INC ..................... WHITEHOUSE .......................................... NJ NY–NJ ....................................................... 1 1

READY FOODS, INC ................................. PHILADELPHIA ......................................... PA Mid Atlantic ................................................ 2 2

RICHARDSON FARMS, INC ..................... MIDDLETON .............................................. MA New England ............................................. 4 4

RICHARDSONS G. H. DAIRY ................... DRACUT .................................................... MA New England ............................................. 3A 3B

RIDGE VIEW FARMS ................................ ELIZABETHTOWN .................................... PA Mid Atlantic ................................................ 4 4

RITCHEY’S DAIRY .................................... MARTINSBURG ........................................ PA Mid Atlantic ................................................ 2 2

RONNYBROOK FARM DAIRY, INC .......... ANCRAMDALE .......................................... NY NY–NJ ....................................................... 4 4

ROSENBERGER’S DAIRY, INC ................ HATFIELD ................................................. PA Mid Atlantic ................................................ 1 1

RUDOLPH STEINER EDUCATION &

FARMING ASSOC., INC.

GHENT ...................................................... NY NY–NJ ....................................................... 4 4

RUSSELL SEARS ...................................... CUMMINGTON .......................................... MA New England ............................................. 4 OOB

RUTTER BROS. DAIRY, INC .................... YORK ........................................................ PA Mid Atlantic ................................................ 1 1

SALEM VALLEY FARMS, INC .................. SALEM ...................................................... CT New England ............................................. 4 4

SARATOGA DAIRY, INC. (STEWART’S

PROCESSING CORP.).

SARATOGA SPRINGS ............................. NY NY–NJ ....................................................... 1 1

SCHNEIDER/VALLEY FARMS, INC .......... WILLIAMSPORT ........................................ PA NY–NJ ....................................................... 2 1

SEWARD DAIRY, INC ............................... RUTLAND .................................................. VT New England ............................................. 2 1

SHAW FARM DAIRY, INC ......................... DRACUT .................................................... MA New England ............................................. 4 4

SHENANDOAH’S PRIDE DAIRY ............... SPRINGFIELD ........................................... VA Mid Atlantic ................................................ 1 1

STEARNS, WILLARD J. & SONS, INC ..... STORRS .................................................... CT New England ............................................. 4 4

STEWART J. LEONARD ........................... NORWALK ................................................ CT New England ............................................. 1 1

STOP & SHOP COMPANIES, INC ............ READVILLE ............................................... MA New England ............................................. 1 1

STUMP ACRES DAIRY FARMS ............... YORK ........................................................ PA .................................................................... 5 3B
4870 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

LIST OF PLANTS AND REGULATORY STATUS—Continued

Plant name City State October 1995 order Status 1 Expected

status 1

SULOMAN’S MILK ..................................... GILBERTSVILLE ....................................... PA Mid Atlantic ................................................ 4 4

SUNNYDALE FARMS, INC ....................... BROOKLYN ............................................... NY NY–NJ ....................................................... 1 1

SYNAKOWSKI WALTER J (VALLEY SIDE

FARM).

REMSEN ................................................... NY NY–NJ ....................................................... 4 4

TANNER BROS. DAIRY ............................ WARMINSTER .......................................... PA Mid Atlantic ................................................ 4 4

THOMAS, ORIN & SONS, INC .................. RUTLAND .................................................. VT New England ............................................. 2 1

TRINITY FARM .......................................... ENFIELD ................................................... CT New England ............................................. 3A 3B

TURKEY HILL DAIRY, INC ........................ CONESTOGA ............................................ PA Mid Atlantic ................................................ 1 1

TURNER’S DAIRY, INC ............................. SALEM ...................................................... NH New England ............................................. 1 1

TUSCAN DAIRY FARMS, INC .................. UNION ....................................................... NJ NY–NJ ....................................................... 1 1

TUSCAN DAIRY FARMS, INC .................. FRASER .................................................... NY NY–NJ ....................................................... 2 2

UPSTATE MILK COOPERATIVES, INC ... JAMESTOWN ............................................ NY .................................................................... 5 2

UPSTATE MILK COOPERATIVES, INC ... ROCHESTER ............................................ NY NY–NJ ....................................................... 2 1

UPSTATE MILK COOPERATIVES, INC ... BUFFALO .................................................. NY NY–NJ ....................................................... 2 1

VALLEY OF VIRGINIA COOP ................... MT. CRAWFORD ...................................... VA Mid Atlantic ................................................ 2 2

VAN WIE, CHARLES F.

(MEADOWBROOK FARMS DAIRY).

CLARKSVILLE .......................................... NY NY–NJ ....................................................... 4 4

WAWA DAIRY FARMS .............................. WAWA ....................................................... PA Mid Atlantic ................................................ 1 1

WAY-HAR FARMS ..................................... BERNVILLE ............................................... PA NY–NJ ....................................................... 2 3B

WELSH FARMS, INC ................................. LONG VALLEY .......................................... NJ NY–NJ ....................................................... 1 1

WENDTS DAIRY DIV NIAGARA CO ......... NIAGARA FALLS ...................................... NY .................................................................... 5 1

WENGERTS DAIRY, INC .......................... LEBANON ................................................. PA Mid Atlantic ................................................ 1 1

WEST LYNN CREAMERY, INC ................ LYNN ......................................................... MA New England ............................................. 1 1

WILLIAM WALSH ....................................... SIMSBURY ................................................ CT New England ............................................. 4 4

WINSOR, S. B. DAIRY, INC ...................... JOHNSTON ............................................... RI New England ............................................. 1 3B

WRIGHT’S DAIRY FARM, INC .................. NORTH SMITHFIELD ............................... RI New England ............................................. 4 4

APPALACHIAN

BROADACRE DAIRIES ............................. POWELL .................................................... TN Tenn Valley ............................................... 1 1

CAROLINA DAIRIES .................................. KINSTON ................................................... NC Carolina ..................................................... 1 1

COBURG DAIRY, INC ............................... N. CHARLESTON ..................................... SC Carolina ..................................................... 1 1

DAIRY FRESH, LP ..................................... WINSTON-SALEM .................................... NC Carolina ..................................................... 1 1

DEAN MILK CO ......................................... LOUISVILLE .............................................. KY Louis-Lex-Evans ........................................ 1 1

FLAV-O-RICH, INC .................................... WILKESBORO ........................................... NC Carolina ..................................................... 1 1

FLAV-O-RICH, INC .................................... LONDON ................................................... KY Tenn Valley ............................................... 1 1

FLAV-O-RICH, INC .................................... BRISTOL ................................................... VA TennValley ................................................. 1 1

FLAV-O-RICH, INC .................................... FLORENCE ............................................... SC Carolina ..................................................... 1 1

FLAV-O-RICH, INC .................................... GOLDSBORO ............................................ NC Carolina ..................................................... 1 OOB

GOLDEN GALLON, INC ............................ CHATTANOOGA ....................................... TN Tenn Valley ............................................... 1 1

HOLLAND DAIRIES, INC ........................... HOLLAND .................................................. IN Louis-Lex-Evans ........................................ 1 1

HUNTER FARMS ....................................... HIGHPOINT ............................................... NC Carolina ..................................................... 1 1

HUNTER FARMS ....................................... CHARLOTTE ............................................. NC Carolina ..................................................... 1 1

IDEAL AMERICAN DAIRY ......................... EVANSVILLE ............................................. IN Louis-Lex-Evans ........................................ 1 1

JACKSON DAIRY ...................................... DUNN ........................................................ NC Carolina ..................................................... 1 1

JERSEY RIDGE DAIRY, INC .................... KNOXVILLE ............................................... TN Tenn Valley ............................................... 1 3B

LAND-O-SUN DAIRIES, INC ..................... KINGSPORT ............................................. TN Tenn Valley ............................................... 1 1

LAND-O-SUN DAIRIES, INC ..................... PORTSMOUTH ......................................... VA Mid Atlantic ................................................ 2 2

LAND-O-SUN DAIRIES, INC ..................... SPARTANBURG ....................................... SC Carolina ..................................................... 1 1

MAOLA MILK & ICE CREAM CO .............. NEW BERN ............................................... NC Carolina ..................................................... 1 1

MAPLEVIEW FARMS ................................ HILLSBORO .............................................. NC .................................................................... 1 2

MARVA MAID DAIRY ................................ NEWPORT NEWS .................................... VA Mid Atlantic ................................................ 2 2

MAYFIELD DAIRY FARMS, INC ............... ATHENS .................................................... TN Tenn Valley ............................................... 1 1

MILKCO, INC ............................................. ASHEVILLE ............................................... NC Carolina ..................................................... 1 1

NORTH CAROLINA ST. UNIV ................... RALEIGH ................................................... NC Carolina ..................................................... 6A 6B

PEELER JERSEY FARMS, INC ................ GAFFNEY .................................................. SC Carolina ..................................................... 1 1

PINE STATE CREAMERY CO .................. RALEIGH ................................................... NC Carolina ..................................................... 1 OOB

REGIS MILK CO ........................................ CHARLESTON .......................................... SC Carolina ..................................................... 1 1

RICHFOOD DAIRY .................................... RICHMOND ............................................... VA Mid Atlantic ................................................ 2 1

SOUTHERN BELLE DAIRY, INC .............. SOMERSET .............................................. KY Tenn Valley ............................................... 1 1

SUPERBRAND DY. PRODS., INC ............ GREENVILLE ............................................ SC Southeast .................................................. 1 1

SUPERBRAND DAIRY, INC ...................... HIGHPOINT ............................................... NC Carolina ..................................................... 1 1

U C MILK CO ............................................. MADISONVILLE ........................................ KY Louis-Lex-Evans ........................................ 1 1

WESTOVER DAIRIES ............................... LYNCHBURG ............................................ VA Carolina ..................................................... 1 1

WINCHESTER FARMS DAIRY ................. WINCHESTER ........................................... KY Louis-Lex-Evans ........................................ 1 1

FLORIDA

BORDEN, INC.(TRI-STATE DAIRY) .......... MIAMI ........................................................ FL Southeast Florida ...................................... 1 1

FARMS STORES, INC. (REW JB DAIRY

PLANT ASSOCIATES dba FARM

STORES).

MIAMI ........................................................ FL Southeast Florida ...................................... 1 1

GOLDEN FLEECE DAIRY ......................... LECANTO .................................................. FL Tampa Bay ................................................ 1 3B

GUSTAFSON’S DAIRY, INC ..................... GREEN COVE ........................................... FL Upper Florida ............................................. 1 1

LIFE STYLE/DIV TG LEE FOODS (T.G.

LEE FOODS).

ORANGE CITY .......................................... FL Upper Florida ............................................. 1 1

LONGLIFE DAIRY PRODUCTS, INC ........ JACKSONVILLE ........................................ FL Southeast .................................................. 1 1

M & B DAIRY PRODUCTS, INC ............... TAMPA ...................................................... FL Tampa Bay ................................................ 1 3B

MCARTHUR DAIRY, INC .......................... PLANTATION ............................................ FL Southeast Florida ...................................... 1 1

MORNINGSTAR FOODS, INC. (VELDA,

INC.).

WINTER HAVEN ....................................... FL Tampa Bay ................................................ 1 1
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4871

LIST OF PLANTS AND REGULATORY STATUS—Continued

Plant name City State October 1995 order Status 1 Expected

status 1

MORNINGSTAR FOODS, INC. (VELDA,

INC.).

MIAMI ........................................................ FL Southeast Florida ...................................... 1 1

PUBLIX SUPER MKTS., INC ..................... DEERFIELD BEACH ................................. FL Southeast Florida ...................................... 1 1

PUBLIX SUPER MKTS., INC ..................... LAKELAND ................................................ FL Upper Florida ............................................. 1 1

SKINNERS DAIRY, INC ............................. JACKSONVILLE ........................................ FL Upper Florida ............................................. 1 OOB

SUPERBRAND DAIRY PRODUCTS, INC PLANT CITY .............................................. FL Tampa Bay ................................................ 1 1

SUPERBRAND DAIRY PRODUCTS, INC MIAMI ........................................................ FL Southeast Florida ...................................... 1 1

T.G. LEE FOODS, INC .............................. ORLANDO ................................................. FL Tampa Bay ................................................ 1 1

VELDA FARMS, LP (VELDA, INC.) ........... ST. PETERSBURG ................................... FL Tampa Bay ................................................ 1 1

WIGGINS DAIRY PRODUCTS, INC .......... PLANT CITY .............................................. FL Tampa Bay ................................................ 1 1

SOUTHEAST

ALCORN STATE UNIVERSITY ................. LORMAN ................................................... MS Southeast .................................................. 6A 6B

ARKANSAS DEPT. OF CORREC ............. GRADY ...................................................... AR Southeast .................................................. 6A 6B

AVENT’S DAIRY NC .................................. OXFORD ................................................... MS Southeast .................................................. 1 1

BAKER & SONS DAIRY, INC .................... BIRMINGHAM ........................................... AL Southeast .................................................. 1 OOB

BARBER PURE MILK CO ......................... BIRMINGHAM ........................................... AL Southeast .................................................. 1 1

BARBER PURE MILK CO ......................... MOBILE ..................................................... AL Southeast .................................................. 1 1

BARBER PURE MILK CO ......................... TUPELO .................................................... MS Southeast .................................................. 1 OOB

BARBE’S DAIRY, INC ................................ WESTWEGO ............................................. LA Southeast .................................................. 1 1

BORDEN DAIRY ........................................ LITTLE ROCK ........................................... AR Southeast .................................................. 1 OOB

BORDEN, INC ............................................ MONROE ................................................... LA Southeast .................................................. 1 1

BORDEN, INC ............................................ BATON ROUGE ........................................ LA Southeast .................................................. 1 1

BORDEN, INC ............................................ MACON ..................................................... GA Southeast .................................................. 1 OOB

BORDEN, INC ............................................ LAFAYETTE .............................................. LA Southeast .................................................. 1 1

BORDEN, INC ............................................ JACKSON .................................................. MS Southeast .................................................. 1 OOB

BROOKSHIRE DAIRY PRODUCTS .......... COLUMBUS .............................................. MS Southeast .................................................. 1 OOB

BROWNS VELVET DY. PRODUCTS

(SOUTHERN FOODS GROUP, LP dba

BROWN’S VELVET).

NEW ORLEANS ........................................ LA Southeast .................................................. 1 1

CENTENNIAL FARMS DAIRY, INC .......... ATLANTA ................................................... GA .................................................................... 1 2

COLEMAN DAIRY, INC ............................. LITTLE ROCK ........................................... AR Southeast .................................................. 1 1

COLLEGE OF THE OZARKS .................... POINT LOOKOUT ..................................... MO Southwest Plains ....................................... 1 OOB

DAIRY FRESH CORP ................................ COWARTS ................................................ AL Southeast .................................................. 1 1

DAIRY FRESH CORP ................................ HATTIESBURG ......................................... MS Southeast .................................................. 1 1

DAIRY FRESH CORP ................................ PRICHARD ................................................ AL Southeast .................................................. 1 1

DAIRY FRESH OF LA ............................... BAKER ...................................................... LA Southeast .................................................. 1 1

DASI PRODUCTS, INC ............................. DECATUR ................................................. AL Southeast .................................................. 2 1

ETOWAH MAID DAIRIES, INC .................. CANTON ................................................... GA Southeast .................................................. 4 4

FLAV-O-RICH, INC .................................... CANTON ................................................... MS Southeast .................................................. 1 1

FOREMOST DAIRY, INC ........................... SHREVEPORT .......................................... LA Southeast .................................................. 1 1

FOREST HILL DAIRY ................................ MEMPHIS .................................................. TN Southeast .................................................. 1 1

GEORGIA STATE PRISON ....................... REIDSVILLE .............................................. GA Southeast .................................................. 6A 6B

GOLD STAR DAIRY .................................. LITTLE ROCK ........................................... AR Southeast .................................................. 1 1

HERITAGE FARMS DAIRY ....................... MURFREESBORO .................................... TN Southeast .................................................. 1 1

HERSHEY CHOCOLATE U.S.A ................ SAVANNAH ............................................... GA Tampa Bay ................................................ 2 2

HILAND DAIRY CO .................................... FAYETTEVILLE ......................................... AR Southwest Plains ....................................... 1 1

HILAND DAIRY CO .................................... FORT SMITH ............................................. AR Southwest Plains ....................................... 1 1

HILAND DAIRY CO .................................... SPRINGFIELD ........................................... MO Southwest Plains ....................................... 1 1

HUMPHREY DAIRY ................................... HOT SPRINGS .......................................... AR Southeast .................................................. 3A 3B

KINNETT DAIRIES, INC ............................ COLUMBUS .............................................. GA Southeast .................................................. 1 1

KLEINPETER DAIRY, INC ......................... BATON ROUGE ........................................ LA Southeast .................................................. 1 1

LOUISIANA STATE PEN ........................... ANGOLA .................................................... LA Southeast .................................................. 6A 6B

LOUISIANA TECH ..................................... RUSTON .................................................... LA Southeast .................................................. 6A 6B

LUVEL DAIRY PRODUCTS, INC .............. KOSCIUSKO ............................................. MS Southeast .................................................. 1 1

MALONE & HYDE DAIRY/FLEMING

COMPANIES, INC.

NASHVILLE ............................................... TN Southeast .................................................. 1 1

MEADOW GOLD DAIRIES, INC. (TRISTATE DAIRY).HUNTSVILLE ............................................. AL Southeast .................................................. 1 1

MID-AMERICA DAIRYMEN, INC ............... LEBANON ................................................. MO Southwest Plains ....................................... 1 2

MISSISSIPPI STATE UNIVERSITY ........... MISS. STATE ............................................ MS Southeast .................................................. 6A 6B

NEW ATLANTA DAIRIES, INC .................. ATLANTA ................................................... GA Southeast .................................................. 1 1

PEELER JERSEY FARMS, INC ................ ATHENS .................................................... GA Southeast .................................................. 1 1

PUBLIX SUPERMARKETS, INC ............... LAWRENCEVILLE ..................................... GA Southeast .................................................. 1 1

PURITY DAIRIES, INC .............................. NASHVILLE ............................................... TN Southeast .................................................. 1 1

RYAN MILK COMPANY ............................. MURRAY ................................................... KY Southeast .................................................. 2 1

SOUTHERN UNIVERSITY ......................... BATON ROUGE ........................................ LA Southeast .................................................. 6A 6B

SUPERBRAND DY. PRODUCTS, INC ...... MONTGOMERY ........................................ AL Southeast .................................................. 1 1

SUPERBRAND DY. PRODS., INC ............ HAMMOND ................................................ LA Southeast .................................................. 1 1

TURNER DAIRIES, INC ............................. COVINGTON ............................................. TN Southeast .................................................. 1 1

TURNER DAIRIES, INC ............................. FULTON .................................................... KY Southeast .................................................. 1 1

MIDEAST

ALBERT MIHALY AND SON DAIRY ......... LOWELLVILLE .......................................... OH E Ohio-W Penn ......................................... 4 4

ARPS DAIRY, INC ..................................... DEFIANCE ................................................. OH Ohio Valley ................................................ 1 1

BAREMAN DAIRY, INC ............................. HOLLAND .................................................. MI Southern Michigan ..................................... 1 1

BARKER’S FARM DAIRY, INC .................. PECKS MILL ............................................. WV Ohio Valley ................................................ 4 4

BORDEN, INC ............................................ YOUNGSTOWN ........................................ OH E Ohio-W Penn ......................................... 1 OOB

BROUGHTON FOODS CO ........................ MARIETTA ................................................. OH Ohio Valley ................................................ 1 1
4872 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

LIST OF PLANTS AND REGULATORY STATUS—Continued

Plant name City State October 1995 order Status 1 Expected

status 1

BRUNTON DAIRY ...................................... ALIQUIPPA ................................................ PA E Ohio-W Penn ......................................... 4 4

BURGER DAIRY CO ................................. NEW PARIS .............................................. IN Indiana ....................................................... 1 1

BURGER, C.F., CREAMERY, INC ............ DETROIT ................................................... MI Southern Michigan ..................................... 2 2

CALDER BROTHERS DAIRY .................... LINCOLN PARK ........................................ MI Southern Michigan ..................................... 1 1

COLTERYAHN DAIRY, INC ...................... PITTSBURGH ............................................ PA E Ohio-W Penn ......................................... 1 1

CON-SUN FOOD INDUSTRIES, INC. ....... ELYRIA ...................................................... OH E Ohio-W Penn ......................................... 1 1

COOK’S FARM DAIRY, INC ...................... ORTONVILLE ............................................ MI Southern Michigan ..................................... 4 4

COUNTRY DAIRY ...................................... NEW ERA .................................................. MI Southern Michigan ..................................... 4 4

COUNTY FRESH, INC ............................... GRAND RAPIDS ....................................... MI Southern Michigan ..................................... 1 1

CROOKED CREEK FARM DAIRY ............ ROMEO ..................................................... MI Southern Michigan ..................................... 4 4

DEAN DAIRY PRODUCTS CO ................. SHARPSVILLE .......................................... PA E Ohio-W Penn ......................................... 1 1

DEAN FOODS COMPANY ........................ ROCHESTER ............................................ IN Indiana ....................................................... 1 1

DIXIE DAIRY CO ....................................... GARY ........................................................ IN Indiana ....................................................... 1 1

EASTSIDE JERSEY DAIRY, INC .............. ANDERSON .............................................. IN Indiana ....................................................... 1 1

ELMVIEW DAIRY ....................................... COLUMBUS .............................................. PA E Ohio-W Penn ......................................... 4 4

EMBEST, INC ............................................ LIVONIA .................................................... MI Southern Michigan ..................................... 1 1

FIKE, R BRUCE & SONS DAIRY .............. UNIONTOWN ............................................ PA E Ohio-W Penn ......................................... 1 1

FISHER’S DAIRY, R.V. FISHER ............... PORTERSVILLE ........................................ PA E Ohio-W Penn ......................................... 4 4

FLEMINGS DAIRY ..................................... UTICA ........................................................ OH Ohio Valley ................................................ 1 1

GALLIKER DAIRY CO ............................... JOHNSTOWN ............................................ PA E Ohio-W Penn ......................................... 2 2

GLEN EDEN FARM-DIANNE TEETS ........ ROCHESTER ............................................ PA E Ohio-W Penn ......................................... 4 4

GOSHEN DAIRY COMPANY .................... NEW PHILADELPHIA ............................... OH E Ohio-W Penn ......................................... 1 1

GREEN VALE FARM ................................. COOPERSVILLE ....................................... MI Southern Michigan ..................................... 4 4

GREEN VALLEY DAIRY ............................ GEORGETOWN ........................................ PA E Ohio-W Penn ......................................... 4 4

GUERNSEY FARMS DAIRY ..................... NORTHVILLE ............................................ MI Southern Michigan ..................................... 1 1

HARTZLER FAMILY DAIRY ...................... WOOSTER ................................................ OH 3B .............................................................. 2

HILLSIDE DAIRY CO ................................. CLEVELAND HGHTS ................................ OH E Ohio-W Penn ......................................... 1 1

HUTTER FARM DAIRY ............................. MT. PLEASANT ......................................... PA E Ohio-W Penn ......................................... 4 4

INVERNESS DAIRY, INC .......................... CHEBOYGAN ............................................ MI Michigan U P ............................................. 1 1

JACKSON ALL STAR DAIRY .................... JACKSON .................................................. MI Southern Michigan ..................................... 1 OOB

JACKSON FARMS ..................................... NEW SALEM ............................................. PA E Ohio-W Penn ......................................... 4 4

JILBERT DAIRY, INC ................................. MARQUETTE ............................................ MI Michigan U P ............................................. 1 1

JOHNSON’S DAIRY, INC .......................... ASHLAND .................................................. KY Ohio Valley ................................................ 1 1

KERBER’S DAIRY ..................................... N. HUNTINGDON ...................................... PA E Ohio-W Penn ......................................... 1 3B

KROGER COMPANY, THE ....................... INDIANAPOLIS ......................................... IN Indiana ....................................................... 1 1

LANSING DAIRY, INC. (MELODY

FARMS, INC.).

LANSING ................................................... MI Southern Michigan ..................................... 1 1

LIBERTY DAIRY CO .................................. EVART ....................................................... MI Southern Michigan ..................................... 1 1

LONDON’S FARM DAIRY, INC ................. PORT HURON .......................................... MI Southern Michigan ..................................... 1 1

MAPLEHURST FARMS, INC ..................... INDIANAPOLIS ......................................... IN Indiana ....................................................... 1 1

MARBURGER FARM DAIRY, INC ............ EVANS CITY ............................................. PA E Ohio-W Penn ......................................... 1 1

MCDONALD DAIRY COMPANY ............... FLINT ......................................................... MI Southern Michigan ..................................... 1 1

MCMAHONS DAIRY, INC .......................... ALTOONA ................................................. PA .................................................................... 5 5

MEADOW BROOK DAIRY ......................... ERIE .......................................................... PA E Ohio-W Penn ......................................... 1 1

MEYER H & SONS DAIRY ........................ CINCINNATI .............................................. OH Ohio Valley ................................................ 1 1

MICHIGAN DAIRY ..................................... LIVONIA .................................................... MI Southern Michigan ..................................... 1 1

MILLER CORPORATION ........................... CAMBRIDGE CITY .................................... IN Indiana ....................................................... 1 OOB

MONG DAIRY CO ...................................... SENECA .................................................... PA E Ohio-W Penn ......................................... 1 OOB

MURPHY’S DAIRY ..................................... JAMESTOWN ............................................ PA E Ohio-W Penn ......................................... 4 OOB

NICOL’S FARM DAIRY .............................. BEAVER .................................................... PA E Ohio-W Penn ......................................... 4 OOB

OBERLIN FARMS DAIRY, INC ................. CLEVELAND ............................................. OH E Ohio-W Penn ......................................... 1 1

OSBORN DAIRY ........................................ SAULT STE MARIE .................................. MI Michigan U P ............................................. 4 4

PLEASANT VIEW DAIRY CORP ............... HIGHLAND ................................................ IN Indiana ....................................................... 1 1

PRAIRIE FARMS DAIRY, INC ................... FT. WAYNE ............................................... IN Indiana ....................................................... 1 1

QUALITY CREAMERY, INC ...................... COMSTOCK PARK ................................... MI Southern Michigan ..................................... 1 1

QUALITY DAIRY CO B.T.U ....................... LANSING ................................................... MI Southern Michigan ..................................... 1 1

RAEMELTON FARM DAIRY ...................... MANSFIELD .............................................. OH Ohio Valley ................................................ 4 OOB

REITER DAIRY CO .................................... SPRINGFIELD ........................................... OH Ohio Valley ................................................ 1 1

REITER DAIRY, INC .................................. AKRON ...................................................... OH E Ohio-W Penn ......................................... 1 1

ROELOF DAIRY ......................................... GALESBURG ............................................ MI Southern Michigan ..................................... 1 1

SANI DAIRY ............................................... JOHNSTOWN ............................................ PA E Ohio-W Penn ......................................... 2 2

SCHENKEL’S ALL-STAR DAIRY, INC ...... HUNTINGTON ........................................... IN Indiana ....................................................... 1 1

SCHIEVER FARM DAIRY .......................... HARMONY ................................................ PA E Ohio-W Penn ......................................... 1 3B

SCHNEIDERS DAIRY, INC ....................... PITTSBURGH ............................................ PA E Ohio-W Penn ......................................... 1 1

SMITH DAIRY PRODUCTS CO ................ ORRVILLE ................................................. OH Ohio Valley ................................................ 1 1

SMITH’S DAIRY PRODUCTS CO ............. RICHMOND ............................................... IN Ohio Valley ................................................ 1 1

STERLING MILK CO ................................. WAUSEON ................................................ OH Ohio Valley ................................................ 1 1

SUPERIOR DAIRIES, INC ......................... SAGINAW .................................................. MI Southern Michigan ..................................... 1 1

SUPERIOR DAIRY, INC ............................ CANTON .................................................... OH E Ohio-W Penn ......................................... 1 1

TAMARACK FARMS .................................. NEWARK ................................................... OH Ohio Valley ................................................ 1 1

TAYLOR MILK CO., INC ............................ AMBRIDGE ............................................... PA E Ohio-W Penn ......................................... 1 1

THE SPRINGHOUSE ................................. EIGHTY FOUR .......................................... PA E Ohio-W Penn ......................................... 4 4

TOFT DAIRY INC ....................................... SANDUSKY ............................................... OH Ohio Valley ................................................ 2 1

TOLEDO MILK PROCESSING, INC.

(COUNTRY FRESH OF OHIO).

MAUMEE ................................................... OH Ohio Valley ................................................ 1 1

TRAUTH, LOUIS DAIRY ............................ NEWPORT ................................................ KY Ohio Valley ................................................ 1 1

TURNER DAIRY FARMS, INC .................. PITTSBURGH ............................................ PA E Ohio-W Penn ......................................... 1 1

UNITED DAIRY FARMERS ....................... CINCINNATI .............................................. OH Ohio Valley ................................................ 1 1

UNITED DAIRY, INC .................................. MARTINS FERRY ..................................... OH E Ohio-W Penn ......................................... 1 1

UNITED DAIRY, INC .................................. CHARLESTON .......................................... WV Ohio Valley ................................................ 1 1
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4873

LIST OF PLANTS AND REGULATORY STATUS—Continued

Plant name City State October 1995 order Status 1 Expected

status 1

VALEWOOD FARMS ................................. CRESSON ................................................. PA .................................................................... 5 5

VALLEY RICH DAIRY ................................ ROANOKE ................................................. VA Ohio Valley ................................................ 2 2

WEST VIRGINIA UNIVERSITY DAIRY ..... MORGANTOWN ........................................ WV E Ohio-W Penn ......................................... 4 OOB

WHITE KNIGHT PACKAGING CORP.

(PARMALAT WHITE KNIGHT PACKAGING CORP.).

WYOMING ................................................. MI Southern Michigan ..................................... 1 1

YOUNG’S JERSEY DAIRY, INC ............... YELLOW SPRINGS .................................. OH Ohio Valley ................................................ 4 4

UPPER MIDWEST

ASSOC. MILK PRODUCERS, INC.

(FOREMOST FARMS COOPERATIVE).

DEPERE .................................................... WI Chicago Regional ...................................... 1 1

AYSTA DAIRY, INC ................................... VIRGINIA ................................................... MN Upper Midwest ........................................... 1 1

CASS-CLAY CREAMERY, INC ................. GRAND FORKS ........................................ ND Upper Midwest ........................................... 1 1

CASS-CLAY CREAMERY, INC ................. FARGO ...................................................... ND Upper Midwest ........................................... 1 1

CASS-CLAY CREAMERY, INC ................. MANDAN ................................................... ND Upper Midwest ........................................... 2 2

CENTRAL MINNESOTA ............................ SAUK CENTRE ......................................... MN Upper Midwest ........................................... 1 1

COUNTRY LAKE FOODS, INC. (LAND

O’LAKES, INC.).

BISMARCK ................................................ ND Upper Midwest ........................................... 2 2

COUNTRY LAKE FOODS, INC. (LAND

O’LAKES, INC.).

THIEF RIVER ............................................ MN Upper Midwest ........................................... 1 1

COUNTRY LAKE FOODS, INC. (LAND

O’LAKES, INC.).

WOODBURY ............................................. MN Upper Midwest ........................................... 1 1

DEAN FOODS CO ..................................... HUNTLEY .................................................. IL Chicago Regional ...................................... 1 1

DEAN FOODS CO ..................................... HARVARD ................................................. IL Chicago Regional ...................................... 1 1

FOREMOST FARMS USA ......................... WAUKESHA .............................................. WI Chicago Regional ...................................... 1 1

FOREMOST FARMS USA ......................... WAUSAU ................................................... WI Chicago Regional ...................................... 1 1

FRANKLIN FOODS .................................... DULUTH .................................................... MN Upper Midwest ........................................... 1 1

HANSENS DAIRY, INC .............................. GREEN BAY .............................................. WI Chicago Regional ...................................... 2 1

HASTINGS COOPERATIVE ...................... HASTINGS ................................................ MN Upper Midwest ........................................... 1 1

KOHLER MIX SPECIALITIES, INC ........... WHITE BEAR ............................................ MN Upper Midwest ........................................... 2 2

KWIK TRIP DAIRY ..................................... LA CROSSE .............................................. WI Chicago Regional ...................................... 1 1

LAMERS DAIRY, INC ................................ KIMBERLY ................................................ WI Chicago Regional ...................................... 2 1

LIFEWAY FOODS, INC ............................. SKOKIE ..................................................... IL Chicago Regional ...................................... 2 1

MARIGOLD FOODS, INC .......................... ROCHESTER ............................................ MN Upper Midwest ........................................... 1 1

MARIGOLD FOODS, INC .......................... CEDARBURG ............................................ WI Chicago Regional ...................................... 1 1

MARIGOLD FOODS, INC .......................... MINNEAPOLIS .......................................... MN Upper Midwest ........................................... 1 1

MEYER BROTHERS DAIRY ..................... WAYZATA ................................................. MN Upper Midwest ........................................... 1 1

MULLER-PINEHURST, INC ....................... ROCKFORD .............................................. IL Chicago Regional ...................................... 1 1

NORTH BRANCH DAIRY, INC .................. NORTH BRANCH ...................................... MN Upper Midwest ........................................... 1 1

OAK GROVE DAIRY .................................. NORWOOD ............................................... MN Upper Midwest ........................................... 1 1

OBERWEIS DAIRY, INC ............................ AURORA ................................................... IL Chicago Regional ...................................... 1 1

POLLARD DAIRY, INC .............................. NORWAY ................................................... MI Michigan U P ............................................. 1 1

ROCK I FARMS ......................................... OSWEGO .................................................. IL Chicago Regional ...................................... 4 4

SCHROEDER MILK CO., INC ................... ST PAUL ................................................... MN Upper Midwest ........................................... 1 1

STAR SPECIALTY FOODS, INC.

(MORNINGSTAR FOODS, INC.).

MADISON .................................................. WI Chicago Regional ...................................... 1 2

STOER DAIRY FARMS, INC ..................... TWO RIVERS ............................................ WI Chicago Regional ...................................... 4 OOB

SWISS VALLEY FARMS CO ..................... CHICAGO .................................................. IL Chicago Regional ...................................... 1 1

TETZNER DAIRY ....................................... WASHBURN .............................................. WI Upper Midwest ........................................... 4 4

UNITED WORLD IMPORTS ...................... CHICAGO .................................................. IL Chicago Regional ...................................... 2 5

VERIFINE DAIRY PRODUCTS CO ........... SHEBOYGAN ............................................ WI Chicago Regional ...................................... 1 1

WEBERS, INC ............................................ MARSHFIELD ............................................ WI .................................................................... 5 3B

CENTRAL

ANDERSON-ERICKSON DAIRY CO ........ DES MOINES ............................................ IA Iowa ........................................................... 1 1

ASHER DAIRY ........................................... MARCELINE .............................................. MO .................................................................... 4 4

BAKER’S DAIRY COMPANY ..................... MOLINE ..................................................... IL Iowa ........................................................... 1 OOB

BRAUM’S ICE CREAM AND DAIRY (W.H.

BRAUM, INC.).

TUTTLE ..................................................... OK Southwest Plains ....................................... 1 1

CENTRAL DAIRY & ICE CREAM .............. JEFFERSON CITY .................................... MO .................................................................... 5 5

CHESTER DAIRY CO ................................ CHESTER .................................................. IL S Ill-E Missouri .......................................... 1 1

COUNTRY LAKE FOODS, INC. (LAND

O’LAKES, INC.).

SIOUX FALLS ........................................... SD E South Dakota ......................................... 1 1

DAIRY GOLD FOODS CO ......................... CHEYENNE ............................................... WY .................................................................... 5 1

DEPT. OF CORRECTIONS ....................... CANON CITY ............................................ CO Eastern Colorado ....................................... 6A 6B

DILLON DAIRY CO .................................... DENVER .................................................... CO Eastern Colorado ...................................... 1 1

ELDON MOSS ........................................... IOWA CITY ................................................ IA Iowa ........................................................... 4 4

FARM FRESH DAIRY, INC ....................... CHANDLER ............................................... OK Southwest Plains ....................................... 1 1

GALESBURG CORR. CENTER ................ GALESBURG ............................................ IL Central Illinois ............................................ 6A 6B

GILLETTE DAIRY OF BLACK HILLS ........ RAPID CITY .............................................. SD Black Hills .................................................. 1 2

GRAVES GRADE A DAIRY ....................... BELLVUE .................................................. CO Eastern Colorado ....................................... 4 4

HILAND DAIRY CO .................................... NORMAN ................................................... OK Southwest Plains ....................................... 1 1

HILAND DAIRY CO .................................... WICHITA ................................................... KS Southwest Plains ....................................... 1 1

JACKSON ICE CREAM CO ....................... HUTCHINSON ........................................... KS Southwest Plains ....................................... 1 1

KANSAS STATE UNIV .............................. MANHATTAN ............................................ KS Greater Kansas City .................................. 6A 6B

KARL’S FARM DAIRY, INC ....................... EASTLAKE ................................................ CO Eastern Colorado ....................................... 4 4

LAESCH DAIRY CO .................................. BLOOMINGTON ........................................ IL S Ill-E Missouri .......................................... 1 1

LAND-O-SUN DAIRIES, INC ..................... O’FALLON ................................................. IL S Ill-E Missouri .......................................... 1 1

LENZ DAIRY .............................................. PRAIRIE HOME ........................................ MO Greater Kansas City .................................. 4 4
4874 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

LIST OF PLANTS AND REGULATORY STATUS—Continued

Plant name City State October 1995 order Status 1 Expected

status 1

LONGMONT DAIRY FARM ....................... LONGMONT .............................................. CO Eastern Colorado ....................................... 4 4

LOWELL-PAUL DAIRY, INC ...................... GREELEY .................................................. CO Eastern Colorado ....................................... 4 4

MEADOW GOLD DAIRIES, INC ................ GREELEY .................................................. CO Eastern Colorado ....................................... 1 1

MEADOW GOLD DAIRIES, INC ................ ENGLEWOOD ........................................... CO Eastern Colorado ....................................... 1 1

MEADOW GOLD DAIRIES, INC. (MODERN DAIRY OF CHAMPAIGN, INC.).CHAMPAIGN ............................................. IL S Ill-E Missouri .......................................... 1 OOB

MEADOW GOLD DAIRIES, INC. (MODERN DAIRY OF CHAMPAIGN, INC.).TULSA ....................................................... OK Southwest Plains ....................................... 1 OOB

MEADOW GOLD DAIRY, INC ................... LINCOLN ................................................... NE Nebraska-W Iowa ...................................... 1 1

MID-STATES DAIRY COMPANY .............. HAZELWOOD ............................................ MO SIll-E Missouri ............................................ 1 1

PATKE FARM DAIRY ................................ WASHINGTON .......................................... MO SIll-E Missouri ............................................ 1 3B

PEVELY DAIRY CO ................................... ST LOUIS .................................................. MO SIll-E Missouri ............................................ 1 1

PRAIRIE FARM DAIRIES, INC .................. CARLINVILLE ............................................ IL SIll-E Missouri ............................................ 1 1

PRAIRIE FARMS DAIRY, INC ................... GRANITE CITY ......................................... IL SIll-E Missouri ............................................ 1 1

PRAIRIE FARMS DAIRY, INC ................... OLNEY ...................................................... IL SIll-E Missouri ............................................ 1 1

PRAIRIE FARMS DAIRY, INC ................... PEORIA ..................................................... IL Central Illinois ............................................ 1 1

PRAIRIE FARMS DAIRY ........................... QUINCY ..................................................... IL SIll-E Missouri ............................................ 1 1

RADIANCE DAIRY ..................................... FAIRFIELD ................................................ IA Iowa ........................................................... 4 4

ROBERTS DAIRY CO ............................... DES MOINES ............................................ IA Iowa ........................................................... 1 1

ROBERTS DAIRY CO ............................... IOWA CITY ................................................ IA Iowa ........................................................... 1 1

ROBERTS DAIRY CO. (FAIRMONTZARDA DAIRY, DIVISION OF ROBERTS DAIRY CO.).

KANSAS CITY ........................................... MO Greater Kansas City .................................. 1 1

ROBERTS DAIRY CO ............................... OMAHA ...................................................... NE Nebraska-W Iowa ...................................... 1 1

ROBINSON DAIRY, INC ............................ DENVER .................................................... CO Eastern Colorado ....................................... 1 1

ROYAL CREST DAIRY, INC ..................... DENVER .................................................... CO Eastern Colorado ....................................... 1 1

SAFEWAY STORES, INC., MK PLNT ....... DENVER .................................................... CO Eastern Colorado ....................................... 1 1

SCHRANT ROADSIDE DAIRY (ROADSIDE DAIRY).WINSIDE ................................................... NE Nebraska-W Iowa ...................................... 4 4

SHOENBERG FARMS, INC ...................... ARVADA .................................................... CO Eastern Colorado ....................................... 1 1

SINTON DAIRY FOODS CO., LLC ........... COLORADO SPRINGS ............................. CO Eastern Colorado ...................................... 1 1

SOUTH DAKOTA STATE UNIV ................ BROOKINGS ............................................. SD E South Dakota ......................................... 6A 6B

SWAN BROS. DAIRY, INC ........................ CLAREMORE ............................................ OK Southwest Plains ....................................... 4 4

SWISS VALLEY FARMS CO ..................... CEDAR RAPIDS ........................................ IA Iowa ........................................................... 1 3B

SWISS VALLEY FARMS CO ..................... DUBUQUE ................................................. IA Iowa ........................................................... 1 1

TEGELERS DAIRY .................................... DYERSVILLE ............................................ IA Iowa ........................................................... 1 OOB

WELLS DAIRY, INC ................................... LE MARS ................................................... IA Nebraska-W Iowa ...................................... 1 1

WELLS DAIRY, INC ................................... OMAHA ..................................................... NE Nebraska-W Iowa ...................................... 1 1

WESTERN DAIRYMEN COOP, INC ......... RIVERTON ................................................ WY Eastern Colorado ....................................... 2 2

WILD’S BROTHER’S DAIRY ..................... EL RENO ................................................... OK Southwest Plains ....................................... 4 4

SOUTHWEST

BELL DAIRY PRODUCTS, INC ................. LUBBOCK ................................................. TX New Mex-W Texas .................................... 1 1

BORDEN, INC ............................................ CORPUS CHRISTI .................................... TX Texas ......................................................... 1 OOB

BORDEN, INC ............................................ EL PASO ................................................... TX New Mex-W Texas .................................... 1 1

BORDEN, INC ............................................ DALLAS ..................................................... TX Texas ......................................................... 1 1

BORDEN, INC ............................................ ALBUQUERQUE ....................................... NM New Mex-W Texas .................................... 1 1

BORDEN, INC ............................................ LUBBOCK ................................................. TX New Mex-W Texas .................................... 1 OOB

BORDEN, INC ............................................ CONROE ................................................... TX Texas ......................................................... 1 1

CREAMLAND DAIRIES ............................. ALBUQUERQUE ....................................... NM New Mex-W Texas .................................... 1 1

DAVID’S SUPERMARKETS, INC .............. GRANDVIEW ............................................. TX Texas ......................................................... 1 1

DEAN DAIRY PRODUCTS ........................ CLOVIS ..................................................... NM New Mex-W Texas .................................... 1 OOB

FARMERS DAIRIES .................................. EL PASO ................................................... TX New Mex-W Texas .................................... 1 1

HOBBS DRIVE IN DAIRY .......................... HOBBS ...................................................... NM New Mex-W Texas .................................... 3A 3B

HYGEIA DAIRY .......................................... CORPUS CHRISTI .................................... TX Texas ......................................................... 1 1

H. E. BUTT GROCERY CO ....................... HOUSTON ................................................. TX Texas ......................................................... 1 1

H. E. BUTT GROCERY CO ....................... SAN ANTONIO .......................................... TX Texas ......................................................... 1 1

JERSEYLAND ............................................ DECATUR ................................................. TX Texas ......................................................... 4 OOB

LAND O’ PINES ......................................... LUFKIN ...................................................... TX Texas ......................................................... 1 1

LANE’S DAIRY ........................................... EL PASO ................................................... TX New Mex-W Texas .................................... 4 4

LILLY DAIRY PRODUCTS, INC ................ BYRAN ...................................................... TX Texas ......................................................... 1 1

LOS LUNAS PRISON DAIRY .................... ALBUQUERQUE ....................................... NM New Mex-W Texas .................................... 3A 3B

MICKEY’S DRIVE IN DAIRY ..................... ALBUQUERQUE ....................................... NM New Mex-W Texas .................................... 4 4

MIDWEST MIX CO .................................... SULPHUR SPRINGS ................................ TX .................................................................... 2 2

MORNINGSTAR SPECIALTY .................... SULPHUR SPRINGS ................................ TX Chicago Regional ...................................... 1 2

MOUNTAIN GOLD DAIRY ......................... CARRIZOZO .............................................. NM New Mex-W Texas .................................... 3A 3B

NATURE’S DAIRY, INC ............................. ROSWELL ................................................. NM New Mex-W Texas .................................... 4 4

OAK FARMS DAIRIES ............................... HOUSTON ................................................. TX Texas ......................................................... 1 1

OAK FARMS DAIRIES ............................... SAN ANTONIO .......................................... TX Texas ......................................................... 1 1

OAK FARMS DAIRIES ............................... DALLAS ..................................................... TX Texas ......................................................... 1 1

PLAINS CREAMERY ................................. AMARILLO ................................................ TX New Mex-W Texas .................................... 1 1

PRICES CREAMERY, INC ........................ EL PASO ................................................... TX New Mex-W Texas .................................... 1 1

PROMISED LAND DAIRY ......................... FLORESVILLE .......................................... TX .................................................................... 4 2

PURE MILK CO (OAK FARMS DAIRY) .... WACO ....................................................... TX Texas ......................................................... 4 4

RANCHO LAS LAGUNAS .......................... SANTA FE ................................................. NM New Mex-W Texas .................................... 4 4

RASBAND DAIRY ...................................... ALBUQUERQUE ....................................... NM New Mex-W Texas .................................... 4 4

SCHEPPS DAIRY, INC .............................. DALLAS ..................................................... TX Texas ......................................................... 1 1

SOUTHWEST DAIRY ................................ TYLER ....................................................... TX Texas ......................................................... 1 1

SUPERBRAND DAIRY PRODS, INC ........ FT WORTH ................................................ TX Texas ......................................................... 1 1

SUPERIOR DAIRIES (BORDEN, INC.) ..... AUSTIN ...................................................... TX Texas ......................................................... 1 1
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4875

LIST OF PLANTS AND REGULATORY STATUS—Continued

Plant name City State October 1995 order Status 1 Expected

status 1

VANDERVOORTS DAIRY ......................... FT WORTH ................................................ TX Texas ......................................................... 1 1

ARIZONA-LAS VEGAS

ANDERSON DAIRY, INC ........................... LAS VEGAS .............................................. NV Great Basin ............................................... 1 1

ETHINGTON DAIRY .................................. GILBERT ................................................... AZ Central Arizona .......................................... 4 OOB

GOLDEN WEST DAIRIES ......................... WELLTON ................................................. AZ Central Arizona .......................................... 4 4

HEIN & ELLEN HETTINGA ....................... YUMA ........................................................ AZ Central Arizona .......................................... 4 4

JACKSON ICE CREAM CO., INC ............. PHOENIX .................................................. AZ Central Arizona .......................................... 1 1

MEADOWWAYNE DAIRY .......................... COLORADO CITY ..................................... AZ Central Arizona .......................................... 4 4

SAFEWAY STORES, INC .......................... TEMPE ...................................................... AZ Central Arizona .......................................... 1 1

SHAMROCK FOODS, INC ........................ PHOENIX ................................................... AZ Central Arizona .......................................... 1 1

SMITH’S FOOD & DRUG CENTERS, INC TOLLESON ............................................... AZ Central Arizona .......................................... 1 1

SUNRISE DAIRY ....................................... TAYLOR .................................................... AZ .................................................................... 5 3B

SUNSTREET DAIRY, INC ......................... PHOENIX .................................................. AZ Central Arizona .......................................... 1 OOB

WESTERN

BROWN DAIRY, INC ................................. COALVILLE ............................................... UT Great Basin ............................................... 4 4

CHURCH OF JESUS CHRIST OF LATTER-DAY.OGDEN ..................................................... UT Great Basin ............................................... 3A 6B

CHURCH OF JESUS CHRIST OF LATTER-DAY.SALT LAKE CITY ...................................... UT Great Basin ............................................... 3A 6B

COUNTRY BOY DAIRY ............................. OGDEN ..................................................... UT Great Basin ............................................... 4 4

CREAM O’WEBER DAIRY, INC ................ SALT LAKE CITY ...................................... UT Great Basin ............................................... 1 1

DALE BARKER .......................................... MOUNT PLEASANT .................................. UT Great Basin ............................................... 4 4

DARIGOLD, INC ........................................ BOISE ........................................................ ID SW Idaho-E Oregon .................................. 1 1

DESERET MILK PLANT ............................ SALT LAKE CITY ...................................... UT Great Basin ............................................... 3A 6B

FARM FRESH ............................................ SALEM ...................................................... UT Great Basin ............................................... 4 4

GOSSNER FOODS, INC ........................... LOGAN ...................................................... UT Great Basin ............................................... 1 1

GRAFF DAIRY ........................................... GRAND JCT .............................................. CO W Colorado ............................................... 1 3B

IDEAL DAIRY, INC ..................................... RICHFIELD ................................................ UT Great Basin ............................................... 4 4

JOHNNY’S DAIRY ..................................... SOUTH WEBER ........................................ UT Great Basin ............................................... 4 4

JONES DAIRY & HEALTH FOODS .......... TAYLORSVILLE ........................................ UT Great Basin ............................................... 4 4

KDK, INC .................................................... DRAPER .................................................... UT Great Basin ............................................... 1 1

MEADOW GOLD DAIRIES, INC ................ POCATELLO ............................................. ID Great Basin ............................................... 1 1

MEADOW GOLD DAIRIES, INC ................ DELTA ....................................................... CO W Colorado ................................................ 1 1

MEADOW GOLD DAIRIES, INC ................ BOISE ........................................................ ID SW Idaho-E Oregon .................................. 1 1

MEADOW GOLD DAIRIES, INC ................ SALT LAKE CITY ...................................... UT Great Basin ............................................... 1 1

REEDER SHADY BROOK DAIRY ............. BRIGHAM CITY ......................................... UT Great Basin ............................................... 4 OOB

REED’S DAIRY, INC .................................. IDAHO FALLS ........................................... ID Great Basin ............................................... 4 4

ROSEHILL DAIRY ...................................... MORGAN ................................................... UT Great Basin ............................................... 4 4

SMITH FOOD&DRUG CENTERS, INC ..... LAYTON .................................................... UT Great Basin ............................................... 1 1

SMITH’S DAIRY ......................................... BUHL ......................................................... ID SW Idaho-E Oregon .................................. 1 3B

STOKER WHOLESALE, INC ..................... BURLEY .................................................... ID SW Idaho-E Oregon .................................. 1 1

UTAH STATE UNIVERSITY ...................... LOGAN ...................................................... UT Great Basin ............................................... 3A 6B

VALLEY DAIRY, INC ................................. YERINGTON ............................................. NV .................................................................... 5 3B

WESTERN QUALITY FOOD PRODUCTS CEDAR CITY ............................................. UT Great Basin ............................................... 2 2

WINDER DAIRY ......................................... SALT LAKE CITY ...................................... UT Great Basin ............................................... 1 1

PACIFIC NORTHWEST

ALLISON HARDY ....................................... ELMA ......................................................... WA Pacific Northwest ....................................... 4 4

ALPENROSE DAIRY ................................. PORTLAND ............................................... OR Pacific Northwest ....................................... 1 1

ANDERSEN DAIRY, INC ........................... BATTLE GROUND .................................... WA Pacific Northwest ....................................... 1 1

BILLANJO DAIRY ...................................... EAGLE POINT ........................................... OR Pacific Northwest ....................................... 4 OOB

CAL-WASH INVESTMENTS, INC ............. COLLEGE PLACE ..................................... WA Pacific Northwest ....................................... 1 OOB

CURLY’S DAIRY, INC ................................ SALEM ...................................................... OR Pacific Northwest ....................................... 1 1

DARIGOLD, INC ........................................ MEDFORD ................................................. OR Pacific Northwest ....................................... 1 1

DARIGOLD, INC ........................................ SPOKANE ................................................. WA Pacific Northwest ....................................... 1 1

DARIGOLD, INC ........................................ PORTLAND ............................................... OR Pacific Northwest ....................................... 1 1

DARIGOLD, INC ........................................ SEATTLE ................................................... WA Pacific Northwest ....................................... 1 1

DEPT. OF CORRECTIONS STATE OF

OREGON.

SALEM ...................................................... OR Pacific Northwest ....................................... 1 3B

EBERHARD CREAMERY, INC .................. REDMOND ................................................ OR Pacific Northwest ....................................... 1 1

ECHO SPRING DAIRY, INC ...................... EUGENE ................................................... OR Pacific Northwest ....................................... 1 1

EDWARD & AILEEN BRANDSMA ............ LYNDEN .................................................... WA Pacific Northwest ....................................... 4 4

EVERGREEN DAIRY, INC. (WEIKS) ........ OLYMPIA ................................................... WA Pacific Northwest ....................................... 4 4

FAITH DAIRY, INC ..................................... TACOMA ................................................... WA Pacific Northwest ....................................... 4 4

FOREMAN’S DAIRY .................................. GRANTS PASS ......................................... OR Pacific Northwest ....................................... 4 OOB

FRED MEYER, INC ................................... PORTLAND ............................................... OR Pacific Northwest ....................................... 1 1

GARY & MARGO WINEGAR ..................... ELLENSBURG .......................................... WA Pacific Northwest ....................................... 1 3B

GERALD GILBERT, ET AL ........................ OTHELLO .................................................. WA Pacific Northwest ....................................... 4 4

GRAAFSTRA DAIRY, INC ......................... ARLINGTON .............................................. WA Pacific Northwest ....................................... 4 4

INLAND NORTHWEST DAIRIES, INC ...... SPOKANE ................................................. WA Pacific Northwest ....................................... 1 1

LOCHMEAD FARMS, INC ......................... JUNCTION CITY ....................................... OR Pacific Northwest ....................................... 4 4

MALLORIE’S DAIRY, INC .......................... SILVERTON .............................................. OR Pacific Northwest ....................................... 4 4

MIKE HARVEY ........................................... VANCOUVER ............................................ WA Pacific Northwest ....................................... 4 4

PACIFIC FOODS OF OREGON, INC ........ CLACKAMAS ............................................ OR Pacific Northwest ....................................... 1 3B

PALMER ZOTTOLA ................................... GRANTS PASS ......................................... OR Pacific Northwest ....................................... 1 1

RICHARD AND LINDA KLINE ................... CHEWELAH .............................................. WA Pacific Northwest ....................................... 4 OOB
4876 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

LIST OF PLANTS AND REGULATORY STATUS—Continued

Plant name City State October 1995 order Status 1 Expected

status 1

ROY KROPF .............................................. HALSEY .................................................... OR Pacific Northwest ....................................... 4 4

SAFEWAY ‘85, INC .................................... MOSES LAKE ........................................... WA Pacific Northwest ....................................... 1 1

SAFEWAY STORES, INC .......................... CLACKAMAS ............................................ OR Pacific Northwest ....................................... 1 1

SAFEWAY STORES, INC .......................... BELLEVUE ................................................ WA Pacific Northwest ....................................... 1 1

SMITH BROTHERS FARMS, INC ............. KENT ......................................................... WA Pacific Northwest ....................................... 4 4

SPRINGFIELD CREAMERY ...................... EUGENE ................................................... OR .................................................................... 5 1

STATE OF WASHINGTON ........................ MONROE ................................................... WA Pacific Northwest ....................................... 4 4

SUNSHINE DAIRY, INC ............................ PORTLAND ............................................... OR Pacific Northwest ....................................... 1 1

TILLAMOOK COUNTY CREAMERY

ASSN.

TILLAMOOK .............................................. OR Pacific Northwest ....................................... 1 2

UMPQUA DAIRY PRODUCTS CO ............ ROSEBURG .............................................. OR Pacific Northwest ....................................... 1 1

VITAMILK DAIRY, INC ............................... SEATTLE ................................................... WA Pacific Northwest ....................................... 1 1

WALTER DE JONG ................................... MONROE ................................................... WA Pacific Northwest ....................................... 4 4

WAYNE STRATTON .................................. PULLMAN .................................................. WA Pacific Northwest ....................................... 4 4

WILCOX FARMS, INC ............................... CHENEY .................................................... WA .................................................................... 1 2

WILCOX FARMS, INC ............................... ROY ........................................................... WA Pacific Northwest ....................................... 1 1

WILLIAM VENN (TIMOTHY BERNDT) ...... NORTH BEND ........................................... WA Pacific Northwest ....................................... 4 4

1 DISTRIBUTING PLANT STATUS:

1: POOL

2: PARTIALLY REGULATED

3: EXEMPT BASED ON SIZE:

A. AS DEFINED UNDER CURRENT FEDERAL ORDERS

B. AS DEFINED UNDER PROPOSED RULE; WITH ROUTE DISPOSITION LESS THAN 150,000 LBS. PER MONTH.

4: PRODUCER-HANDLER

5: UNREGULATED

6: EXEMPT BASED ON INSTITUTIONAL STATUS:

A. AS DEFINED UNDER CURRENT FEDERAL ORDERS

B. AS DEFINED UNDER PROPOSED ORDERS (GOVERNMENT, UNIVERSITY, AND CHARITABLE) 2 NEW SINCE OCT. 95: INFORMATION NOT INCLUDED IN ANALYSIS.

2. Basic Formula Price Replacement and

Other Class Price Issues

This proposed rule would replace the

basic formula price (BFP) with a

multiple component pricing system that

would determine butterfat prices for

milk used in Class II, Class III and Class

IV products from a butter price; protein

and other solids prices for milk used in

Class III products from cheese and whey

prices; and nonfat solids prices for milk

used in Class IV products from nonfat

dry milk product prices. Prices for Class

I and Class II would be determined on

the basis of skim milk prices for Class

III and Class IV, computed from the

respective component prices. A Class I

skim milk price for each order would be

determined by computing a six month

declining average of the higher of the

Class III or Class IV skim milk prices for

the second preceding month and adding

a fixed Class I differential to the result.

The Class I butterfat price would be

determined by adding the fixed Class I

differential to the six month declining

average of the butterfat price used for

Class II, Class III and IV butterfat for the

second preceding month. The Class II

skim milk price, on a current month

basis, would be computed by adding

$0.70 to the Class IV skim milk price. A

table showing current and proposed

prices for the period 1994 through 1997

appears at the end of this discussion of

the proposed BFP replacement.

Provisions for Federal milk orders

regulating the handling of milk in areas

for which no support for a multiple

component pricing system has been

expressed would maintain a

hundredweight skim/butterfat pricing

system instead of the component pricing

plan. The hundredweight prices would

be determined by using the component

price formulas contained in this

decision and computing an appropriate

hundredweight price using standard

component levels. In addition, the

proposed Mideast order area, for which

a multiple component pricing plan

similar to that now in effect in the

Southern Michigan order has been

supported (containing a ‘‘fluid carrier’’

component instead of an ‘‘other solids’’

component), would be modified to

incorporate such provisions.

Background

In the early years of the Federal milk

order program, prices that served the

function of the present BFP were

determined primarily from evaporated

milk prices or condensery pay prices.

Some markets developed formulas to

determine the basic price for milk used

in manufactured products and fluid

milk prices. These, however, did not

always reflect the actual relationship

between supply and demand.

Furthermore, when adjacent markets

priced milk using different formulas,

price disparities occurred between

competing handlers regulated under

different orders.

The Minnesota-Wisconsin

manufacturing grade milk price series

(M–W) was adopted in the early 1960s.

The M–W was a competitive pay price

obtained from a survey of payments

made by manufacturing plants in

Minnesota and Wisconsin to producers

of Grade B (manufacturing grade) milk.

Approximately 50 percent of total U.S.

Grade B milk marketings were

accounted for by these two states when

the M–W was adopted. The base month

M–W was updated using a second

survey of a sub-sample of the plants in

the base month survey. This sub-sample

of plants reported pay prices for the first

half, and an estimate of pay prices for

the last half, of the month following the

base month.

Over time the production of Grade B

milk has declined steadily. In 1970, 46

percent of Wisconsin milk marketings

and 71 percent of Minnesota milk

marketings were Grade B. By 1989,

these shares had declined to 17 and 26

percent, respectively. Around this time

(1989) USDA’s National Agricultural

Statistics Service (NASS), which

conducts the survey, considered the

number of plants eligible for the smaller

updating survey to be too few to be

statistically reliable as an indicator of

the value of milk.

Therefore, in June of 1992, a national

hearing was held to consider changes to

the M–W price series. The result was

the current BFP, which replaced the M–

W in 1995. The current BFP uses the

same base month competitive pay price

as the M–W, but updates the base month

price with a formula that uses changes

from the base month to the next month

in prices paid for butter, nonfat dry

milk, and cheese. An updating process
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4877

is necessary to attempt to capture

current supply and demand conditions,

since the base month survey price is not

available until a month after the milk

has already been marketed.

The problem of using a declining

volume of Grade B milk to accurately

represent the value of milk used for

manufacturing was not solved with the

implementation of the current BFP. By

1995, the percentage of milk marketed

as Grade B milk had fallen to 8 percent

of total Wisconsin marketings and 11

percent of total Minnesota marketings.

Nationally, Grade B milk constituted

less than 5 percent of total U.S. milk

marketings in 1995, compared with 9

percent in 1989—a decline of 45

percent. Minnesota and Wisconsin

accounted for 2.9 billion pounds, or

about 42 percent of the national Grade

B milk marketed in 1995; but this was

less than 2 percent of all milk marketed

in the U.S. that year. In fact the decision

based on the basic formula price hearing

recognized that ‘‘the adoption of the

base month M–W price, or any Grade B

milk series, is only a short term

solution, since the amount of Grade B

milk production is expected to continue

declining.’’

The 1996 Farm Bill, enacted in early

April 1996, requires consolidation of the

Federal milk marketing orders into

between 10 and 14 orders, and, among

other provisions, authorizes the

Secretary to implement the use of

uniform multiple component pricing

when developing one or more basic

formula prices for manufacturing milk.

As part of the process of implementing

the provisions of the Farm Bill, several

committees were formed to deal with

specific issues involved in restructuring

the Federal milk order system, and

public comments were requested.

Basic Formula Price Replacement

Committee

One of the committees formed to

assist in the restructuring process was

the Basic Formula Price Replacement

Committee. This committee hosted a

public forum on dairy price discovery

techniques in Madison, Wisconsin, in

late July 1996, considered numerous

comments submitted by interested

persons, established criteria for a new

BFP, conducted extensive study and

analysis, and issued a preliminary

report on BFP replacement in April

1997. The report generated additional

comments, and the committee studied,

incorporated, and developed responses

to these comments, as well as those

received earlier, in the development of

this proposed new basic formula price.

The Committee began with a set of

goals to be met by a replacement for the

basic formula price. These goals are: (a)

the replacement must meet the supply

and demand criteria set forth in the

Agricultural Marketing Agreement Act

of 1937 (the Act), (b) the replacement

price should not deviate greatly from

the general level of the current BFP, and

(c) the replacement should demonstrate

the ability to change in reaction to

changes in supply and demand.

To achieve the basic goals of BFP

replacement, a set of criteria was

established to evaluate the various

alternatives. The criteria were: (a)

stability and predictability; (b)

simplicity, uniformity, and

transparency; (c) sound economics—

e.g., consistency with market

conditions; and (d) reduced regulation.

Stability refers to a moderation of

month-to-month fluctuations in the

basic formula price. A price that

fluctuates less than the current BFP

would improve the wholesale and retail

pricing structure in the industry and

facilitate an improved planning horizon

for both producers and processors. A

predictable basic formula price would

allow the industry to improve longrange planning, thereby contributing to

economic efficiency.

The new basic formula price should

be simple to derive and easy for the

dairy industry to understand, since it

would be used in all Federal milk

orders. The BFP also should be

transparent. That is, it should be

possible to see and understand the

derivation of the BFP, even if a complex

formula is used to determine the price.

Further, the new basic formula price

should be applied uniformly within

orders and on a national basis.

The most important criterion is sound

economics—the ability of the BFP to

reflect the supply and demand for raw

milk. Currently, the BFP is intended to

represent the interaction of supply and

demand for manufacturing milk and

thereby, the supply and demand for

fluid milk at a minimum level. A

replacement that fits this traditional role

suggests that the supply and demand for

manufacturing milk should be reflected

in the new price.

Sound economics also implies that

minimum prices for milk used in

manufactured products will be marketclearing. The use of two classes to price

milk used in traditional ‘‘surplus’’

products of butter, nonfat dry milk, and

cheese (that is, milk in excess of that

amount needed to fill fluid demand),

helps assure that only one product will

have to be priced at a level that clears

the market. The market-clearing product

in most cases is butter/nonfat dry milk.

The criterion of sound economics is

sufficiently important that it may

override other criteria. For instance,

supply and demand factors that result in

significant price fluctuations may come

at the expense of stability; simplicity

may conflict with the need to

incorporate important supply and

demand factors reflecting market

conditions for milk. A degree of

complexity may be necessary to

accommodate sound economics.

Finally, reduced regulation is a

desirable trait of a new basic formula

price, to the extent that it does not come

at the expense of sound economics. One

function of the BFP is to represent a

market-clearing price for milk used in

manufactured dairy products. Reducing

regulation should be attempted while

discovering such a price, but the goal of

reduced regulation is of less importance

than accurately reflecting the market

forces of supply and demand.

A replacement for the BFP could

affect regulation in two ways. In

reporting price information to determine

the basic formula price, many plants

currently report payroll information on

a monthly basis. A revised method for

determining the BFP could entail

reporting manufactured product

transaction prices, manufacturing costs

and yields, and additional auditing to

assure data accuracy. Second, a system

of pricing milk used in manufactured

dairy products based on components

might require increased reporting and

accounting to determine component

usage.

University Study Committee

In recognition of the expertise

available within the academic

community, a University Study

Committee (USC) was commissioned to

conduct objective analyses of the

performance of numerous alternatives to

the current basic formula price. The ten

members of the USC represent six land

grant universities around the country.

The USC established its own criteria

for screening potential replacements for

the basic formula price. Alternatives

that met the USC’s threshold criteria

were then subjected to further analysis.

The USC’s first level criteria were: (a) a

long life—alternatives that were

expected to have a useful life of less

than 10 years were eliminated; (b)

understandable and transparent—the

procedure of deriving a price must be

easy to see and understand; (c)

geographic uniformity—the same basic

formula price would serve as the

minimum price across the country; and

(d) reflect the manufactured milk

market—the values of milk used in

butter, powder, and cheese would be

combined into a single formula price.
4878 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

For its second level of criteria, the

USC used a form of time-series analysis

called vector autoregression (VAR), to

test whether the proposed basic formula

price replacements would satisfy the

following: (a) reflect national market

conditions for manufactured dairy

products—the price for milk used in

manufacturing should reflect the supply

and demand for milk used in those

products, measured by simulating a

change in the level of stocks of the

products and observing the impact on

prices generated by each basic formula

price option; (b) reflect changes in the

value of milk used in manufacturing—

observing how well each option

responds to changes in the prices of

butter, powder, and cheese; and, (c)

provide price stability—as reflected by

low standard deviations and low price

variation in response to a change in

stocks.

Comments

Over 1,600 comments were received

relative to the basic formula price in

response to the invitation to comment

under Federal Order Restructuring. The

comments ranged from one-page letters

from dairy producers to lengthy

discussions of a particular alternative to

the BFP from trade associations or

cooperatives. Most of the comments

may be grouped into five categories

representing alternatives to the current

BFP. These five alternatives are:

economic formulas, futures markets,

cost of production, competitive pay

price, and product price and component

formulas. In addition, numerous

comments were received relative to the

use of National Cheese Exchange prices

in particular and exchange prices in

general in the determination of a basic

formula price.

Economic Formulas

Economic formulas are mathematical

or statistical formulas that incorporate

factors reflecting the supply and

demand for a particular commodity or

product. Typically, economic formulas

include factors such as consumer

income, production, prices of competing

products, population levels or per capita

consumption, and inventories. Several

comments were received supporting the

use of an economic formula for

determining the BFP. Two parties

submitted specific formulas. One

formula included the cost of milk

production and a commodity reference

price, plus consumer prices to reflect

the demand side of the supply/demand

equation. A second formula included

such factors as disposable per capita

income, a dairy parity index, and an

index of manufactured dairy product

prices. This formula also included a

productivity index to allow the formula

to automatically adjust for changes in

productivity over time.

Proponents of economic formulas

expressed the view that since these

formulas incorporate both the supply

side and the demand side, economic

formulas would truly represent the

value of milk, and would therefore be

appropriate for use in determining the

BFP. Additionally, proponents

expressed the view that economic

formulas would diminish price

volatility and reduce the effect of the

cheese market on prices, which

proponents viewed as a positive

outcome.

Opponents of economic formulas

expressed the view that since economic

formulas do not react to changing

conditions, particularly technology, the

formulas would not yield a value of

milk that represented the true supply

and demand for milk. Since many

economic formulas have a tendency to

be static rather than dynamic, the

formulas do not react to changing

economic conditions as rapidly as may

be necessary. Opponents went on to

explain that economic formulas are

difficult to adjust; in many cases the

only people who understand them are

the people who constructed them in the

first place.

Economic formulas can, if properly

constructed, have a tendency to reflect

the supply and demand for milk used in

manufactured dairy products, at least in

the short run. Stability of economic

formulas depends on the variables used

in the formula and the weight they

receive. Since agricultural commodity

markets can be relatively unstable

because of inherent characteristics such

as seasonality, weather, perishability,

etc., the more weight a commodity price

has in a formula the more unstable the

formula is likely to be. Thus, a formula

that attributes less weight to commodity

prices will be somewhat more stable

than a formula that attributes greater

weight to such prices. The trade-off, of

course, is that higher commodityweighted formulas react more quickly to

changes in market conditions. By

contrast, factors such as cost of

production, per capita consumption,

population, and income tend to be more

stable in periods of little or no inflation,

and thus have a more stabilizing

influence on formula-driven price

series.

Changing technology should lead to

reevaluating the weights of various cost

components, but this subjects the

formula to legitimate debate and

scrutiny that in turn diminish the

simplicity, transparency, and stability of

a formula-derived BFP. Thus, there is a

significant risk in using methodology to

develop formulas that result in a price

announced on the basis of data that is

not publicly known, with only those

announcing the price knowing the

specific details of the derivation of the

price. Further, when the methodology is

unveiled, further debate and scrutiny

are invited.

Additionally, data availability can be

a problem. Some data may be available

only on an annual basis, whereas the

BFP must be established monthly.

Substituting or estimating data is very

likely to introduce a bias into the

formula. The developer must exercise

considerable judgment in constructing

the formula price, and a major criticism

of economic formulas is that they are

difficult to understand, with the

developer frequently being the only one

to fully understand its intricacies.

The USC divided economic formulas

into three categories: (1) cost of

production formulas, which will be

discussed later, (2) econometric models,

and (3) formulas which included either

a feed cost snubber or a stock snubber.

The USC dismissed econometric models

on the basis of the first level criteria, as

being too difficult to understand and in

constant need of maintenance, respecification, re-estimation, etc. The

formulas which included the feed cost

snubber or the stocks snubber passed

the first level criteria, but did not

perform as well as other alternatives

when subjected to the level two

analysis.

Futures Markets

A number of comments were received

proposing that the futures market be

used to replace the basic formula price.

One proponent proposed using a

monthly weighted average of milk

futures transactions on the Coffee,

Sugar, and Cocoa Exchange (CSCE)

computed on a daily basis. Proponents

explained that since the commodity

exchange allows free and open trading

the price established would represent

the national supply and demand for

milk. A proponent went on to explain

that open trading on a daily basis on the

commodity exchange allows everyone

in the dairy industry to track the

established prices on a daily basis rather

than under the current system where the

price is just announced.

Opponents to the use of the futures

market in establishing the BFP

explained that the futures markets for

dairy, and milk in particular, have not

been trading for a sufficient period of

time to determine what the exchange

price represents. Opponents also

expressed a concern that the volume
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4879

and open interest, at least for the

present, are relatively small, and

questioned the future viability of the

dairy futures markets. Several

opponents also expressed a lack of faith

in having the BFP established by

commodity traders rather than by the

dairy industry although many, if not

most, agricultural commodity prices are

determined on futures markets.

Both proponents and opponents of

futures markets agreed that once a solid

history of trading dairy futures is

available, it may be feasible to use the

futures market to establish a BFP.

There are currently two different

futures contracts for pricing milk. The

Coffee, Sugar, and Cocoa Exchange

(CSCE) has a fluid milk contract. In

addition, the CSCE and the Chicago

Mercantile Exchange have basic formula

price contracts, which are cash

settlement contracts using the current

basic formula price. The cash settlement

contract would not make a viable

alternative to the current basic formula

price because it is settling against an

announced price that will not continue

to be announced.

The fluid milk contract has behaved

somewhat erratically when compared to

the basic formula price, leading

economists to question what market the

fluid milk contract is pricing. Early

research indicates that the fluid milk

futures market is reflecting the spot

value of Grade A milk rather than the

value of milk used in manufactured

products. Since the BFP is intended to

represent the value of milk used for

manufacturing, use of the futures market

in its determination would not be

appropriate.

Futures markets are not necessarily

stable, nor are they intended to be.

Futures prices fluctuate on a daily basis,

reflecting changes in expectations about

supply and demand. A weighted

monthly average would introduce more

stability, but the commodity influence

would still drive the BFP and introduce

significant variation into the price

series.

The use of futures markets to derive

the BFP could generate a price that is

applied nationally. However, the futures

basic formula price, although

conceptually global in terms of

participation, must be heavily

influenced by supply and demand

conditions in the upper Midwest region,

since this region is the defined delivery

area in the contracts.

There is a significant lack of

familiarity, particularly at the producer

level, with futures markets. Thus,

transparency would not be a feature of

a futures-driven BFP. Since most people

do not understand futures markets it

would be difficult to convince

individuals that a futures-derived BFP is

simple or predictable.

Finally, futures markets are not, and

were not intended to be, cash pricesetting mechanisms. They were

established to transfer price risk. There

is no reason to expect them to be

suitable in serving a price-setting

function for which they were not

intended. There are also questions about

the long term viability of the milk

futures contract. Although volumes

traded increased last summer, they have

since declined, even more after the

opening of the basic formula price cash

settlement contract. Even if the milk

futures markets continue to operate,

they are very thin. Their use in

establishing Federal order prices would

result in a very small amount of trading

setting prices across the nation.

The USC rejected use of the futures

market to replace the basic formula

price for many of the same reasons

discussed above. The USC expressed

particular concern about what is priced

by milk futures contracts, and about the

future viability of the milk futures

market.

Cost of Production

A considerable number of comments

received, predominantly from dairy

producers, supported determining the

basic formula price on the basis of the

cost of producing milk. Proponents

explained that the minimum price for

milk should be no less than the cost to

produce the milk, and many proponents

expressed the opinion that a profit

should also be included in the cost of

production figure. Other proponents

suggested a yearly adjustment or

updater to account for inflation. Some

proponents suggested the

implementation of a quota system in

addition to using the cost of production

to determine the BFP, realizing that a

guaranteed cost of production would

undoubtedly lead to over-production.

Very few of the proponents discussed

what cost of production figures should

be used or how to implement a cost of

production basis across an industry

with substantially different costs, even

within the same region.

Very few comments opposed the use

of cost of production to establish the

BFP. Those filing opposing comments

pointed out that cost of production

represents only the supply factor for

milk, including no demand factor. The

opponents also observed that there are

great difficulties in determining a cost of

production regionally, let alone

nationally, because cost of production

varies greatly across regions.

Cost of production would be more

stable than the current BFP, and more

stable than other options based heavily

on commodity market prices. Stability is

due to the fact that many of the input

values do not change rapidly or as

rapidly as commodity prices. In fact,

some cost factors may move in opposite

directions, reducing the net effect of any

one input factor. This is also one of the

drawbacks to a cost of production-based

BFP. The cost of production may not

respond quickly enough, or sufficiently

to reflect changes in supply conditions

if, indeed, there is any observable link

between cost of production and levels of

milk production.

A basic formula price based on cost of

production would be more complicated

than many other options suggested,

since considerably more data would be

needed to accurately estimate cost of

production. And, although a uniform

price could be calculated if national

averages are used, there is a wide range

of cost differences by region, which

would introduce problems of uniformity

in prices.

The most serious drawback with

using cost of production to replace the

BFP, and the reason the USC dropped

cost of production from consideration

based on their level one criteria, is that

cost of production represents only the

supply side of the market, ignoring

factors underlying demand or changes

in demand for milk and milk products.

Competitive Pay Price

A number of producer groups and

cooperative associations submitted

comments supporting the use of a

competitive pay price to establish the

basic formula price. These proponents

expressed the view that a competitive

pay price is a good indicator of the

national supply and demand for milk

and would provide a simple,

economically defensible method of

calculating the true value of milk used

in manufactured dairy products. Many

of the proponents suggested adding

additional states to the competitive pay

price survey of purchasers of

manufacturing grade milk in Minnesota

and Wisconsin. Some of these

proponents also suggested that a

competitive pay price be adjusted for

hauling subsidies, that premiums be

removed, and that adjustments be

provided for any unique payments that

would not necessarily reflect true

supply/demand conditions. Several

proponents suggested including a

competitive pay price for Grade A milk,

with some adjustments, as a way to

improve the size and representativeness

of the competitive pay price.
4880 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Some of the comments favoring a

competitive pay price addressed the

issue of adjusting the competitive pay

price to the current month. For the most

part, proponents were opposed to using

a formula containing a cheese price

established on the National Cheese

Exchange or the Chicago Mercantile

Exchange, but supported the use of the

NASS cheese survey price for such a

purpose.

Opponents of a competitive pay price

expressed the view that the current BFP,

which uses a competitive pay price

determined in Minnesota and

Wisconsin, does not represent the

national supply and demand for milk

used in manufacturing but represents

the value of such milk in Minnesota and

Wisconsin. These comments stated that

supply/demand situations in other

regions of the country may vary

significantly from Minnesota and

Wisconsin, with regional price

distortions resulting from the use of

prices from a specific region.

A competitive pay price results from

open market negotiation between dairy

farmers (or their cooperatives) and milk

processors. Competition requires

sufficient numbers of buyers and sellers

so that no one participant or group of

participants can unduly influence the

price. In addition, the price can not be

a Federal- or State-regulated price, such

as the price for Grade A milk currently

priced under Federal milk orders.

Identifying a competitive pay price in

today’s dairy industry, where 70 percent

of the milk is currently covered under

Federal milk marketing orders, is a

challenge. After accounting for state

regulations, only about two percent of

Grade A milk is unregulated, and it is

unlikely that even this small amount of

milk is not affected by regulated prices.

Only about five percent of the total milk

marketed in the U.S. is Grade B or

unregulated, and 42 percent of that milk

is located in Minnesota and Wisconsin.

The remainder is scattered among 23

states in amounts too small and

delivered to too few processing plants to

generate a competitive pay price. In

areas where alternative markets exist,

the price for unregulated milk likely

will not be below the price paid for

regulated milk, since producers would

prefer to sell their milk to regulated

handlers to receive the higher regulated

price. Thus, unregulated handlers are

compelled to meet the regulated price in

order to attract sufficient supplies of

milk. The circular result is that the

regulated price ultimately becomes the

competitive price. This process does not

lead to a representative competitive pay

price for milk.

Most competitive pay price

alternatives are not structurally different

from the current BFP and will not yield

a price series any more stable than the

current BFP. Some improvement in

stability might be possible with a more

stable ‘‘updater’’ to adjust the

competitive pay price. However, the

updater may then result in a

competitive price that fails to reflect the

current value of milk used in

manufacturing.

Competitive pay prices may have

problems associated with uniformity,

simplicity, and sound economics. With

regard to simplicity, an updater would

be necessary in conjunction with a

method to determine premiums and

federal order payments to deduct from

the competitively set price. These

adjustment mechanisms are neither very

simple nor transparent. A competitive

pay price may be uniformly applied, but

as the competitive pay price often

reflects the use of prices in just one

region, the derived price may not be

fully applicable across regions.

The concept of a competitive pay

price has appeal from the standpoint of

sound economics. But the submitted

proposals, as well as the current basic

formula price construction, raise

concerns about the degree of

competition reflected in a price based

on the declining volume of Grade B

milk produced and purchased, or the

introduction of Grade A milk that, even

if unregulated, is significantly

influenced by minimum order prices

and therefore suspect as a ‘‘competitive’’

price.

The addition of a Grade A price to a

competitive pay price survey has been

considered likely to raise the level of the

BFP significantly above the level of the

current basic formula price. The

Minnesota-Wisconsin Grade A/B price

currently collected by NASS has

averaged about $0.75 per

hundredweight above the BFP over the

past five years. While the proposal to

exclude performance premiums and the

need for adjustment for the current

month may help to minimize problems

associated with the regulated price

serving as the competitive price, serious

issues are raised by this proposal. More

data would be necessary, increasing the

burden of reporting premiums paid to

producers, the basis for such premiums,

hauling subsidies, and hauling cost

data.

The changes in market conditions and

limited information would reduce the

predictability of the new basic formula

price, and transparency would not be

assured, particularly if the price is based

on a survey. The current BFP suffers

from these same shortcomings,

particularly as the price support

program has declined in importance in

the market.

In response to comments concerning

the declining base of manufacturing

milk in Minnesota and Wisconsin from

which to draw survey information and

the limited geographical area

encompassed by the current survey,

Grade A manufacturing milk data was

gathered to analyze alternatives to the

Minnesota-Wisconsin base month price.

A Grade A pay price series was then

computed. The price series included

nine states’ pay prices for Grade A milk

that is used in manufacturing. These

nine states, California, Idaho, Iowa,

Minnesota, New Mexico, New York,

Pennsylvania, Washington, and

Wisconsin, account for approximately

75% of the Grade A milk used for

manufacturing in the U.S. The Grade A

pay prices were adjusted for protein

content, performance premiums, overorder premiums, and hauling subsidies.

The Grade A competitive pay price was

below the current BFP base month price

in 27 of the 35 months included in the

study. When the product price formula

updater was included, the Grade A pay

price averaged $0.11 per hundredweight

below the current BFP.

The determination that a Grade A pay

price is lower than the current BFP

conflicts with the hypothesis presented

earlier. However, further analysis

indicates that the result is not surprising

when one considers the relative pay

price and the quantity of milk used for

manufacturing in each of the states that

were included. Also, the 5-percent

weighting of butter/powder versus 95

percent cheese production in the

current BFP updating formula changed

significantly, to approximately 30

percent butter/powder and 70 percent

cheese with the use of national

production data rather than the

Minnesota-Wisconsin production data.

The reduced price level that would

result from this study certainly provides

justification for discarding a competitive

pay price as a replacement for the basic

formula price. One reason for the lower

price level is the inclusion of prices

from western states, especially

California. California has become the

nation’s largest milk-producing state,

and a major percentage of California

milk is used in manufactured products.

California has its own State milk order

regulation, and maintains prices for

milk used in manufactured products at

levels below those in other areas of the

nation, largely through use of very

generous manufacturing allowances in

computing milk prices from product

prices. Handlers in other western states,

even those under Federal order price
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4881

regulation, must compete with

California handlers to sell their

manufactured products. As a result, pay

prices to producers in these areas tend

to be lower than in the rest of the United

States.

The USC evaluated several different

competitive pay price series. Two of

these price series, an A/B series and an

adjusted A/B series, passed the level

one criteria, but even these two series

were questionable in their ability to

reflect the manufactured milk market.

Neither one of these two price series

performed well when tested using the

level two criteria and therefore were

dropped from further consideration.

Product Price Formulas and Component

Pricing

In comments supporting the use of a

product price formula to replace the

current basic formula price, proponents

expressed the opinion that a price

determined from the national finished

product markets more accurately

reflects the value of milk for

manufacturing than other methods of

determining a milk price. Proponents

explained that the price handlers can

afford to pay for milk is determined by

the price for which the finished product

can be sold. Therefore, a pricing system

that translates finished product prices to

a price for raw milk would result in the

most representative raw milk price for

both producers and handlers.

Proponents of product price formulas

explained that component pricing, with

prices determined for butterfat, protein,

nonfat solids, etc., would best be

accomplished through product price

formulas, to reflect the value of each

component in finished product prices.

Proponents also explained that product

price formulas are relatively easy to use

and understand, and that the value of

milk may be computed on an on-going

basis by everyone in the dairy industry

by following commodity markets.

Proponents of multiple component

pricing (MCP) explained that since the

components of milk are what give milk

its value, particularly in manufactured

products, it is the components that

should be priced; particularly butterfat

and protein, and to a lesser extent the

other solids contained in the milk.

Opposition to product price formulas

was directed at the need for product

yields and make allowances in

determining a milk price or component

prices. Opponents expressed the view

that yields and make allowances would

not reflect the true results in

manufacturing plants, and therefore

would not yield an accurate price for

milk. Opponents further explained that

when yields and make allowances are

determined, they would be difficult to

adjust and would not react to changes

in manufacturing conditions.

Opponents also argued that when an

incorrect make allowance is established,

plants are guaranteed a return, or profit,

to the detriment of dairy farmers. Other

opponents explained that an incorrect

yield or make allowance may force

payment for milk at a level that would

not allow a return to the manufacturing

plant.

The USC tested several product price

formulas, including a one-class multiple

component pricing formula and a set of

formulas similar to the formulas

recommended in this decision. Based on

the results of the USC analysis

measured against their level two

criteria, the multiple component pricing

formulas had the best overall

performance of any of those alternatives

reaching the level two testing.

Commodity Prices

A considerable number of comments

were received concerning the use of

commodity prices in determining a

basic formula price. Most of the

comments were directed at the use of

National Cheese Exchange prices in the

computation of the current BFP.

Commenters expressed the view that the

prices were being manipulated by the

big cheese companies in order to keep

milk prices low so that the cheese

companies could make a larger profit.

Proposed Basic Formula Price

Replacement

Application of the BFP and USC

Committees’ criteria for BFP

replacement to the various BFP

alternatives resulted in the

determination that the proposed

component pricing product price

formulas best meet the stated goals and

criteria.

Prices derived from product price

formulas that use commodity prices as

the basis for the computed price are

subject to the same problems of stability

as the underlying commodity prices. For

the most part product price formulas do

not include a factor to improve stability.

Product price formulas are relatively

simple to compute and understand, and

may be applied uniformly, or on a

regional basis, accommodating

differences in yields or make

allowances. Product prices established

in a relatively free and open interaction

between supply and demand directly

translate the value of the finished

products to the value of milk and its

components. Therefore, they have a

sound economic underpinning.

Arguably, product price formulas reflect

the supply and demand for the

manufactured product, rather than for

raw milk used to produce the product,

and therefore may be criticized for not

adequately representing market

conditions for milk used in

manufacturing. They should, however,

reflect accurately the market values of

the products made from such milk.

Product price formulas can require

increased data collection, particularly if

industry insists on audited make

allowances and actual transaction prices

to be used in the formulas.

The predictability of prices computed

from product price formulas should be

reasonably good, or at least no worse

than predictability of the underlying

commodity prices. Short run

predictability should even improve

since all information needed to compute

prices is reported on an ongoing basis,

unless survey information is used. This

contrasts with the present BFP

computation in which a major part of

the formula, the base month MinnesotaWisconsin price, is not available until

the actual basic formula price is

announced.

Product price formulas are

transparent, since the information to

compute the price is available, and the

effect of a change in commodity prices

or one of the other factors may be

observed and quantified.

This proposed rule recommends that

the BFP be replaced with a multiple

component pricing system which will

determine butterfat, protein, and other

solids prices for milk used in Class III

products and butterfat and nonfat solids

prices for milk used in Class IV

products.

Numerous comments were received

concerning whether the revised orders

should keep Class III–A (i.e. a four class

market) or whether all hard

manufactured products should be

priced in Class III. The opposition to

Class III–A centered around two issues:

(1) the integrity of the classified pricing

system, and (2) the perception that a

butter/nonfat dry milk class would

reduce producer pay prices. The

supply/demand for butter and nonfat

dry milk is sufficiently different from

the supply/demand for cheese to justify

separate classification and pricing. In

addition, the recommendation to use the

higher of the Class III or Class IV price

for determining the Class I price, and

base the Class II price on the Class IV

price, should more accurately reflect the

value of these different categories of use.

Changes in the cheese markets have a

major impact on the dairy industry. The

cheese industry has evolved from

cheese production being a means of

surplus milk storage and removal to a

competitive consumer demand-driven
4882 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

industry. Currently, more milk is used

in cheese production than is used in

Class I. The nonfat dry milk industry is

now one which balances surplus milk

storage and removals. This category is

also evolving, with increasing

commercial uses for nonfat dry milk,

and dry milk products formulated for

specific needs. Increasing quantities of

nonfat dry milk are being produced for

use in other dairy products and the food

and pharmaceutical industries.

The separation of manufacturing milk

into two classes will assure that shifts

in demand for any one manufactured

product will not lower the prices for

milk used in all other classifications,

including Class I prices. Recent milk

price increases have been attributed to

increased cheese values. Many people

expect that per capita cheese

consumption will continue to grow.

However, some warn of impending

market saturation as more cheese plant

capacity materializes and consumer

tastes and preferences change. Cheese

consumption patterns are based on

many factors outside the dairy

industry’s control. Health concerns

relating to changing demographics,

changes in pizza consumption and

income growth, as well as retail and

wholesale inventory decisions, etc., will

impact consumption and prices. A

recent report by the Food and

Agricultural Policy Research Institute

noted that ‘‘anything that results in

demand weakness for cheese will likely

result in a markedly different outlook

for the entire dairy sector . . .’’ The

proposed pricing system will allow

other manufactured products (i.e. Class

IV) to move Class I prices, helping to

reduce the volatility in milk prices.

Over the last six years cheese prices,

and to a lesser extent butter prices, have

shown considerable fluctuation while

the nonfat dry milk price remained

relatively stable. Price changes for these

finished products are indicative of

various supply/demand situations over

time. The stable nonfat dry milk prices

and the butter prices prior to the fall of

1995 were a reflection of large stocks

being carried in storage and flat

demand. Prices for nonfat dry milk and

butter became more volatile once

government inventories were depleted

and were no longer a factor in

stabilizing prices. Butter prices

increased during May and June of 1997

in response to demand for cream, while

both cheese and nonfat dry milk prices

remained relatively flat. These

differences in price movements indicate

separate supply and demand balances

for different manufactured dairy

products.

The different supply and demand

characteristics for the cheese and butter/

nonfat dry milk market segments

warrant separate classification and

prices. Research by Emmons (discussed

in the BFP Committee Preliminary

Report) concluded that no single pricing

system is appropriate for all classes of

milk and, in fact, that multiple pricing

formulas are appropriate. Each product

would be allowed to achieve its market

clearing level independent of the other

products. Dairy farmers will be paid a

price which is more representative of

the level at which the market values

their milk.

The current BFP serves two functions:

(1) a fixed differential is added to the

current BFP to establish the Class I and

Class II prices; and (2) the current BFP

serves as the Class III price, or the price

for milk used in manufactured products.

In some Federal milk orders a seasonal

adjuster is added to the BFP to

determine the Class III price. The

proposed replacement would function

in a similar fashion, using component

prices. Class IV (butter/nonfat dry milk)

would be priced on a butterfat and

nonfat solids basis. Class III (hard

cheese) would be priced on a butterfat,

protein, and other solids basis. The

price of butterfat would be the same in

Class II, Class III, and Class IV.

Payments to producers under MCP

would be based on the Class III prices

for butterfat, protein, and other solids in

addition to a producer price differential

computed from the value differences

between other classes and Class III

components and from differences in

butterfat and other solids values

between classes. Producer pay prices

also would be adjusted for the somatic

cell count of producers’ milk under

orders with MCP.

Because nonfat dry milk may be

substituted for fresh milk or wet solids

in the production of many Class II

products, the Class II price should be

determined using Class IV butterfat and

nonfat solids prices plus a fixed per

hundredweight differential of $0.70 over

the Class IV skim price. The $0.70

differential represents the cost of

converting concentrated milk to dry

solids, plus rehydration. Class II would

be priced on a current basis rather than

in advance to enable the Class II price

to be aligned with the Class IV price.

This alignment should also reduce

perceived problems in the use of nonfat

dry milk to make Class II products.

Tying the Class II price to the Class IV

price by this fixed differential should

reduce the incentive to produce nonfat

dry milk for use in Class II products.

The Class I price should consist of a

Class I butterfat price and a Class I skim

milk price. The Class I butterfat price

would be determined by adding a fixed

Class I differential to a 6-month

declining average of the second

preceding month’s butterfat price (used

in Classes II, III, & IV). The Class I skim

milk price would be determined by

adding a Class I differential to a 6-

month declining average of the second

preceding month’s skim milk price

(using the higher of Class III or Class IV

skim prices). The calculation of Class I

prices would be the same for both MCP

and non-MCP markets.

Announcement of Class I butterfat

and skim milk prices in advance

eliminates current problems caused by

butterfat differential fluctuations.

Handlers would have true advance Class

I pricing. There would be two different

butterfat prices each month but no

butterfat differential. The separate Class

I butterfat price should integrate easily

since Class I butterfat testing and

reporting currently exists.

The prices for butterfat, protein, and

other solids used in Class III would be

computed as follows:

Butterfat price=(NASS AA Butter survey

price¥0.079)/0.82)

Protein price=((NASS block cheese

survey price¥0.127)x1.32)+((((NASS

block cheese survey

price¥0.127)x1.582)¥butterfat

price)x1.20)

Other solids price=((NASS dry whey

survey price¥.10)/0.968).

The butterfat price for Class IV

products is the same as for Class III

while the nonfat solids price is

computed as follows:

Nonfat solids price=((NASS nonfat dry

milk survey price¥0.125)/0.96)

This system of pricing best fits the three

established goals and criteria, discussed

previously, for a replacement to the

BFP.

The first goal, that a replacement for

the basic formula price meet the supply/

demand criteria set forth in the Act, may

be the most difficult to evaluate

definitively since the Act specifically

mentions minimum prices to producers.

The BFP, as part of a classified pricing

system, does contribute to minimum

prices to producers. However, the basic

formula price does not need to be set at

a level to ‘‘assure an adequate supply of

wholesome milk.’’ The proposed BFP

replacement meets the supply and

demand criteria for milk used in butter/

nonfat dry milk and cheese even though

they are established from finished

product commodity prices. The

commodity prices are based on a

competitive marketplace and reflect the

supply and demand for those products

(Class III and Class IV) that utilize
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4883

approximately 50% of the Grade A milk

supply.

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 not only for

finished products but for the milk used

to make them.

The second goal is that a BFP

replacement should not deviate greatly

from the price level of the current BFP.

Several comparisons of this proposed

basic formula price replacement were

made to the current BFP to determine

whether the proposed formulas resulted

in a price level for milk used in

manufactured products that is

reasonably close to the current BFP.

Protein, butterfat, and other solids

values were combined to compute a

Class III hundredweight price using

standard factors of 3.15 for protein and

5.5 for other solids. The resulting price

averaged $0.26 or 2 percent above the

current BFP for the 69-month period of

September 1991 through May 1997. The

Class IV hundredweight price,

computed from the butterfat price and

the nonfat solids price using a constant

8.65 for nonfat solids, averaged $0.22 or

2 percent below the current BFP during

the same period. The proposed Class III

and Class IV prices were both highly

correlated with the current basic

formula price. The Class III price had a

.963 correlation coefficient while the

Class IV price had a .749 correlation

coefficient.

The proposed basic formula price

replacement also meets the third

primary goal. The proposed formulas

have the ability to respond to supply/

demand changes. The Class III and Class

IV prices should respond appropriately

since the formulas use NASS-surveyed

commodity prices that reflect the supply

and demand for these commodities.

Overall, the proposed BFP

replacement formulas (for Class III and

Class IV) meet the established criteria

necessary for a BFP replacement. The

formulas are relatively simple to use

and can be applied uniformly. The

formulas are transparent and the Class

III and Class IV formulas meet the sound

economics criterion.

The proposed use of NASS survey

prices may reduce the ability to predict

prices, at least in the near term, since

there is a limited history of using NASS

survey prices for computing Federal

order prices. Predictability should

improve over time as the relationship

between the survey prices and easilytracked exchange prices becomes

apparent to industry observers.

Regulation should be reduced since

NASS is collecting the weekly cheese

survey, and the manufacturing plant

survey would no longer be required.

Regulation could increase, however,

make allowances are audited.

The proposed formulas used in the

basic formula price replacement may

result in prices that are less stable than

the current BFP. Unlike the current BFP,

in which commodity updates are used

to adjust the producer pay price survey,

changes in product prices would be the

sole determinant of changes in

component prices. The current BFP is

based primarily on the base month

survey price, which does not move as

rapidly as the commodity markets (as

noted by many respondents). As a

result, the current BFP reacts more

slowly to changes in the commodity

markets than does the proposed

commodity-driven price series.

There has been considerable criticism

of the use of exchange prices

(particularly cheese) in determining the

basic formula price. This criticism

ranged from inaccurate representation of

commodity values to accusations of

market manipulation. The National

Cheese Exchange eventually closed and

the Department decided to use a new

NASS Cheddar cheese price survey in

the computation of the basic formula

price and in federal milk order

component pricing plans. Cheese

transactions occurring during the week

are surveyed and released by NASS on

the following Friday. From the weekly

price and sales volume a monthly

weighted average price is determined.

The BFP Committee recommended

using NASS cheese survey prices and

having NASS develop a price survey for

butter. This survey would have to be

expanded and data released more often.

Nonfat dry milk and dry whey prices are

currently surveyed and published, but

will need to be published on a more

timely basis if they are used in

component price computations.

Several alternatives to a NASS price

survey were considered. There is a cash

butter market at the Chicago Mercantile

Exchange (CME). These prices are

currently used to determine the butterfat

differential and butterfat price in all

federal milk orders. Dairy Market News

(DMN) publishes a wholesale butter

price. Both of these price series have

been criticized due to the ‘‘thinness’’ of

trading. There is no exchange trading of

dry milk products. Alternatives to a

NASS survey are limited to prices

published by Dairy Market News or a

California survey. The prices reported

by DMN are generally considered to be

representative of the dry product

markets. However, the prices are

reported as a range. A simple average of

the prices is used to compute a monthly

price and may not reflect the weighted

average price at which the product

moved. In many instances multiple heat

treatment products are involved, and a

substantial number of forward contracts

are included. The DMN prices are not

intended to establish prices but are

provided for market information.

NASS data traditionally have been

collected via a survey with voluntary

participation. The price information in

the current cheese price survey, like

most NASS data, is not audited. NASS

applies various statistical techniques

and cross-checking with other sources

to provide the most reliable information

available.

Alternatives and comments regarding

exchange trading and the use of NASS

survey prices are invited. This decision

proposes the use of NASS survey prices

for computing the component values

used in the BFP replacement.

Make Allowances

Several characteristics of Federal milk

orders should be kept in mind

concerning make allowances. First,

federal milk order prices are minimum

prices. Second, the BFP and its

replacement should price milk used in

what have been considered surplus

products. The BFP is not intended to

represent the total value of all milk.

Third, most dairy manufacturing plants

are not required to participate in the

federal milk order pool and are not

required to pay federal milk order

prices.

An economic engineering approach to

determine appropriate make allowances

was investigated. Neither the time nor

the resources are available to construct

models for determining appropriate

make allowances at this time. As an

alternative, various sources were used to

determine appropriate make allowances

for the basic formula price replacement.

Research by Stephenson and Novakovic

of Cornell University indicates that

results obtained by using an economic

engineering approach can be

comparable to a survey of plants.

Resources may need to be devoted to

developing an economic engineering

model, a survey, or a combination of the

two.

The proposed butter make allowance

of $0.079 per pound and the nonfat

solids make allowance of $0.125 per

pound were developed from an analysis

of several sources. Research by

Stephenson and Novakovic on surveyed

data from butter and nonfat dry milk

manufacturing plants resulted in
4884 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

equations for estimating the long-run

average cost per pound of producing

butter and nonfat dry milk.

Applying these equations to national

average nonfat dry milk production

resulted in make allowances ranging

from $0.1166 to $0.1561 per pound.

These values are in alignment with the

seven-year average, $0.1392 per pound,

based on audited cost of production

data published by the California

Department of Food and Agriculture.

This California average included a

return on investment. These computed

costs straddle the proposed $0.125 make

allowance. The proposed $0.125 make

allowance is approximately 90 percent

of the California production costs. The

$0.125 make allowance is appropriate,

as it covers the costs of most plants but

does not cover the costs of all

manufacturing plants. Several

comments in support of product price

formulas also suggested that a make

allowance of $0.125 for nonfat dry milk

was appropriate.

The determination of the $0.079

butter make allowance is also based on

research by Stephenson and Novakovic.

However, applying the long run cost

equations to national production results

in national make allowances ranging

from $0.1318 to $0.1013. These values

are considerably higher than the sevenyear average of $0.0879 reported by

California. Variation in plant size, or

capacity, is the main reason for the

differences between the computed

values and the average for California

butter plants. Many plants produce

small quantities of butter, resulting in

an understated average plant size and

overstated cost figures. This rapidly

becomes apparent when comparing

California data to the national average

data. California produces approximately

three times more butter per plant than

the national average at a lower cost. The

$0.079 make allowance is set at 90

percent of the California audited cost of

production. This make allowance

should allow an efficient butter plant to

operate.

The other solids make allowance is

based on research conducted by Hurst,

Aplin, and Barbano of Cornell

University. Their research indicated a

make allowance range of $0.079 to

$0.259 per pound of whey powder,

depending on plant size. The $0.10 used

in the other solids price computation

corresponds to the area of the

manufacturing cost curve at which

manufacturing costs per unit, that

diminish as volume of production

increases, begin to level off. This part of

the cost curve would appear to be the

most appropriate to use for

determination of the other solids make

allowance.

As in the case of the other solids make

allowance, the proposed $0.127 per

pound protein make allowance reflects

the point where the long-run average

cost curve begins to level off for

Cheddar cheese production. This cost

curve was developed by MesaDishington, Barbano, and Aplin of

Cornell University. The combination of

the cheese and other solids (dry whey)

make allowances result in a total Class

III make allowance approximately $0.10

below the reported California audited

make allowance.

The proposed make allowances used

in computing the component prices for

Class III and Class IV result in per

hundredweight prices which did not

deviate greatly on average from the

current BFP over the period analyzed,

one of the criteria for a basic formula

price replacement. During the

September 1991 through May 1997

period on which this analysis is based,

Class III prices would average $0.26 per

hundredweight above the current BFP,

with Class IV prices averaging $0.22 per

hundredweight below.

Changes in make allowances will

affect component prices and per

hundredweight milk values. A one-cent

per pound change in the butter make

allowance will affect the butterfat price

in the opposite direction by $0.0122 per

pound. This would be $0.0427 per

hundredweight for milk at 3.5 percent

butterfat. The butterfat price also is used

in the computation of the protein price.

The protein price will change inversely

to the butter make allowance by $0.0146

per pound or $0.046 per hundredweight

for milk with 3.15 percent protein. A

positive make allowance change for

nonfat dry milk will result in a decline

in the nonfat solids price. A one-cent

change in the nonfat dry milk make

allowance will result in a $0.0104 per

pound or $0.094 per hundredweight

opposite change in the nonfat solids

price. A one-cent change in the cheese

make allowance will cause an opposite

change in the protein price by $0.0322

per pound or $0.1014 per

hundredweight for milk with 3.15

percent protein. Finally, a one-cent

change in the other solids (dry whey)

make allowance will change the other

solids price by $0.0103 per pound or

$0.0567 per hundredweight in the

opposite direction.

The factors used in the proposed

formulas to compute component prices

are determined by the quantity of the

component in the commodity, except

for protein, for which the Van Slyke

yield formula is used. In the protein

formula, the 1.32 and 1.582 are yield

factors derived from the Van Slyke

cheese yield formula. The 1.32 factor

times the cheese price is used in the

protein price formulas in many current

Federal order component pricing plans.

Both the 1.32 and 1.582 are determined

by calculating the change in cheese

yield if an additional tenth of a pound

of protein or butterfat is contained in

the milk, holding everything else

constant. Accounting for the additional

value of butterfat in cheese is necessary.

This additional value is included with

the protein price calculation as a means

of quantifying the amount by which the

value of butterfat in cheese exceeds the

value of butterfat in butter, and because

it is the casein in protein that forms the

molecular matrix that retains the

butterfat in cheese. The ratio of butterfat

to protein is calculated from the protein

and butterfat yield factors of 1.32 and

1.582.

The nonfat solids formula uses the

0.96 factor as the percent or quantity of

nonfat solids in a pound of nonfat dry

milk. The 0.82 in the butterfat formula

represents the percent or quantity of

butterfat in one pound of butter. The

0.968 factor in the other solids formula

represents the percentage of other solids

in whey powder.

This proposed pricing system

eliminates the need for regional yields

based on regional differences in milk

composition. The value of milk would

be adjusted automatically based on the

level of components contained in the

milk in each order even though the

component prices are the same

nationally. This automatic adjustment

means that handlers would pay the

same price per pound of component but

have differing per hundredweight

values based on the milk component

levels, creating equity in the minimum

cost of milk used for manufacturing

purposes.

An analysis of the basic formula price

replacement requires several

assumptions. Historic commodity price

surveys are not available for all of the

commodities. Prices used as substitutes

for historic price survey data in this

analysis include: the National Cheese

Exchange 40-pound block prices for

computing protein prices; the Chicago

Mercantile Exchange Grade AA butter

prices for computing butterfat prices;

and the Dairy Market News Central

States dry whey price for computing the

other solids prices. Available survey

prices used were nonfat dry milk prices

published monthly by NASS in ‘‘Dairy

Products’’.

One of the requirements of a basic

formula price replacement, based on the

assumption that the current basic

formula price reflects the national
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4885

supply and demand for manufacturing

milk, is that the price level not deviate

greatly from the current basic formula

price. All comparisons are thus made to

the current basic formula price.

Three different comparisons were

examined. First, standard component

levels were used to compute a

hundredweight price that was compared

to the current basic formula price. The

standards for computing Class III prices

were 3.5 percent butterfat, 3.15 percent

protein, and 5.5 percent other solids.

The standards for computing Class IV

prices were 3.5 percent butterfat and

8.65 percent nonfat solids. The second

comparison computed a per

hundredweight price using actual

component tests to determine an ‘‘at

test’’ value. A third comparison

computed hundredweight prices at 3.5

percent butterfat with protein and other

solids adjusted to reflect the change in

skim milk that occurs as the butterfat is

changed from ‘‘at test’’ to 3.5 percent.

The latter two comparisons: (1)

eliminate any bias occurring from the

use of ‘‘standard’’ component levels,

and (2) address seasonality of

component levels. These latter two

comparisons require tests for protein

and other solids and were only

performed for months in which test data

was available (September 1991 through

May 1997).

Statistically, the Class III

hundredweight price and the Class IV

hundredweight price did not equal the

current basic formula price for all

comparisons. However, in absolute

terms, the average differences were

relatively small. When compared to the

Class III and Class IV prices computed

using the constants, the current basic

formula price averaged $0.26 per

hundredweight below the Class III price

and $0.22 per hundredweight above the

Class IV price during the September

1991 through May 1997 period.

Comparing the Class III and Class IV

prices at test to the current basic

formula price at test, the Class III price

averaged $0.35 per hundredweight

above the current basic formula price

while the Class IV price averaged $0.19

below the current basic formula price.

The third comparison, in which the

Class III and Class IV prices are adjusted

to 3.5 percent butterfat, had the Class III

price averaging $0.32 per

hundredweight above the current BFP,

while the Class IV price averaged $0.22

per hundredweight below the current

BFP.

In addition to comparing the absolute

Class III and Class IV prices to the

current BFP, it is important to compare

the relationship between the Class III

and Class IV prices and the current

basic formula price. Correlation

coefficients were computed to

statistically test the relationships

between the Class III and Class IV prices

and the current basic formula price.

Statistically, the correlation coefficients

are positive and significant, indicating

positive relationships between the

current basic formula price and the

Class III and Class IV prices. The

correlation coefficient between the Class

III price and the current basic formula

price is generally above .95 while the

correlation coefficient between the Class

IV price and the current basic formula

price is approximately .75. These

relationships are expected since the

current basic formula price is weighted

more heavily on milk used for the

manufacture of cheese than on the value

of milk used in the manufacture of

butter and nonfat dry milk.

The proposed Class III and Class IV

formulas are computed from product

prices representing the use of milk in

each class. That is, the Class III price

would be derived from the value of

cheese while the Class IV price would

be derived from the value of butter and

nonfat dry milk. Therefore the Class III

and Class IV prices could, and would,

vary significantly from the current BFP

in individual months, reflecting the

economic (supply and demand)

conditions for cheese, butter, and nonfat

dry milk. This situation is particularly

true of the Class IV price. For example,

during 1993 and 1994 the price of butter

and nonfat dry milk was relatively low

and stable compared to the price of

cheese. The degree of variability of

individual months’ prices from the

average for the year is expressed by a

standard deviation. A lower standard

deviation indicates that individual

observations (in this case, monthly

product prices) vary less from the mean

than would be indicated by higher

standard deviations. These statistical

descriptions indicate the difference in

variability of prices between butter/

powder and cheese in 1993 and 1994.

Further examples are included in the

attached table.

During 1993 the proposed Class IV

price would have averaged $11.51 with

a standard deviation of .15, compared to

the 1993 BFP average of $11.80 with a

standard deviation of .72, and the

average Class III price of $11.99 with a

standard deviation of .83. In 1994, the

proposed Class IV price would have

averaged $11.15 with a standard

deviation of .13, compared to the 1994

BFP average of $12.00 with a standard

deviation of .57, and the average

proposed Class III price of $12.18 with

a standard deviation of .65. For 1996,

when the economic conditions for

butter and nonfat dry milk had changed,

and the prices become more volatile, the

proposed Class IV price averaged $13.82

with a standard deviation of 2.19 versus

the 1996 BFP average of $13.39 with a

standard deviation of 1.26, and the

proposed Class III average price of

$14.04 with a standard deviation of

1.33.

The Class III and Class IV prices

clearly reflect the value of the milk used

in the respective manufactured

products, whereas the current basic

formula price reflects primarily the

value of milk used to manufacture

cheese. Therefore, to the extent the

proposed Class III and Class IV formulas

deviate from the present level of the

BFP, they may be more appropriate

indicators of the value of milk used in

those products than the current BFP.

Class I

The basic formula price replacement

also will act as a mover for the Class I

price in addition to establishing prices

for milk used in Class III and Class IV.

Several comments were filed relative to

the use of the basic formula price

replacement to establish the Class I

price. These comments ranged from

continuing the current system to

establishing the Class I price

independently of the basic formula

price(s) for milk used in manufactured

products. One comment suggested

eliminating the basic formula price and

pooling only the Class I and Class II

differentials.

In comments suggesting that the Class

I price not be computed from the basic

formula price, commenters expressed

the opinion that the Class I price should

not be based on prices for milk used in

manufactured products because these

prices do not reflect the market for Class

I milk. The comments noted that

fluctuations in the Class I price do not

result in corresponding changes in the

retail price for fluid milk, particularly

when the Class I price is declining.

These commenters suggested including

the retail milk price, as well as other

factors, in computing the Class I price.

The result would be to determine the

Class I price from an economic formula.

Other commenters expressed the

opinion that the Class I price should be

more stable, and that with advance

pricing it is very difficult to price fluid

milk products because of large

fluctuations in the butter market. (It is

the Class I hundredweight price at 3.5

percent butterfat that is announced in

advance. Fluctuations in the butterfat

differential, which is not announced in

advance, result in corresponding

fluctuations in the skim price, which is

predominately applicable to Class I
4886 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

milk.) Other commenters suggested that

if the current basic formula price

reflects the demand for fluid milk, the

basic formula price and the Class I price

should at least move in the same

direction, rather than in opposite

directions as they have done at times

over the past several years. In addition,

commenters expressed the opinion that

the elasticity of demand for fluid milk

products is significantly different from

the elasticity of demand for

manufactured products, justifying

separate pricing of Class I and the basic

formula price.

Proponents of eliminating the BFP

and pooling only the Class I and Class

II differentials explained that this

proposal would eliminate the need and

controversy of determining a basic

formula price while still distributing the

proceeds of the Class I and Class II

markets to producers. The remainder of

the producer value of milk would be

determined directly by the market rather

than from an administrativelyestablished value for milk used in

manufacturing.

The concept of pooling differentials

only would eliminate the need to

determine a basic formula price.

However, the Act states that the

Secretary shall establish minimum

prices for milk and classify milk in

accordance with the purpose for which

it is used. The differential milk value

would not be the minimum value nor

differentiate between classes as

specified in the Act. As interpreted

herein, the Act does not provide for

pooling differentials only and new

legislative authority would be required

in order to do so.

There certainly are some reasons for

partially breaking the direct link

between Class I prices and the BFP. This

proposed rule includes a method for

pricing Class I based on a six-month

declining average of the higher of the

Class III or Class IV prices. A complete

separation should not occur since

handlers compete for the same

undifferentiated milk to use in Class I

fluid milk products as well as in cheese

and other manufactured dairy products.

Therefore, an appropriate price

relationship must be maintained

between Class I and the manufacturing

classes to assure an adequate supply of

milk for Class I uses.

Partially breaking the direct link

between Class I prices and the basic

formula price replacement would

reduce the volatility in producer prices.

This rule proposes that the fixed Class

I differential for each order be added to

a 6-month declining average of the

higher of Class III or Class IV skim

prices and a 6-month declining average

of the butterfat price. The skim milk

price is determined for Class III by

combining the result of multiplying 3.3

by the protein price and 5.7 by the other

solids price, and for Class IV by

multiplying the nonfat solids price by 9.

These factors represent the quantities of

the respective components in 100

pounds of skim milk. The use of a 6-

month declining average would

significantly decrease monthly Class I

price volatility while minimally

affecting the long-run price. Application

of the 6-month declining average of the

higher of the Class III or Class IV prices

to the computation of Class I prices for

the period February 1992 through May

1997 would have resulted in prices

which averaged only two cents below

the average price computed by adding a

fixed differential to the higher of the

Class III or Class IV skim milk price for

the second preceding month.

The Class I butterfat price

computation adds the Class I differential

to the 6-month declining average of the

butterfat price. Application of the Class

I differential to both the skim and

butterfat pounds rather than to total

product pounds achieves true Class I

advance pricing. A Class I handler

consequently would know both the

skim milk and butterfat prices in

advance.

Several options were analyzed with

respect to selecting the appropriate

Class I price mover. The options

included using the second preceding

month’s prices, using a moving average,

and using a declining average. A

declining average weights the current

price most heavily, with the next most

current price receiving a smaller weight,

and so forth for the number of months

included. For example, a three month

declining average would weight the

most current price by three, the next

most current by 2, and the third price

by 1, with the resulting sum divided by

6 to determine the average.

All options were evaluated on the

ability to improve price stability while

maintaining appropriate producer price

signals. A Class I price mover using the

higher of the Class III and Class IV skim

milk prices for the second preceding

month (most resembling the current

mover) was the least stable option, with

a standard deviation of 1.3188. A 12-

month moving average of the higher of

the Class III and Class IV skim milk

prices resulted in the most price

stability with a standard deviation of

.8840. However, a 12-month moving

average tends to react more slowly to

economic signals since the most current

month, which most nearly reflects

current economic conditions, has a

weight of only 8.3 percent. The 6-month

declining average contributes a weight

of 28.6 percent of the price to the most

current month, while a 6-month moving

average reflects only 16.7 percent of the

current month’s price in the average. By

reflecting current economic conditions

more rapidly than the longer moving

averages, the 6-month declining average

strikes an acceptable balance between

responsiveness to current market values

and the goal of stability.

The combination of advanced

butterfat and skim milk pricing and a 6-

month declining average will allow

Class I handlers true advanced Class I

pricing and increased price stability.

Increased producer pay price stability as

a result of increased Class I price

stability will remain dependent on the

Class I utilization of each market.

Improving price stability has other

advantages. Dairy processors,

consumers, and producers will benefit

from less month-to-month variation in

prices than is experienced under the

current pricing mechanisms. Increased

Class I price stability may result in

lower prices to consumers.

As discussed previously, the price

link between Class I use and Grade A

milk used to manufacture Class III and

Class IV products should be maintained

since Grade A milk can be used for fluid

uses as well as for manufacturing uses.

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. Federal milk orders

traditionally have viewed fluid use as

having a higher value than

manufacturing use. The proposed Class

I price mover reflects this philosophy by

using the higher of the Class III or Class

IV price for computing the Class I price.

In some markets the use of a simple

or even weighted average of the various

manufacturing values would inhibit the

ability of Class I handlers to procure

milk supplies in competition with those

plants that make the higher-valued of

the manufactured products. Use of the

higher of the Class III or Class IV price

will make it more difficult to draw milk

away from Class I uses for

manufacturing. For example, if the Class

IV price were used as the Class I mover

there would be months in which the

Class III price would be more than two

dollars above the Class IV price. As a

result, the Class I differential would

have to be well over two dollars for the

Class I price to remain above the Class

III price. Certainly, in this scenario the

economic decision would be to sell milk

for Class III manufacturing, at least in

those markets with a Class I differential

below two dollars, since the price is

above the Class I price. If the Class III
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4887

price is used as the Class I price mover,

the reverse situation of having the Class

IV price well above the Class III price

would result in the same problem. The

potential of having a Class III or IV price

in excess of the Class I price is not

entirely eliminated by using the higher

of the Class III or Class IV price because

of the advance Class I pricing feature,

and, to some extent, because of the

effect of using a 6-month declining

average on which to base the Class I

price. However, use of the higher of the

two manufacturing prices for each of the

months averaged and weighting the

average toward the most recent month

should reduce the popential

considerably, allowing Class I handlers

to compete more effectively with

manufacturing plants for fluid milk.

Class II

Under this proposed rule, the value of

Class II milk would be determined by

multiplying the pounds of nonfat solids

in producer milk allocated to Class II by

the nonfat solids price, the pounds of

butterfat by the butterfat price, and the

hundredweight of Class II skim milk by

$0.70. Generally, the source of inputs

alternative to producer milk for the

manufacture of Class II products is dry

milk products and butterfat. Basing the

price of milk used to make Class II

products on these alternative

ingredients should help considerably to

remedy a situation in which it is

perceived that a separate product class

for dry milk (Class III–A) has a

competitive advantage over producer

milk used to produce Class II products.

The 70-cent differential between the

Class IV and Class II skim milk prices

is an estimate of the cost of drying

condensed milk and re-wetting the

solids to be used in Class II products.

One commenter suggested that there

should be a $1.00 difference between

Class IV and Class II. Additional

comments on the appropriate level of

this differential, with supporting data,

are encouraged.

The proposed rule would not provide

for advance pricing on Class II milk, for

several reasons. First, although the

current Class II price is announced in

advance on the basis of the second

preceding month’s BFP, it is announced

as a hundredweight price for milk

containing 3.5% butterfat. When the

butterfat price changes between the time

the price is announced and the month

to which the price applies, the 3.5%

hundredweight price is still applicable,

but the balance between the skim milk

price and the butterfat price may have

shifted significantly. This phenomenon

effectively eliminates the advance

announcement feature of Class II

pricing. For example, on July 3rd the

June basic formula price was

announced, establishing the August

Class II price for milk containing 3.5

percent butterfat at $11.04 per

hundredweight. The June butterfat

differential was $0.114, which if applied

to the $11.04 would have resulted in a

butterfat price of $1.2105 per pound of

butterfat and $0.0705 per pound of skim

milk. However, the August butterfat

differential was $0.106. The actual

butterfat price would therefore have

been $1.11333 per pound, and the

actual skim milk price would have been

$0.0733. This example illustrates that

even though the Class II price is

announced in advance, the price of the

skim milk and butterfat used in Class II

currently is not known in advance. The

further a product varies from a 3.5

percent butterfat content, the greater

will be the effect of the butterfat price

changes between the announcement

date and the month in which the milk

is used.

Second, although advance pricing

would be possible under the proposed

component plan, a problem occurs in

accounting for the skim milk and

butterfat, particularly butterfat, in Class

II products. Additional finished product

testing and accountability, and therefore

increased regulation, would be needed

to account properly for butterfat used in

Class II since it would have to have a

different price than the butterfat, priced

on a current basis, used in other

manufacturing classes.

Third, pricing Class II on a current

basis would allow the price relationship

between the nonfat solids and butterfat

in Class IV and Class II to remain

constant from month to month. With a

constant price relationship between

these two classes, competition and

substitution between milk and the Class

IV products used to make Class II

products will be based on the relative

merit of the alternative inputs rather

than on regulated price relationships.

The use of product price formulas, for

Class II and well as for Class IV, should

allow industry participants to track

price trends throughout the month,

enabling them to estimate changes in

price.

Quality Adjustments

This proposed rule would adjust

producer payments for the somatic cell

count of producers’ milk under orders

using multiple component pricing.

Payments made by handlers for milk

used in Class II, Class III, and Class IV

should also be adjusted on the basis of

the somatic cell count of the milk. A

somatic cell adjustment is appropriate

for several reasons. First, somatic cell

levels are not only an indicator of

general milk quality, but also are an

indicator of the potential yield of milk

in cheese and other products that

require casein for their structure and

body. Research has shown a direct link

between increased somatic cell counts

and decreased cheese yields. Milk with

the same protein content but different

somatic cell counts has different values

due to the difference in cheese yields

caused by varying somatic cell counts.

Second, many producers currently are

subject to some type of multiple

component pricing plan or quality

premium program that adjusts their pay

prices for somatic cell levels even if the

order in which their milk is pooled does

not incorporate such adjustments.

Although many producers’ returns are

affected by the somatic cell count of the

milk, there is little, if any, oversight of

the testing for somatic cells if the order

does not include pricing adjustments.

Fair and accurate testing can be assured

by incorporating multiple component

pricing and somatic cell adjustments

into Federal orders. Third, somatic cell

counts have taken on greater importance

in the world dairy market, as evidenced

by the recent debate between the

European Community and the United

States over allowable somatic cell

counts in milk used to make exported

dairy products. It is now more

important that the somatic cell level of

producer milk be verifiable.

The somatic cell adjustment should

apply on a hundredweight basis and be

computed by subtracting the somatic

cell count (in thousands) from 350 and

multiplying the result by the product of

.0005 times the monthly average cheese

price. This level of adjustment has

worked well in orders currently

containing somatic cell adjustments,

and is supported by data and research

contained in Federal order milk hearing

records.

Application of the Proposed Basic

Formula Price

Under this proposed rule, producers

in most Federal order markets would be

paid on a multiple component basis

since the basic formula price

replacement is based on individual milk

component prices. Producers will be

paid for the pounds of butterfat, pounds

of protein, pounds of other solids, a per

hundredweight price known as the

producer price differential, and a per

hundredweight somatic cell adjustment.

The producer price differential returns

to producers their pro rata share of the

proceeds of the classified pricing

system. The butterfat price for

producers would be the same butterfat

price computed for Class III and Class
4888 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

IV butterfat. The protein and other

solids prices would be the same protein

and other solids prices computed for

Class III.

Handler obligations and producer

payments under the orders that are not

proposed to have component pricing

provisions would be based on

hundredweight prices computed from

these component prices.

All of the Federal milk orders will

require changes to accommodate

replacement of the current BFP with the

proposed multiple component pricing

plan or with its hundredweight price

equivalent. There would no longer be a

butterfat differential under any order,

but a butterfat price. The same butterfat

price would be used for butterfat in

Class II, Class III, and Class IV, while a

separate butterfat price, announced in

advance, would apply to butterfat used

in Class I.

For purposes of allocation of producer

receipts the assumption will be made

that the protein and other solids (nonfat

solids) can not be separated easily from

the skim milk. The protein and other

solids will therefore be allocated

proportionately with the skim milk

based on the percentage of protein and

other solids in the skim milk received

from producers. Accordingly, the

pounds of protein and other solids will

be determined by multiplying the

percent protein or percent other solids

in the skim milk of the total producer

milk received by the handler times the

pounds of skim milk allocated to each

class. The assumption that the nonfat

components follow the skim milk may

need to be revisited as the fractionation

technology of milk continues to improve

and the pricing system falls short of

meeting the needs of marketing

practices. At the present time such a

problem is not apparent.

For the Market Administrator to

compute the producer price differential,

handlers will need to supply additional

information on their monthly reports of

receipts and utilization. Handlers that

are filing reports in orders that currently

have multiple component pricing and a

somatic cell adjustment will see little or

no change in their reporting

requirements. Under orders that would

be adopting component pricing for the

first time, the pounds of protein, the

pounds of other solids, and somatic cell

information will be needed in addition

to the product pounds and the butterfat

currently reported. This data will be

required from each handler for all

producer receipts, including milk

diverted by the handler, receipts from

cooperatives as 9(c) handlers and, in

some cases, receipts of bulk milk

received by transfer or diversion.

Payments by handlers to cooperative

associations for Class I milk would be

calculated on the basis of Class I skim

pounds times the Class I skim price plus

the pounds of Class I butterfat times the

Class I butterfat price. Payment for Class

II milk would be paid for based on the

Class II differential times the

hundredweight of producer skim milk

in Class II, the pounds of nonfat solids

in Class II times the nonfat solids price,

and the pounds of butterfat in Class II

times the butterfat price. Class III milk

will be paid for based on the pounds of

protein in Class III times the protein

price, the pounds of other solids in

Class III times the other solids price,

and the pounds of butterfat in Class III

times the butterfat price. The pounds of

nonfat solids in Class IV times the

nonfat solids price, and the pounds of

butterfat in Class IV times the butterfat

price would be used to calculate

obligations for Class IV milk. The

appropriate somatic cell adjustment will

apply to milk in Class II, Class III, and

Class IV.

The Class I value of milk to handlers

would be calculated by multiplying the

skim pounds of producer milk in Class

I times the Class I skim price plus the

pounds of Class I butterfat times the

Class I butterfat price. Class II milk

value would be computed on the basis

of the Class II differential times the

hundredweight of producer skim milk

allocated to Class II, the pounds of

nonfat solids in Class II times the nonfat

solids price, and the pounds of butterfat

in Class II times the butterfat price.

Class III milk value would be computed

based on the pounds of protein in Class

III times the protein price, the pounds

of other solids in Class III times the

other solids price, and the pounds of

butterfat in Class III times the butterfat

price. The pounds of nonfat solids in

Class IV times the nonfat solids price,

and the pounds of butterfat in Class IV

times the butterfat price would

comprise the value of Class IV producer

milk. Also included would be the

appropriate somatic cell adjustment

applied to milk in Class II, Class III, and

Class IV, the value of overage, the value

of inventory reclassification, the value

of other source receipts and receipts

from unregulated supply plants

allocated to Class I, and the value of

handler location adjustments.

The handler’s obligation to the

producer settlement fund will be

determined by subtracting from the

handler’s value of milk the following

values: (a) the total pounds of producer

milk times the producer price

differential adjusted for location, (b) the

total pounds of butterfat times the

butterfat price, (c) the total pounds of

protein times the protein price, (d) the

total pounds of other solids times the

other solids price, (e) the total value of

the somatic cell adjustments to the

producer milk, and (f) the value of other

source milk at the producer price

differential with any applicable location

adjustment at the plant from which the

milk was shipped deducted from the

handler’s value of milk.

Payments to producers traditionally

have been made in two payments, a

partial payment based, in most cases, on

the prior month’s Class III price and a

final payment at the uniform price. This

traditional payment system will

continue, with any exceptions for local

marketing practices noted in the

regional discussions. The partial

payment will be paid on a per

hundredweight basis with the price

equaling the combined value of the skim

and butterfat prices for the lowestpriced class in the previous month. By

computing the partial payment on a

hundredweight basis, confusion about

the use of partial month component test

averages will be eliminated and

handler’s partial payroll processing

costs should not be affected. Final

payments to producers and for 9(c) milk

will be based on: (a) the hundred weight

of milk times the producer price

differential adjusted for location, (b) the

pounds of protein times the protein

price, (c) the pounds of other solids

times the other solids price, (d) the

pounds of butterfat times the butterfat

price, and (f) the somatic cell

adjustment rate times the

hundredweight of milk.

Since producers will be receiving

payments based on the component

levels of their milk, the payroll reports

that handlers supply to producers and

to the Market Administrator must reflect

the basis for such payment. Therefore

the handler will be required to supply

the producer not only with the

information currently supplied, but

also: (a) the pounds of butterfat, protein,

and other solids in the producer’s milk,

as well as the average somatic cell count

of the producer’s milk, and (b) the

minimum rates that are required for

payment for each pricing factor and, if

a different rate is paid, the effective rate

also. The requirement that payment

factors be reported to producers when

producers are paid currently exists in all

of the orders. Addition of the

component information is purely a

conforming change. Administration of

these provisions should not be changed

from current practices.

With advance pricing of Class I and

the inherent instability of the

commodity markets there may be

occasions when the computation of the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4889

producer price differential results in a

value of zero or below. In such a

situation, the producer price differential

will be as computed.

The following table is of actual and

proposed class prices and the proposed

Class I price mover for the period of

January 1994 through December 1997.

The proposed prices are shown for

information purposes only. These prices

result from the strict application of the

proposed formulas using current market

situations. These prices should not be

interpreted as prices that would have

actually occurred throughout the data

period because industry participants

likely would have reacted differently to

the proposed price levels than they

reacted to the actual price levels.

Although the proposed formulas for

calculating the Class III and Class IV

prices resulted in prices fairly close to

the BFP for the period over which data

was collected and analyzed (September

1991 through May 1997), the price

differences during the last six months of

1997 have been considerably greater.

The proposed Class II price has

averaged 83 cents over the BFP during

July through December 1997, with a

range of 63 cents to $1.00 more than the

BFP. Over the same period, the

proposed Class IV price has averaged

$1.01 more than the BFP, with

differences ranging from 3 cents under

to $1.97 over. Comments on this failure

of the more recent data to fit the

relationship between the BFP and the

proposed Class III and IV prices

observed over the earlier and longer

period are invited.

A feature of the relationships between

the proposed class prices that should be

pointed out is that there is no assurance

that the class prices will retain the

relative values that their designations

might imply. Because of the advance

pricing feature for Class I, and because

the Class I price would be based on a

declining average of former months’

prices, there is some possibility that the

Class I price level for some markets may

fall below the levels of one or more of

the other classes. At the same time,

basing the Class II price on the Class IV

component values might, at times, result

in the Class II price falling below the

level of the Class III price. Comments on

whether such changing price

relationships are appropriate and, if not,

how they might be avoided, are

welcome.

The pricing formulas contained in

this proposed rule are suggested as

viable replacements for the current basic

formula price for use in establishing

minimum prices for milk and the

components of milk. Comments should

address whether the formulas suggested

are appropriate or whether other pricing

methods would be preferable. In

addition, comments are welcomed on

the specific details of the suggested

pricing formulas. This would include

comments on the appropriate

commodity prices from which

component prices are to be calculated,

the method of obtaining such prices, the

content of each component to be priced

in the relevant commodity, the

appropriate make allowance to be used

in the determination of each component

price, the optimum method of

determining the Class I price mover, as

well as the appropriate level of the Class

II skim milk differential. Such

comments should incorporate relevant

data and rationale to support the

adoption of factors that differ from those

proposed herein.

ACTUAL CLASS PRICES, PROPOSED CLASS PRICES, AND PROPOSED CLASS I PRICE MOVER, BY MONTH

[January 1994 through December 1997]

Year and month

Basic

formula

price

Proposed

Class I

price

mover*

Proposed

Class III

price

Class III-A

price

Proposed

Class IV

price

Class II

price

Proposed

Class II

price

Dollars per cwt

1994:

January .............................................. $12.41 $12.55 $12.36 $10.22 $11.00 $13.25 $11.67

February ............................................. 12.41 12.55 12.43 10.23 11.01 12.26 11.68

March ................................................. 12.77 12.69 13.09 10.32 11.22 12.61 11.90

April .................................................... 12.99 12.88 13.36 10.34 11.31 13.19 11.99

May .................................................... 11.51 12.57 11.69 10.24 11.08 13.88 11.75

June ................................................... 11.25 12.16 11.15 10.09 11.02 12.18 11.70

July ..................................................... 11.41 12.01 11.85 10.13 11.08 10.35 11.76

August ................................................ 11.73 11.96 12.08 10.38 11.21 11.84 11.88

September .......................................... 12.04 12.03 12.44 10.35 11.25 12.95 11.92

October .............................................. 12.29 12.16 12.55 10.36 11.29 12.15 11.97

November ........................................... 11.86 12.14 11.88 10.40 11.29 12.53 11.97

December ........................................... 11.38 11.94 11.31 10.17 10.99 12.24 11.67

Average .............................................. 12.00 12.30 12.18 10.27 11.15 12.45 11.82

1995:

January .............................................. 11.35 11.78 11.44 10.06 10.83 11.02 11.51

February ............................................. 11.79 11.78 11.96 10.12 11.05 11.35 11.72

March ................................................. 11.89 11.85 12.17 10.22 11.14 12.20 11.81

April .................................................... 11.16 11.72 11.42 10.27 11.17 12.09 11.84

May .................................................... 11.12 11.62 11.36 10.21 11.19 12.19 11.87

June ................................................... 11.42 11.64 11.69 10.37 11.28 11.46 11.96

July ..................................................... 11.23 11.65 11.70 10.61 11.49 11.42 12.17

August ................................................ 11.55 11.83 12.36 10.82 11.72 11.72 12.40

September .......................................... 12.08 12.24 13.22 10.90 11.82 11.53 12.50

October .............................................. 12.61 12.74 13.69 11.66 12.45 11.85 13.12

November ........................................... 12.87 13.18 13.89 12.40 12.89 12.38 13.56

December ........................................... 12.91 13.54 14.01 11.24 11.99 12.91 12.66

Average .............................................. 11.83 12.13 12.41 10.74 11.58 11.84 12.26

1996:

January .............................................. 12.73 13.62 13.43 11.16 11.95 13.17 12.63

February ............................................. 12.59 13.59 13.31 10.39 11.54 13.21 12.21

March ................................................. 12.70 13.54 13.41 10.32 11.40 13.03 12.07
4890 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

22Earlier research that has been reported

elsewhere was based on an older version of the

model. Present revisions have made substantial

changes to the various transportation cost functions.

In particular, distribution costs for refrigerated

products were reduced substantially and now are

on par with bulk milk assembly costs.

ACTUAL CLASS PRICES, PROPOSED CLASS PRICES, AND PROPOSED CLASS I PRICE MOVER, BY MONTH—Continued

[January 1994 through December 1997]

Year and month

Basic

formula

price

Proposed

Class I

price

mover*

Proposed

Class III

price

Class III-A

price

Proposed

Class IV

price

Class II

price

Proposed

Class II

price

April .................................................... 13.09 13.61 13.88 10.52 11.55 12.89 12.23

May .................................................... 13.77 13.80 14.32 11.90 12.66 13.00 13.34

June ................................................... 13.92 14.23 14.18 15.12 15.24 13.39 15.91

July ..................................................... 14.49 14.91 14.86 16.01 16.33 14.07 17.01

August ................................................ 14.94 15.46 15.71 15.82 16.33 14.22 17.00

September .......................................... 15.37 16.10 16.31 15.85 17.17 14.79 17.84

October .............................................. 14.13 16.21 15.04 14.94 15.91 15.24 16.58

November ........................................... 11.61 15.42 12.45 12.18 13.12 15.67 13.80

December ........................................... 11.34 14.56 11.59 11.75 12.67 14.43 13.34

Average .............................................. 13.39 14.59 14.04 13.00 13.82 13.93 14.50

1997:

January .............................................. 11.94 13.77 11.92 11.50 12.48 11.91 13.16

February ............................................. 12.46 13.36 12.36 12.36 13.18 11.64 13.86

March ................................................. 12.49 13.25 12.47 12.78 13.73 12.24 14.40

April .................................................... 11.44 13.12 11.51 12.10 13.06 12.76 13.73

May .................................................... 10.70 12.97 10.69 11.56 12.49 12.79 13.17

June ................................................... 10.74 12.98 10.76 12.22 12.98 11.74 13.66

July ..................................................... 10.86 12.93 11.51 12.06 12.83 11.00 13.50

August ................................................ 12.07 12.94 13.07 11.88 12.69 11.04 13.36

September .......................................... 12.79 13.06 13.42 11.87 12.76 11.16 13.43

October .............................................. 12.83 13.43 13.71 13.50 14.27 12.37 14.95

November ........................................... 12.96 13.89 13.88 14.01 14.79 13.09 15.47

December ........................................... 13.29 14.08 14.23 12.46 13.53 13.13 14.20

Average .............................................. 12.05 13.32 12.46 12.36 13.23 12.07 13.91

48-Month Avg ..................................... 12.32 13.09 12.77 11.59 12.45 12.58 13.12

* To be used to calculate Class I price for second succeeding month.

3. Class I Pricing Structure

Although not required by the 1996

Farm Bill, the legislation provided

authorization for the Secretary to review

the Class I (fluid milk) price structure

(as part of the consolidation of the

orders) including the consideration of

utilization rates and multiple basing

points for developing a pricing system.

In any event, the consolidation of orders

requires the review of the pricing

system because historically Class I

pricing provisions, as well as other

Federal order provisions, have been

reviewed on an individual market basis.

The 1996 Farm Bill suggested two

possible methods for establishing a

Class I price structure, and USDA also

specifically requested input from the

public on this issue. As a result of these

requests, more than 1400 letters were

received that addressed Class I pricing.

The ideas submitted were divided into

several categories including: basic

formula price (market driven) plus a

differential established on location,

demand-based, or flat; decoupling Class

I pricing from the basic formula price;

pooling Class I differentials only; basing

Class I pricing on the cost of production;

end product pricing for all classes of

milk; and various other ideas including

farm point pricing, a two-class milk

system, and differentials reflecting only

regional supply and demand conditions.

To assist in analyzing and developing

a Class I price structure, USDA

established a partnership with Cornell

University (Cornell). Cornell’s analysis,

in part, was based on the U.S. Dairy

Sector Simulator Model (USDSS). The

USDSS is used to evaluate the

geographic or ‘spatial’ value of milk and

milk components across the U.S. under

the assumption of globally efficient

markets. Using 240 supply locations,

334 consumption locations, 622 dairy

processing plant locations, 5 product

groups, 2 milk components (fat and

solids-not-fat) and transportation and

distribution costs among all locations,

USDSS determines mathematically

consistent location values for milk and

milk components. The model uses data

from May and October 1995.

The supply and consumption at the

county level are aggregated to

geographic points-cities central to a

multi-county farm or population

density-to simplify a very complex

problem. The production of milk and

the consumption of dairy products are

fixed at the various supply and

consumption points used. Plant

locations are restricted to those

presently processing products but plant

processing locations were not

constrained with respect to the volume

processed. Processing costs are assumed

to be uniform between locations and

across plant volumes (no economies of

scale). Therefore, processing is allowed

to move among available locations to

find the least cost solution in terms of

assembly from supply points through

distribution to consumption points.

Transportation costs are categorized

by raw milk assembly, interplant bulk

shipments, refrigerated and nonrefrigerated finished products.

Transportation costs among regions

reflect not only distance traveled, but

also differences in wage rates and actual

highway weight limit restrictions. While

assembly costs and interplant bulk

shipments are calculated using a linear

cost function, the refrigerated and nonrefrigerated finished product functions

are non-linear. In fact, refrigerated costs

(e.g., packaged milk) fell below raw milk

assembly costs on an equivalent unit

basis in many cases at distances more

than 900 miles. Previous spatial

modeling at Cornell had assumed

constantly higher finished product

transportation costs versus raw milk

assembly costs for all distances.22
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4891

23Any references to the ‘‘current’’ system of Class

I prices or the ‘‘current’’ price structure are to be

interpreted as those established in or after the final

decision based on the 1990 national hearing issued

March 5, 1993 (58 FR 12634).

The output from the USDSS model

provides information as to optimal

processing locations and volumes at

those locations, milk assembly, and

intermediate and finished product

distribution flows. It represents a least

cost, or ‘efficient’ organization of the

industry. Importantly for the research,

the model provides the marginal values

(i.e., the value of one more unit) of milk

at each location. These values,

technically known as shadow prices, are

indicative of values that are consistent

with the optimized solution. A shadow

price on one unit of milk at any

processing location can be interpreted

as follows: If the processor at a

particular location had one more unit of

milk, the entire pattern of milk

assembly, and product transportation

could be reorganized in such a way that

marketing costs, equal to the shadow

price, could be saved. This notion of

marginal value is consistent with

economic theory on how prices are

determined in a competitive market.

The significance of the shadow value

in terms of milk price regulation may be

stated. If the regulated price, or cost of

milk, is arbitrarily set higher than the

shadow price at a particular processing

location, a lower cost solution could be

found by processing more milk at other

locations. This would imply higher

transportation costs for either raw milk

assembly, finished product distribution,

or both. Such a result clearly leads to a

higher cost, less efficient system. It is

also contrary to what is generally

thought of as ‘‘orderly’’ marketing of

milk which is a fundamental reason for

the existence of federal milk marketing

orders.

It should be stressed that for the

purposes of looking at Class I values, the

calculated shadow prices provide

information regarding the relationship

of the prices between geographic

locations. They do not provide guidance

regarding the overall level of Class I

price or differential values. That is, the

model does not help us understand

whether the Class I prices should be $14

in Minneapolis and $15 in New York

City, or $15 in Minneapolis and $16 in

New York City. However, it does tell us

that the Class I price difference between

the two locations should be about one

dollar.

A relative merit of the USDSS model

is the degree of detail available in the

output. This detail is achieved through

the careful assembly of spatially

disaggregated data. However, it should

be remembered that by its construction

the USDSS is a ‘model’ and thus a

simplification of a complex dairy

industry. In actuality, both the level and

relative values between locations would

change virtually daily and would reflect

a host of influences not represented in

the model. That notwithstanding, the

USDSS model provides an objective

guidepost from which to compare

current federal order differentials and to

consider possible alternatives.

Several factors must be considered

when selecting a replacement for the

current 23 Class I price structure. First, a

Class I price structure must be

considered from a national, as well as a

local or regional, perspective. As

expected, many comments from

industry address Class I pricing issues

from a local or regional perspective.

These comments provide valuable

information about particular markets

but do not consider the feasibility or

impact of a local or regional issue on a

national basis. While remaining mindful

of local and regional concerns, USDA

has also evaluated structures from a

national perspective.

Second, a Class I price structure must

recognize the location value of milk.

Results from the USDSS model confirm

that milk has value at location. As

described earlier, the model provides

shadow prices reflecting the relative

values of milk and milk components at

geographic locations. While shadow

prices do not suggest Class I

differentials for specific locations, they

do provide a means to evaluate price

relationships among locations.

Third, a Class I price structure must

recognize all uses of milk. The classified

pricing system contained in the Federal

milk order program values milk for fluid

use higher than milk used for soft or

hard manufactured products. The higher

Class I price encourages all milk to be

used first to satisfy Class I needs. At the

point where the cost of moving milk

from an alternate location for Class I use

is equal to the cost to supply milk for

manufactured products, demand for

manufactured products influences a

market’s ability to procure milk for

Class I needs. Thus, all uses of milk

must be considered when evaluating a

national Class I pricing structure.

Finally, a Class I price structure must

meet the requirements of the AMAA.

The broad tenet of the AMAA is to

establish and maintain orderly

marketing conditions. For the Federal

milk order program this is achieved

primarily through classified pricing and

pooling. With regard to pricing, it is

recognized that the objective of the

AMAA is to stabilize the marketplace

with minimum prices, not to set market

prices. In evaluating a national Class I

pricing structure, consideration was

given to whether the proposed prices

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 regard to raw product

costs.

Of the numerous Class I price

proposals submitted, seven broad

categories of proposals were selected for

further evaluation. These seven

categories of proposals are all based on

a basic formula price plus a differential.

The seven categories of proposals were

selected because they basically adhered

to these four standards. The seven

options considered in further detail are

location specific differentials, flat

differentials, relative use differentials,

demand-based differentials, and

decoupled baseline with adjusted

differentials. These options will be

explained in more detail later.

Several comments were received that

suggested pooling only Class I

differentials as a replacement for the

current Class I price structure. This

proposal was eliminated from further

analysis because it would require new

legislative authority to implement since

the AMAA requires the Secretary to

establish minimum prices for milk. This

proposal would result in the elimination

of all manufacturing milk classes.

Processors and manufacturers would

compete for available milk supplies

providing producers with a basic

competitive price for their milk.

The AMAA requires in 7 U.S.C.

608c(5)(A) that the Department classify

‘‘* * * milk in accordance with the

form in which or the purpose for which

it is used * * *’’ and establish ‘‘* * *

minimum prices for each such use of

classification.’’ If the Department did

not differentiate between the uses of

milk as suggested in this proposal, it is

difficult to determine how this would be

accomplished. Moreover, Section

8c(5)(B) provides ‘‘* * * for the

payment to all producers and

associations of producers delivering

milk to all handlers of uniform prices

for all milk so delivered, irrespective of

the uses made of such milk by the

individual handlers to whom it is

delivered * * *.’’ This further indicates

that the intent of the authorizing

legislation is the classification and

pricing of all producer deliveries.

Otherwise, it would be difficult to pay

producers a uniform price for all of their

milk ‘‘* * * irrespective of the uses

made of such milk by the individual

handler to whom it is delivered.’’

Several proposals were submitted

supporting ‘‘decoupling’’ Class I prices
4892 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

from Class III prices. The term

‘‘decoupling’’ has been construed in a

number of ways; however, a review of

the proposals indicates that the primary

concern is about how the BFP

influences Class I prices. The purist

definition of decoupling is to determine

Class I prices without relating them to

the Class III price through differentials.

This approach implies no relationship

between the value of milk for fluid use

and milk used for manufacturing. With

this in mind, in general, decoupled

prices could be determined in two ways:

(1) Set Class I prices administratively; or

(2) Set Class I prices based on a

relationship that does not include the

Class III price.

While it is true that milk for fluid use

and milk for manufacturing use have

different values, the realities of the

characteristics of milk supply and

demand, and the AMAA mandate ‘‘to

provide an adequate supply of milk’’ for

fluid use, suggests the necessity of a

relationship between the price of milk

for fluid use and milk used for

manufacturing. Adopting a Class I price

based on the purist definition of

decoupling would not provide a

relationship between fluid and

manufacturing uses. In this context,

decoupling Class I prices from Class III

prices has been eliminated. However,

the use of a ‘‘decoupled’’ price based on

the Class III price is considered in

further detail later.

Some comments were received

recommending the use of end product

pricing. One comment specifically

recommended it on all classes of milk

while others were unclear if end

product pricing should apply to all

classes of milk. Under end product

pricing, milk components would be

priced according to their value in the

product mix.

A number of questions arise with the

recommendation of end product pricing.

Mathematically it is relatively easy to

take commodity prices and work

backward on the average. However,

where is the appropriate ‘‘end’’ to work

backward from? Nonfat dry milk, for

example, is not an end product at the

consumption level. Likewise, sweet

butter can be used for ice cream, etc.

Other questions raised by this option

include: Is a Class I milk value properly

discovered based on component value

in manufacturing products? Do make

allowances protect inefficiencies in the

manufacturing sector and thereby

transfer costs to the other sectors?

At this point in time there is no need

to price Class I milk on end product

components. The market system has

limited ability to value additional

nonfat solids in fluid milk sales.

However, technology is on the horizon

that may substantially change milk

composition. If it results in a consumer

acceptable product at some point in the

future, end product pricing to establish

fluid milk prices may need to be

revisited.

Several comments supported the

adoption of a cost of production factor

in the determination of a Class I price.

Milk prices are a result of the supply

and demand conditions in the

marketplace. The cost of producing milk

is obviously a factor in the supply

function. However, many other factors

affect the price of milk. Demand

influences such as household income

levels, prices of substitutes or

complements, and availability all have a

significant impact on the price. Pricing

milk solely on the cost of production

lacks economic justification.

Numerous other Class I pricing

proposals were presented to the

Department. At this time they are not

being further considered primarily

because they are regionally based and

are not feasibly adaptable on a

nationwide basis, do not adhere to the

requirements of the AMAA, do not

recognize the location value of milk, or

do not recognize all class uses of milk.

Of the seven categories of options

selected for further review, six options

were contained in the pricing reports

issued by AMS Dairy Programs in

March 1997. Based on the feedback

received from these reports, another

pricing option was submitted for

consideration by USDA and has been

included for further review. In addition,

further analysis and development of the

modified location-specific differentials

(Option 1B), presented in the March

pricing reports, has resulted in a

revision of this proposal and it is now

referred to as relative value-specific

differentials. The seven options

analyzed in further detail, representing

a broad spectrum of views expressed by

interested parties, are as follows:

Option 1A: Location-Specific

Differentials—$1.60 per hundredweight

fixed differential for three surplus zones

(Upper Midwest, West, and Southwest)

within a nine-zone national price

surface, plus for the other six zones, an

added component that reflects regional

differences in the value of fluid and

manufacturing milk.

Option 1B: Relative Value-Specific

Differentials—Class I differentials are

established based on a relationship

between prices and geographic location.

This option establishes the differential

levels by equating the relative valuespecific differential in Minneapolis,

Minnesota, to current Class I differential

level at this location of $1.20 per

hundredweight. A location adjusted

price differential for every county is

established by evaluating differences

between nearby Class I differential

pricing points generated by the USDSS

model.

Option 2: Relative Use Differentials—

$1.60 per hundredweight fixed

differential plus a formula-based

differential driven by the ratio of Class

I milk to all other uses of milk.

Option 3A: Flat Differentials—$1.60

per hundredweight flat differential,

uniformly applied across all orders to

generate an identical minimum Class I

price at all locations.

Option 3B: Flat Differentials Modified

by Class I Use—$2.00 per

hundredweight differential in markets

where Class I utilization is less than 70

percent on an annual basis and a

differential equal to $2.00+$0.075 (Class

I use %¥70%) in markets where the

Class I utilization is equal to or exceeds

70 percent.

Option 4: Demand-based

Differentials—$1.00 per hundredweight

fixed differential plus a transportation

credit based on location of reserve milk

supplies.

Option 5: Decoupled Baseline Class I

Prices with Adjustors—Baseline 1996

Class I prices adjusted by a supply/

demand adjustor that uses a 12-month

rolling average utilization to determine

a 2 percent change that results in a

$0.12 per hundred weight price

adjustment. A short-term cost of

production adjustor may also be applied

to this option.

Evaluation Criteria

In order to evaluate the Class I pricing

options, nine performance criteria,

based upon the regulatory objectives

and limitations of the AMAA, were

developed. Economic principles of

efficiency and equity were used to

describe market performance. These

evaluation criteria established an initial

framework for analysis of the Class I

pricing options. The nine evaluation

criteria were divided into two

categories, objective and administrative.

Six objective criteria were identified

and defined as follows:

1. Ensure an adequate supply of milk

for fluid use. Class I price levels need

to provide a sufficient price signal to

maintain an adequate supply of milk for

fluid use. This supply level can be

achieved through either the movement

of milk to where it is needed, increased

production, or some combination of

both.

2. Recognize quality (Grade A) value

of milk. Grade A milk is required for

fluid use. Additional costs of obtaining
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4893

and maintaining Grade A status need to

be reflected in Class I prices.

3. Provide appropriate market signals.

A Class I price should send timely

signals to the market regarding supply/

demand conditions.

4. Recognize value of milk at location.

Basic economic theory, validated by

actual market observations and

University-based research, affirms that

milk for Class I use has a different value

at different locations. This value needs

to be reflected in the Class I price in

order for the system to recognize and

resemble the market rather than

interfere with the market.

5. Facilitate orderly marketing with

coordinated system of prices. A system

of Class I prices needs to be coordinated

on a national level. Appropriate levels

of prices will provide alignment both

within and among marketing areas. This

coordination is necessary for the

efficient and orderly marketing of milk.

6. Recognize handler equity with

regard to raw product costs.

Appropriate levels of Class I prices

provide known and visible prices at all

locations thereby ensuring that handlers

are able to compete for available milk

supplies on an equitable basis.

Three administrative criteria were

identified and described as follows:

1. Minimize regulatory burden. The

Class I price structure should not

significantly increase the burden on

handlers, particularly small businesses.

This would include increased reporting

requirements and recordkeeping, as well

as possible increases in administrative

assessment should Market

Administrators be required to manage a

more complex regulatory system.

2. Minimize impact on small

businesses. The Class I price should be

set at a level that does not disadvantage

small businesses in competition with

large businesses.

3. Provide long-term viability. The

Class I price structure should be

expected to operate for an extended

time period without major

modifications.

The nine evaluation criteria listed

above were used to qualitatively

evaluate each of the seven options. Each

option was evaluated based on how the

option performed compared to the

current system, either better than, worse

than, or the same as, for each

performance criterion. The results of the

qualitative analysis provided a

preliminary framework from which to

identify options that would be analyzed

quantitatively using a multi-regional

model developed by the Economic

Research Service of the Department.

Based on the qualitative analysis, four

of the seven options were eliminated

from further analysis. These options

were: Option 2—Relative Use

Differentials, Option 3A—Flat

Differentials, Option 3B—Modified Flat

Differentials, and Option 4—DemandBased Differentials. These options were

eliminated for various reasons including

failure to adhere to AMAA, creation of

disorderly marketing conditions, and

impacts on small businesses. A

discussion of the four eliminated

options, including the evaluation

against the evaluation criteria follows.

Option 2: Relative Use Differential.

Utilization-based differentials were

discussed extensively during the Farm

Bill debate and have been discussed by

the industry for several years. The 1996

Farm Bill specifically authorizes the

Secretary to consider utilization rates

when establishing Class I differentials.

This is perceived to be based on an

order’s marketwide utilization. A

utilization-based differential would

allow Class I differentials to adjust

automatically with changing market

supply and demand conditions. An

increased demand for fluid milk relative

to supply would generate an increase in

the Class I differential. Hence an

incentive is provided to increase local

production or attract alternate supplies.

Likewise, if milk supplies increase in

relation to fluid sales, the differential

would adjust downward signaling to

producers and handlers that milk is

more than adequate to meet the local

needs.

One possible option of a utilizationbased differential is relative use. Under

this concept, a marketing area’s

differential would be determined by a

formula based on the ratio of Class I

milk to milk in all other classes. In order

to prevent widely fluctuating prices, a

percentage limit could be placed on

differential changes to temper

adjustments based on market supply

and demand conditions. For this

analysis, a limit of 25 percent has been

applied. The relative use ratio could be

computed on a monthly, quarterly, or

annually moving average basis.

Using this concept, the relative use

Class I differential would equal $1.60

per hundredweight plus the relative use

ratio times $1.00. A 25 percent limit

would be applied so the new differential

would not exceed 125 percent of the

current differential nor fall to less than

75 percent of the current differential.

The $1.60 base differential was selected

to be comparable with other options

considered in this rule such as Option

1A, location-specific differentials.

Further discussion of the $1.60 base

differential will be addressed under the

discussion of Option 1A later in this

proposed rule.

The table below illustrates the Class I

differentials under the proposed

consolidated orders. These differentials

are not location-specific within the

applicable orders. For purposes of this

analysis and to provide a basis for

comparison within the proposed

consolidated orders, a weighted average

Class I differential for each order has

been calculated, based on October 1995

data. This weighted average differential

is computed by multiplying the

percentage of Class I milk in each of the

current orders that comprise the

consolidated order by the applicable

current order differential and adding the

resulting amounts. This weighted

average differential is not locationspecific for the consolidated orders.

TABLE 1.—CLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON OCTOBER 1995 DATA UNDER OPTION 2—RELATIVE

USE

Proposed order 1

Relative use

ratio 2

(%)

+ $1.60=Class

I diff.

($/cwt) 3

Weighted average diff.

($/cwt) 3

Maximum diff.

range

(75%–125%)

New diff.

($/cwt)

Change in diff.

($/cwt)

Northeast ................................................... 0.92 2.52 3.14 2.35–3.93 2.52 ¥0.62

Appalachian .............................................. 4.60 6.20 2.79 2.09–3.49 3.49 0.70

Southeast .................................................. 5.76 7.36 3.04 2.28–3.80 3.80 0.76

Florida ....................................................... 7.54 9.14 3.89 2.92–4.86 4.86 0.97

Mideast ...................................................... 1.26 2.86 1.91 1.43–2.39 2.39 0.48

Central ....................................................... 0.95 2.55 2.52 1.89–3.15 2.55 0.03

Upper Midwest .......................................... 0.53 2.13 1.32 0.99–1.65 1.65 0.33

Southwest ................................................. 0.93 2.53 3.01 2.26–3.76 2.53 ¥0.48

AZ-Las Vegas ........................................... 1.04 2.64 2.46 1.85–3.08 2.64 0.18
4894 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

TABLE 1.—CLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON OCTOBER 1995 DATA UNDER OPTION 2—RELATIVE

USE—Continued

Proposed order 1

Relative use

ratio 2

(%)

+ $1.60=Class

I diff.

($/cwt) 3

Weighted average diff.

($/cwt) 3

Maximum diff.

range

(75%–125%)

New diff.

($/cwt)

Change in diff.

($/cwt)

Western ..................................................... 0.42 2.02 1.84 1.38–2.30 2.02 0.18

Pacific NW ................................................ 0.55 2.15 1.90 1.43–2.38 2.15 0.25

1Based on the 11 proposed orders contained in this proposed rule.

2 Relative use ratio = Class I÷all other uses. 3Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each current order multiplied by the applicable current order differential.

Analysis Based on Evaluation Criteria

In one of the nine criteria, Option 2

may perform slightly better than the

current system. In five of the nine

criteria, Option 2 performs poorer than

the current system, while in the

remaining three criteria, it performed

about the same as the current system.

Option 2 was evaluated against the

objective criteria as follows:

1. Ensure an adequate supply of milk

for fluid use. In terms of ensuring an

adequate supply of milk for the fluid

market, Option 2 provides for the

appropriate minimum price levels

necessary to bring forth adequate milk

supplies to meet the needs of the fluid

market. Based on the comparisons of

weighted average current differentials

versus the relative use ratio

differentials, eight of the proposed

orders would receive moderate to

significant increases while three

markets would have slight to significant

decreases. Differential changes of these

magnitudes could have some effect on

milk supplies in some regions.

However, the availability of milk for

fluid use would not be significantly

different from what exists today.

2. Recognize quality (Grade A) value

of milk. Option 2 does recognize the

quality value (Grade A) of milk with the

$1.60 base differential.

3. Provide appropriate market signals.

One of the benefits of a self-adjusting

system is to provide producers with a

better signal of the market conditions. In

theory, when supplies increase in

relation to fluid demand, the Class I

utilization would decrease precipitating

a downward adjustment in the

differential thereby signaling producers

to decrease production. Likewise, if

supplies decrease relative to demand,

the Class I utilization would increase

precipitating an upward adjustment in

the differential signaling producers to

increase production and/or signaling

processors of the need to reach further

for the milk supply. Option 2 provides

for a faster market signal than the

current system of simply pooling the

various classes of milk.

Option 2 does not recognize that

utilization percentages may be affected

by factors such as decisions to pool or

not pool manufacturing plants, shifting

supplies among markets, market

incentives or disincentives such as

transportation credits, and pool plant

and producer definitions. These may or

may not be appropriate factors to

consider in determining supply/demand

conditions accurately but these factors

will directly impact the relative use

ratio.

4. Recognize value of milk at location.

Cornell’s economic research indicates

that milk has different values based on

location and use. The relative use

concept suggests that a market has only

some average value and not a value at

any specific location. Markets such as

the Arizona-Las Vegas and Southwest

would have similar utilizations but are

quite different in size and in the

distance milk must be hauled to provide

sufficient supplies for the fluid market.

Phoenix, Arizona handlers receive milk

from relatively close supplies, less than

50 miles, whereas the San Antonio,

Texas handlers must reach out 200–500

miles and Houston, Texas handlers

must reach out 270–650 miles to

adequately supply their total needs. The

relative use concept does not take this

into account. Location adjustments

could not overcome this deficiency

since they would create disorderly

marketing conditions at points where

they bordered on neighboring orders.

Market structure with regard to supply

areas and demand centers must be

considered, thus Option 2 performs

worse than the current system.

5. Facilitate orderly marketing with

coordinated system of prices. The need

for coordination of prices between and

among markets is not recognized under

the relative use concept. Markets with

high Class I utilization could be

adjacent to low utilization markets.

Prices in adjacent markets need to be

aligned to facilitate orderly marketing

conditions. If utilization is the primary

criteria for establishing Class I

differentials, price alignment may not

exist between adjacent markets creating

handler inequity and disorderly

marketing conditions.

6. Recognize handler equity with

regard to raw product costs. Markets can

adjust rapidly depending on pooling

decisions of cooperatives. In 1996, the

New Mexico-West Texas Order had a

Class I utilization high of 52.1% in May

falling to a low of 23.9% in December.

Heavy manufacturing markets regularly

have larger volumes of milk depooled

during periods of rapidly increasing

prices. If Class I differentials were

allowed to adjust too frequently, price

alignments established between and

among markets would disappear

causing inequity among competing

handlers. To prevent extreme

differential changes, percentage limits

are proposed to limit differential

changes. However when a change is

warranted, a significant price

adjustment could occur requiring

realignment of zones between adjacent

markets. Thus, the main attraction of

this concept, the self-adjustment of

differentials, actually creates problems

with price alignment and handler equity

between orders.

Option 2 was evaluated against the

administrative criteria as follows:

1. Minimize regulatory burden.

Option 2 would not likely increase the

regulatory burden on handlers.

Differentials would be set until market

conditions warranted a change. No

additional reporting would be necessary

to implement such a system.

2. Minimize impact on small

businesses. Small handlers in markets

where Class I differentials are

decreasing might be somewhat

disadvantaged since over-order charges

would probably increase. This tends to

affect small and large handlers

disproportionately. Small milk

producers in these markets could also

experience a small decline in their pay

prices.

3. Provide long-term viability. As

supply and demand conditions in

markets adjust to the point where

differentials need to be changed,

administrative input may be required to
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4895

align markets and maintain handler

equity. Thus, the system becomes an

administered system such as we have

today rather than a self-adjusting

procedure. This fact, as well as the other

shortcomings, mentioned tends to

negate its appeal as a viable long-term

option.

Although Option 2 appears to perform

better than the current system in

providing appropriate market signals to

producers, this becomes a major

obstacle with this proposal. In fact, it is

because of this self-adjustment that

Option 2 performs poorer than the

current system in five of the criteria.

Even though independent of other

factors Option 2 provides more

appropriate price signals, it does so in

a way that will have significant impacts

on certain regions of the country. The

projected impacts of Option 2 by region

are discussed below:

Central, Mideast, and Upper Midwest.

Class I differentials are estimated to

increase from $0.00–$0.48 in the

Central, Mideast, and Midwestern

regions. Currently, over-order charges

are significantly higher and likely

would largely absorb these differential

increases. Impacts on producers and

processors would be minimal.

Northeast. The Northeastern

marketing area would be affected

significantly by the adoption of a

relative use differential. Processors

would pay on average $0.58 less for

Class I milk as compared to the current

system. Producers would likely turn to

over-order charges to try to make up for

their lost revenue. Historically, this

region has had difficulty maintaining a

large over-order premium structure and

assumptions are that this would

continue. Producer incomes would

decrease possibly impacting the total

market’s milk supplies.

Southeast. Large increases in Class I

differentials would occur in the orders

located in the Southeast. Class I

handlers would experience increased

competition from lower cost handlers in

nearby markets. Producers in these

markets would probably not experience

any significant gains from these

increased differentials due to the overorder premiums that are currently being

charged.

Southwest. The Southwest market is

the only other market to experience

decreases in differentials. Over-order

charges currently are relatively small in

this market and an attempt to increase

the charges would likely occur.

However, producer groups have had the

same difficulty as the Northeast in

maintaining an over-order structure. A

$0.48 drop in the average differential in

the Southwestern market would surely

be felt by producers and accelerate the

exodus of producers from the East Texas

supply area. Producers in New Mexico

and West Texas would also be affected,

but the impact may not be as severe.

Arizona-Las Vegas, Western, and

Pacific Northwest. In the Western

regions, Class I differentials are

expected to increase slightly. Over-order

charges in these markets are not as great

as in the Midwestern markets and

would probably be unable to totally

absorb any significant Class I price

increase. Producer pay prices and Class

I handler costs would increase slightly.

Because of the limited effect of overall

Class I differential changes, Option 2

would have a minimal effect on small

businesses, both producers and

processors. Areas that have decreases in

Class I differentials would have a

minimal negative impact on producer

pay prices. The majority of producers

impacted in these regions are

categorized as small businesses. On the

other hand, handlers in areas with larger

increases in the Class I differentials

would experience increased

competition from lower cost regions.

Location advantages of some small

handlers would disappear while others

emerge. Handler equity in these

competing markets could erode placing

some small handlers under greater risk.

It is difficult to quantify the impact to

consumers under this option. Federal

Order Class I differentials around the

country would likely increase slightly.

Over-order charges may decline to offset

this increase. It is expected that overall

handler costs would change slightly

under this option resulting in little

change to consumer prices.

Although this option would provide

more appropriate and timely market

signals to producers, setting Class I

differentials based solely on utilization

presents price alignment problems.

Because Class I differentials would be

allowed to change independently from

adjacent markets, this would result in

significant equity problems among

competing handlers thus impacting

small businesses on a continual basis.

Consequently, this proposal would lead

to disorderly marketing conditions

throughout the Federal order program

and is not given further consideration as

a possible Class I price structure.

Option 3A: Flat Differential. Under

this option, an equal differential would

be applied in all orders resulting in an

identical minimum Class I price at all

locations. For example, the Class I

differential in Atlanta, Georgia, would

be the same as the Class I differential in

Minneapolis, Minnesota. For

comparison to other Class I price

options discussed in this proposed rule,

a flat $1.60 differential level has been

evaluated even though some public

comments proposed flat differentials of

$2.00 or more per hundredweight.

The concept of flat Class I

differentials across all orders is largely

predicated on the view that current

Class I differential levels are too high in

many parts of the country. Accordingly,

regionally differentiated Class I prices

are generally unwarranted and have led

to or have not been properly adjusted to

reflect changes in milk production. The

most recent consideration of a flat Class

I price plan was considered during a

National Hearing held in Fall 1990.

Proponents of flat Class I pricing

maintain that the marketplace should

establish more of the value required to

draw milk to fluid outlets than is

reflected in the minimum prices

established by the current Class I

system. Increased reliance on the

marketplace in determining a price has

appeal because the competitive normal

marketplace, where there are many

buyers and sellers with equal market

knowledge and power, is generally

viewed as the most efficient

determinant of values and prices.

The following table illustrates the

differential-level impact on the

suggested consolidated orders based on

October 1995 data assuming a flat

differential level of $1.60. As indicated

in the table, a flat $1.60 differential level

is significantly less than the calculated

weighted average differential level in

most marketing areas, except for the

suggested Upper Midwest regional

order.
4896 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

TABLE 2.—CLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON OCTOBER 1995 DATA UNDER OPTION 3A—FLAT

DIFFERENTIALS

Suggested consolidated order 1

New

differential

($/cwt)

Weighted

average

differential

($/cwt) 2

Change

($/cwt)

Northeast ...................................................................................................................................... 1.60 3.14 ¥1.54

Appalachian .................................................................................................................................. 1.60 2.79 ¥1.19

Southeast ..................................................................................................................................... 1.60 3.04 ¥1.44

Florida ........................................................................................................................................... 1.60 3.89 ¥2.29

Mideast ......................................................................................................................................... 1.60 1.91 ¥0.31

Central .......................................................................................................................................... 1.60 2.52 ¥0.92

Up Midwest ................................................................................................................................... 1.60 1.32 0.28

Southwest ..................................................................................................................................... 1.60 3.01 ¥1.41

Arizona-Las Vegas ....................................................................................................................... 1.60 2.46 ¥0.86

Western ........................................................................................................................................ 1.60 1.84 ¥0.24

Pacific NW .................................................................................................................................... 1.60 1.90 ¥0.30

1Based on the 11 proposed orders contained in this proposed rule.

2Weighted average differential for the consolidated orders is computed by summing the product of the percentage of Class I milk in each current order multiplied by the applicable current order differential.

Analysis Based on Evaluation Criteria

In two of the nine evaluation criteria,

the concept of a flat Class I price

structure performs equal to the current

Class I system. In all the other criteria,

a flat Class I price structure performs

worse than the current Class I price

system.

Option 3A was evaluated against the

objective criteria as follows:

1. Ensure an adequate supply of milk

for fluid use. A flat Class I price

structure performs worse than the

current Class I price structure in

ensuring an adequate supply of milk for

fluid use because it ignores the

fundamental fact that Class I milk has

different values depending on its

location. As a result, the marketplace

would have to establish all of the

appropriate values of milk within and

between markets. The current method of

establishing Class I differentials reflects

the sufficiency and availability of local

milk supplies together with valuing

alternative milk supplies. Because some

milk is produced just about everywhere,

a Class I differential needs only to be

high enough to bring forth enough

milk—‘‘local’’ and milk from alternative

and more distant supply areas—at any

location to meet Class I demand. The

cost of transporting alternative milk

supplies into an area places an upper

limit constraint on the value of milk at

that location and thus provides a

measure by which to evaluate whether

or not the differential level established

is reasonable.

Under a flat Class I price plan, the

assumption is made that the minimum

differential value of Class I milk is the

same at all locations. Reforming the

Class I price structure should continue

to recognize the observable and

measurable fact that Class I milk has a

location value. At all locations, the

Class I differential value needs to

represent a reasonable sum of such

factors that, taken as a whole,

accomplish the goal of assuring an

adequate supply of milk to meet

demands. In this context, there does not

appear to be a sufficient economic

rationale to apply a flat Class I

differential value that may be

appropriate to one market and apply it

to all other markets. Doing so would not

reflect the important and measurable

characteristic that fluid milk takes on

different relative value depending on

where it is located and where it needs

to go to satisfy demand. Therefore, the

Class I milk pricing plan needs to

establish a price level that provides

sufficient economic incentives for the

movement of Class I milk. Such a basis

is consistent with the supply and

demand pricing criteria of the AMAA.

2. Recognize quality (Grade A) value

of milk. A flat Class I price structure

does recognize the quality value (Grade

A) of milk with the $1.60 flat

differential.

3. Provide appropriate market signals.

Because a flat Class I price option does

not recognize the observable fact that

milk has differing location values, it

cannot provide the appropriate price

signals to ensure that, in all markets, the

differential level is sufficiently high

enough to bring forth the amount of

milk needed to satisfy demand.

Additionally, a flat Class I price option

does not provide appropriate market

signals on how a deficit market can

obtain needed supplemental milk

supplies. For example, if the Class I

price in Chicago is the same as Atlanta,

where supplemental supplies are often

needed, a flat Class I price provides no

economic incentive to absorb the

producer-incurred cost of moving milk

to Atlanta. In this example, the total

price incentives that would encourage

milk to move must come from outside

the pricing structure.

The following real-world intra-market

example demonstrates problems with

flat Class I pricing. In Texas, the cities

of Dallas and Houston are major milk

consumption centers. Dallas is located

nearly equidistant (about 70 miles) from

two major milk supply areas to the east

and south. Houston is located much

further (about 255 miles) from the same

two milk supply areas and, like Dallas,

relies on the same two milksheds for

satisfying its Class I demands. A flat

Class I price surface applicable to both

cities does not, in and of itself, provide

the price difference necessary to cause

producers to deliver their milk to

Houston. The additional dollars (value)

that would need to attach to milk to

cause it to be delivered to Houston

would fall outside of the regulated

price. Producers might not share in the

value above the minimum regulated

price if handlers have the market power

to play one producer against another to

lower prices. Because this additional

value is not represented in a regulated

price charged to handlers, a degree of

market power is returned to handlers.

Those producers located nearer to

Houston would have no marketing

alternative since they could only haul

their milk greater distances to a

manufacturing outlet for surplus

disposal. Additionally, handlers at

Houston would also be less certain of

the price their competitors were paying

for milk than they were with a regulated

price that more adequately reflected

different location values of milk.

Location adjustments, which address

such problems, could not be used under
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4897

a flat differential option since they

would create disorderly marketing

conditions at points where they

bordered on neighboring orders.

Examining an inter-market example

moves the analysis to one that is more

regional and national in scope. Using

prevailing Class I utilization rates

between the Ohio and Carolina markets

at an assumed flat Class I differential of

$2.00 results in nearly no change in the

blend price to producers in the Ohio

market. However, in the higher Class I

use Carolina market, producer blend

prices are reduced by 81 cents, changing

the blend price differences between the

two markets from $1.27 (current blend

price difference) to only 46 cents. Since

the blend price provides the price signal

to producers in a market to alter

production, and should provide the

incentive to move milk from the Ohio

market to the Carolina market, the 46-

cent price difference is simply not

enough of a price signal difference to

achieve this outcome.

4. Recognize value of milk at location.

Flat Class I pricing does not fully

recognize that milk has value at

location. Instead, it assumes that all

Class I milk has the same value at any

location. To the extent that milk would

take on additional value above a

specified flat differential, that additional

value would be determined by the

marketplace and be outside of the

minimum regulated value which is

shared with producers. Research

conducted by Cornell University

suggests that Class I prices would vary

in the absence of regulation on the basis

of supply and demand conditions under

assumptions of a rational, competitive

market. Results of the USDSS model

conclude that there is a location value

for milk used in fluid uses and that

value does not resemble a flat Class I

price surface. Because flat Class I

pricing does not fully recognize the

value of milk at location, it can only be

concluded that it does not perform as

well as the current Class I price system.

5. Facilitate orderly marketing with a

coordinated system of Class I prices.

Flat Class I pricing does not assure

orderly marketing with a coordinated

system of Class I prices. Flat Class I

pricing sets an equal value on Class I

milk in all markets even when such a

price is not warranted. Flat Class I

pricing does not provide for

coordination of Class I milk value on a

national scale because the location

value is not reflected in the regulated

price but left for the producers and

processors to individually negotiate.

6. Recognize handler equity with

regard to raw product costs. Class I

values that are location-based assure

that handlers’ costs for milk are more

equitable and uniform. Because

differential levels largely represent

location value, adjusting the level by

location relative to all other locations

from the lowest point level (price

alignment), assures that all handlers are

paying the same relative price for their

milk supply. The need or incentive for

handlers to compete on the basis of the

cost of a milk supply, otherwise a

burden borne by dairy farmers, is

mitigated because of the location

adjustments on the minimum

procurement prices paid by their

competitors. Mitigated also is the

possible disorder from price uncertainty

for both handlers and producers.

Because milk is valued on an equitable

basis, handlers compete with each other

on the basis of plant operations and on

the basis of service to their customers.

Option 3A was evaluated against the

administrative criteria as follows:

1. Minimize regulatory burden. The

flat differential price structure performs

equal to the current system in

minimizing the regulatory burden on

handlers because no additional

information would be required under

this option than is currently required.

2. Minimize the impact on small

businesses. Flat Class I pricing can

impact small businesses, both producers

and handlers. Flat Class I pricing

changes the competitive relationship

between large and small handlers.

Under the current Class I pricing system

all handlers, regardless of size, compete

equally on the cost of their milk supply.

Under a flat pricing system, a large

handler could have a greater

competitive advantage in procuring a

milk supply because it may be able to,

in the short run, offer producers a price

somewhat above the flat minimum level

or above what a small handler is able to

pay. Over a longer time period, the

small handler might not be able to

procure a supply of milk.

3. Provide long-term viability. An

important objective in the reform of the

Class I price structure is that the

resulting price structure be viable for a

longer period of time. Given the

potential competitive problems

associated with flat Class I pricing

addressed above, a flat Class I price

structure would seem to fail the

criterion of offering an alternative that

would endure.

Flat Class I pricing performs worse

than the current system, raising a

number of issues regarding its impact on

dairy farmers. As Table 2 suggests, there

is significantly less Class I revenue that

could be shared with producers

resulting in a lowering of producer

blend prices everywhere. Only in the

proposed Upper Midwest order would

there be an increase, all other areas

would lose revenue. However, even

with the increase in the Class I

differential in the Upper Midwest, given

the relatively low Class I utilization of

this market the actual change in

producer blend prices would be much

smaller than the change in the

differential.

As discussed earlier, flat Class I

pricing could effect small businesses,

both producers and handlers, depending

on where they are located and the

magnitude of change in the Class I

differential. Plants located further from

significant surplus regions would

experience losses. Similarly producers

more distantly located would also

experience significant revenue losses.

Apparent advantages of a flat Class I

price plan are the initial equity among

all producers regardless of their location

and the short-run potential for lower

prices to consumers in areas that would

experience a lowering of Class I prices.

The long-run effect on producers in

distant and generally milk deficit

markets is unclear.

Because flat Class I pricing does not

ensure an adequate supply of milk for

fluid uses as well as the current system,

it is unclear that over the long run

consumers would actually enjoy lower

milk prices. Should a flat Class I price

structure negatively affect producer

income, there is diminished certainty

that the order program would ensure

consumers with an adequate supply of

milk at reasonable prices.

A problem in employing a flat Class

I differential was demonstrated in the

intra-market example discussed

previously. Producers might not share

in the value above the minimum

regulated prices which more fully

represents the value of Class I milk

because handlers have the market power

to obtain price concessions from

producers. Likewise, those producers

who are located more distant from the

primary milk sheds could have reduced

market power since the alternative

would be to haul their milk greater

distances to a manufacturing outlet for

surplus disposal. Handlers at greater

distances from the milkshed would be

less certain of the price their

competitors are paying for their milk

supply than they were with a regulated

price that more fully reflected the value

of milk at location.

In the inter-market example also

discussed earlier, flat Class I pricing

introduces another variable, Class I

utilization rates, into the increased

market power transferred from the

producer to the handler. Flat Class I

pricing combined with Class I
4898 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

utilization rates results in an

insignificant change in the blend price

paid to producers in an adequately

supplied market. However, in higher

Class I utilization and deficit markets,

producer blend prices are significantly

reduced. Since the blend price provides

the price signal to producers in a market

to alter production based on demand,

and provides the incentive to move

needed milk between two markets, the

narrower price difference may not

provide an adequate price difference for

more adequately supplied markets to

ship needed milk to deficit markets.

There are few real experiences on

what might happen under a system of

flat Class I differentials. The Mississippi

milk order was voted out during May

1973 (38 FR 8751) through March 1976.

In the absence of the order, ‘‘flat’’

pricing replaced classified pricing.

Sharp variations in prices paid to

producers by individual handlers

developed as sales shifted from handler

to handler within the market. Producers

shifted from handler to handler, and

milk that would otherwise have been

used for manufacturing purposes was

brought in from outside the state at

lower prices and displaced the Class I

marketings of local producers.

Finally, adoption of a flat Class I

pricing plan was rejected by the

Secretary in the recommended and final

decisions of the 1990 National Hearing

because it did not meet the supply and

demand pricing standard of the AMAA,

namely § 608c(18). In light of this

statutory requirement that Federal milk

order prices be established based on

economic conditions that affect supply

and demand, flat Class I pricing has no

legal foundation.

Option 3B: Flat Differential Modified

by Class I Use.

Under this option, an equal

differential of $2.00 per hundredweight

would apply in an order if the Class I

use is less than or equal to 70 percent.

If Class I use exceeds 70 percent, the

Class I differential in an order would be

$2.00 + $0.075* (Class I use percent—

70 percent). This option is based on the

flat Class I price concept modified by

the relative use price concept. This

option assumes that markets with Class

I use equal to or below 70 percent have

an adequate reserve supply of milk to

meet fluid needs and that markets with

Class I use above 70 percent require

additional milk supplies to meet fluid

demand. This 70 percent figure was

merely selected for illustrative purposes

and no analysis has been done to

determine if this is an appropriate

percentage.

A level of $2.00 per hundredweight

for the flat portion of the differential

was selected because such a level has

been suggested in comments concerning

the flat Class I price concept.

The differentials resulting from this

option are listed in the table below. As

with the relative use option (Option 2),

the estimated Class I differentials

presented in the table are not entirely

location-specific within the

consolidated order. To provide a basis

for comparison, a weighted average

differential for each order has been

calculated based on current differentials

for the consolidated orders using

October 1995 data. These differentials

are also not location-specific for the

consolidated orders.

TABLE 3.—CLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON OCTOBER 1995 DATA UNDER OPTION 3B—FLAT

DIFFERENTIAL MODIFIED BY CLASS I USE

Proposed order 1 Class I use

(percent)

New

differential

($/cwt)

Weighted

avg diff 2

($/cwt)

Change

($/cwt)

Northeast .......................................................................................................... 47.9 2.00 3.14 ¥1.14

Appalachian ...................................................................................................... 81.5 2.86 2.79 0.07

Southeast .......................................................................................................... 85.2 3.07 3.04 +0.03

Florida ............................................................................................................... 88.3 3.37 3.89 ¥0.52

Mideast ............................................................................................................. 55.8 2.00 1.91 0.09

Central .............................................................................................................. 48.8 2.00 2.52 ¥0.52

Upper Midwest .................................................................................................. 34.5 2.00 1.32 0.68

Southwest ......................................................................................................... 48.1 2.00 3.01 ¥1.01

AZ-Las Vegas ................................................................................................... 48.9 2.00 2.46 ¥0.46

Western ............................................................................................................ 29.6 2.00 1.84 0.16

Pacific NW ........................................................................................................ 35.6 2.00 1.90 0.10

1Based on the 11 proposed orders contained in this proposed rule.

2Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk in each current order multiplied by the applicable current order differential.

Analysis Based on Evaluation criteria.

Of the nine evaluation criteria

developed to evaluate Class I pricing

options, the concept of a modified flat

Class I price structure performs equal to

the current system in two of the criteria

and worse than the current system in

the rest of the criteria. However, this

option does perform marginally better

than Option 3A in the three proposed

southern orders. Nevertheless, Option

3B would still perform worse than the

current system because the remainder of

the proposed orders retain a purely flat

differential.

Option 3B was evaluated against the

objective criteria as follows:

1. Ensure an adequate supply of milk

for fluid use. The concept of a modified

flat Class I price structure performs

poorer than the current Class I price

structure in ensuring an adequate

supply of milk for fluid use for the same

reasons articulated in Option 3A. In

three of the suggested orders with over

70% Class I utilization, this option does

give marginal increased recognition to

the inherent location value of milk by

relying on Class I utilization to trigger

price incentives for attracting Class I

milk. However, a majority of the

suggested new orders continue to

employ a lower and purely flat

differential because Class I utilization

does not exceed 70 percent. It is

unlikely that an adequate supply of milk

for fluid use would be ensured.

2. Recognize quality (Grade A) value

of milk. A modified flat Class I price

structure does recognize the quality

(Grade A) value of milk with the $2.00

base differential.

3. Provide appropriate market signals.

The concept of a modified flat Class I

price structure that changes based on

Class I utilization appears to provide

marginally superior market signals in

three of the proposed new orders than

does the purely flat option. The

modified flat Class I price structure

offers the potential for being self-
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4899

adjusting in both deficit and adequately

supplied markets as relative use

changes. However, a majority of markets

would maintain a purely flat differential

and likely would experience the same

problems that a flat Class I price

structure presents. While the modified

flat Class I price structure may provide

more appropriate market signals by

establishing economic incentives that

will encourage milk to move to more

deficit markets, it fails to provide

appropriate market signals for a majority

of the orders.

4. Recognize the value of milk at

location. A modified flat Class I price

structure, like Option 3A, does not fully

recognize the location value of milk. As

discussed in Option 3A and Option 2,

the relative use adjustor to the flat

differential only recognizes that a

market with a certain utilization has an

average value above markets that are

more deficit and does not recognize the

value of milk at location. In fact Option

3B assumes that milk has the same

value in a majority of the orders.

Because Option 3B does not fully

recognize the value of milk at location,

it does not perform as well as the

current system.

5. Facilitate orderly marketing with

coordinated system of Class I prices.

Independently, both a flat Class I price

structure and a relative use Class I price

structure fail to provide a coordinated

system of Class I prices. Hence, when

the two price structures are combined in

the modified flat Class I price structure

it can be concluded that the combined

price structure will not facilitate orderly

marketing with a coordinated system of

Class I prices. The flat differential

portion imposes an equal value on Class

I milk in all markets with less than a

specified Class I utilization, in this

example 70 percent, even when such a

differential level is not warranted.

Producers and processors are left to

negotiate the real value of the milk

resulting in an uncoordinated system of

Class I prices. Then, when the relative

use factor is utilized to adjust the prices,

problems arise because of a lack of

alignment between orders.

6. Recognizes handler equity with

regards to raw product costs. Since both

Option 3A and Option 2 do not

adequately recognize handler equity

with regards to raw product costs as

well as the current system, this

modified flat Class I price structure

option similarly cannot recognize

handler equity for raw product costs for

the same reasons discussed in the

analysis of the other individual options.

Option 3B was evaluated against the

objective criteria as follows:

1. Minimize regulatory burden. The

flat differential modified by Class I use

concept performs equal to the current

system in minimizing the regulatory

burden on handlers because no

additional information than what is

currently required would be requested

under this option.

2. Minimize the impact on small

businesses. As with Option 3A a

modified flat Class I pricing structure

could have dramatic impacts on small

businesses, both producers and

handlers. Like Option 3A, the modified

flat pricing concept changes the

competitive relationship between large

and small handlers. Large handlers in

areas where the differential is flat would

have a competitive advantage in

procuring milk supplies over small

handlers because they may be able to

pay more than the flat price. In markets

where the relative use modifier becomes

effective, small handlers could further

be at a competitive disadvantage to

neighboring handlers merely required to

pay the flat portion of the differential.

Price variances between large and small

producers are likely to increase as well.

The analysis for this option is

fundamentally the same as discussed

previously in Option 3A and Option 2.

3. Provide long-term viability. Given

the difficulties associated with Option

3A and Option 2, a system that

combines the two into a Class I pricing

structure would perform worse than the

current Class I price structure.

Because a modified flat Class I pricing

option performs worse than the current

system and is so similar in application

to a purely flat pricing structure, it too

raises a number of issues regarding its

impact on dairy farmers. These issues

are nearly identical to those applicable

to purely flat pricing. Using October

1995 data, almost 87 percent of all milk

would have been in the eight markets

with a flat price under this option. In

the consolidated markets with

utilization above 70 percent

(Appalachian, Southeast, and Florida),

this option, based on October 1995 data,

would still lower Class I differentials in

two of the three markets.

As with Option 3A, Option 3B would

have a significant economic impact on

a substantial number of small

businesses depending on where they are

located and the magnitude of the change

from the current Class I differential. The

estimated impact on consumers for this

modified flat Class I pricing option is

nearly identical to that presented in the

Option 3A analysis.

The same problems presented and

discussed in the analysis of Option 3A

using both inter- and intra-market

examples are applicable to Option 3B.

These problems are exhibited for this

modified flat pricing option. Using an

intra-market example, producers would

not likely share in the value above the

minimum regulated prices that more

fully represents the value of Class I milk

because handlers would have the greater

degree of market power. In the intermarket example, blend price differences

would not provide adequate price

differences for more adequately

supplied markets to ship needed milk to

deficit markets, although the modified

flat option may perform marginally

better than a purely flat differential

structure.

Option 4: Demand-based Differential.

Under this option, an equal differential

would be applied in all orders and in

defined demand centers an additional

component would be added to reflect

the cost of transporting milk from

reserve supply areas to demand centers.

The differentials would be adjusted

periodically to reflect changes in

supply/demand conditions.

One possible option of a demandbased differential concept was proposed

by the Upper Midwest Dairy Coalition

(UMDC). Under this proposal, a fluid

supply area would be established for

each market from which milk

production around the major bottler

locations is procured. Also, for each

market, a reserve supply area would be

established that would be outside the

fluid supply area from which milk

production is generally supplied to fluid

handlers in the major fluid bottling

locations.

The Class I differential for the reserve

area under this proposal would be set at

$1.00 per hundredweight. For fluid

supply areas, the differential would be

$1.00 plus transportation costs from the

reserve area to the fluid demand area.

Fluid handlers in the fluid supply area

would pay the higher differential, and

transportation and balancing credits

would be drawn from the market order

pool.

Using this demand-based option, a

market with a 100-mile supply area

would have a differential of $1.00 +

($0.35*1) = $1.35 (if the cost of

transportation is 35 cents per

hundredweight per 100 miles). A market

with a 700-mile supply area, on the

other hand, would have a differential of

$1.00 + ($0.35*7) = $3.45. Monies paid

by Class I handlers through the second

part of the Class I differential would be

used to fund the order’s system of

transportation credits and balancing

payments. These transportation credits

and balancing payments would be

provided to organizations that supply

the order’s fluid market.
4900 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

To encourage movement of the

nearest milk supply for fluid use, two

restrictions would be implemented.

First, a handler’s total transportation

credits would be limited to the variable

amount paid in by the handler for

transportation. Secondly, a handler’s

total transportation credit would not

exceed 80% of the handler’s

transportation bill on each Class I

shipment or 2.8 cents per

hundredweight per 10 miles (28 cents

per 100 miles), whichever is less. Any

residual left after paying transportation

credits would be added to the $1.00

differential and paid to all producers in

the pool.

While Class I handlers would be

required to pay the established Class I

price ($1.00 + transportation), from a

producer point of view, this option is in

essence a flat differential proposal. No

amount over the $1.00 is guaranteed to

return to producers in a blend price.

Thus, this option suffers from the

shortcomings of a flat differential

option.

The table below contains a few

examples of differentials that would

apply to specific locations. These

differentials are based on the furthest

distance milk for fluid use is

transported using the USDSS model

solving for each consumption point

individually. Such demand-based

differentials would be established at

every fluid milk processing location.

UMDC has suggested that the USDSS

model be used as a guide in establishing

differentials and that expert judgment

will be employed to adjust for proper

alignment in pricing relationships.

TABLE 4.—CLASS I DIFFERENTIALS FOR SELECTED CITIES UNDER OPTION 4: DEMAND-BASED DIFFERENTIALS

Selected location

Current

differential

($/cwt)

Demandbased

differential

($/cwt)

Change

($/cwt)

Miami, FL ...................................................................................................................................... 4.18 3.88 ¥0.30

Tampa, FL .................................................................................................................................... 3.88 2.05 ¥1.83

Orlando, FL .................................................................................................................................. 3.88 3.08 ¥0.80

New Orleans, LA .......................................................................................................................... 3.65 1.28 ¥2.37

Atlanta, GA ................................................................................................................................... 3.08 2.38 ¥0.70

New York City, NY ....................................................................................................................... 3.14 1.80 ¥1.34

Chicago, IL ................................................................................................................................... 1.40 1.49 0.09

Minneapolis, MN ........................................................................................................................... 1.20 1.11 ¥0.09

Phoenix, AZ .................................................................................................................................. 2.52 1.00 ¥1.52

Dallas, TX ..................................................................................................................................... 3.16 1.40 ¥1.76

Denver, CO .................................................................................................................................. 2.73 1.19 ¥1.54

Portland, OR ................................................................................................................................. 1.90 1.13 ¥0.77

Seattle, WA .................................................................................................................................. 1.90 1.31 ¥0.59

Boise, ID ....................................................................................................................................... 1.50 1.06 ¥0.44

Analysis Based on Evaluation Criteria

In eight of the nine criteria, Option 4

performs poorer than the current

system. In the remaining criterion,

Option 4 performs about the same as the

current system.

Option 4 was evaluated against the

objective criteria as follows:

1. Ensure an adequate supply of milk

for fluid use. In terms of ensuring an

adequate supply of milk for the fluid

market, proponents argue that the

package of Class I differentials and pool

structure established under this option

would produce an adequate supply of

milk for the fluid market. It is apparent,

however, that the Class I differentials on

their own would not. This is a prime

function of Federal milk marketing

orders. While Class I differentials

should be set at the minimum level

necessary to bring forth adequate milk

supplies, Option 4 would not result in

differentials that would perform this

function. Substantial over-order values

would be required in many areas to

attract adequate milk supplies for fluid

purposes plus a reserve. Over-order

prices are useful tools for allowing the

market to find the final value of Class

I milk; however, it is Federal order Class

I prices that must meet the basic tenets

of the AMAA.

2. Recognize quality (Grade A) value

of milk. As with all of the seven options,

Option 4 does recognize the quality

(Grade A) value of milk with the $1.00

base differential.

3. Provide appropriate market signals.

The net result of Option 4 failing to

provide Class I differentials that

recognize an appropriate price level for

milk at location is that appropriate

market signals are not sent to market

participants. Federal orders should

provide known and visible prices to

market participants at all locations. The

net effect of Option 4 would be to

provide frequently shifting prices to

market participants that fail to provide

appropriate market signals.

Currently, blend prices and changes

in blend prices provide signals to

producers to make production

adjustments. Under this option, the

transportation portion of the Class I

differential (the amount above $1.00)

would be paid to those responsible for

transporting milk, while producers

would be guaranteed only $1.00 on

Class I milk. Thus, the option by design

could send distorted price signals to

producers in blend prices. At times

when milk supply is plentiful, local

fluid handlers may need to go a

relatively short distance to procure

milk. Thus, there may be residual

transportation credit revenues in the

pool to be paid to producers in the

blend price signaling that supplies are

short and more production is needed.

However, when handlers bring milk in

from long distances, all transportation

credit revenue would be used up and

producers would only share in the $1.00

differential indicating to producers that

there are ample supplies of milk. Thus,

blend prices could be lower when local

supplies are tight than when local

supplies are plentiful.

4. Recognize value of milk at location.

Option 4 would result in differing Class

I levels at different locations that may

significantly underrepresent the true

Class I value at many locations. This

would force a greater portion of the true

Class I value outside of the order

structure. Moreover, higher or lower

price levels for fluid milk in an area

may not be reflected in Federal order

blend prices to producers in the area

due to transportation costs. In terms of

blend prices, producers in all areas

would share in $1.00 plus potentially a

variable residual of their respective
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4901

differential. Hence, Option 4 performs

worse than the current system.

5. Facilitate orderly marketing with

coordinated system of prices. Another

problem with Option 4 is that resulting

Class I differentials are not coordinated

across wide areas and thus do not

facilitate orderly marketing. Milk, both

packaged and bulk, moves long

distances. Class I differentials should

encourage milk to move in directions

indicated by underlying economics,

essentially from areas that have relative

surpluses of milk to areas that are

relatively deficit. Option 4 performs

worse than the current system in this

area.

6. Recognize handler equity with

regard to raw product costs. Processor

equity suffers under Option 4 because

Class I over-order charges would need to

increase in many areas. While it may be

desirable for the market to set the final

Class I price charged to bottlers, when

a large portion of this price occurs

outside of regulation, Federal orders

cannot assure a reasonable degree of

handler equity concerning prices paid

for Class I milk. Additionally, the net

effect of the Class I price paid by

handlers less the transportation credits

received would likely create inequity

among handlers.

Option 4 was evaluated against the

administrative criteria as follows:

1. Minimize regulatory burden.

Option 4 would increase the regulatory

burden on handlers as compared to the

present system. Additional reporting on

sources of milk and transportation costs

would be required. Fluid handlers

would be required to report, and Market

Administrators to verify, hauling cost

information on each load of bulk milk

received. This additional regulatory

requirement may also result in an

increase in administrative assessments

to handle the additional record

verifications.

2. Minimize impact on small business.

It is likely that small handlers might be

disadvantaged by this option. With

demand-based differentials, a

substantial part of the Class I value

needed to attract adequate milk supplies

would likely come from over-order

payments. Federal order Class I prices

are mandatory and should affect

handlers in an area equally. Over-order

pricing is not mandatory and may or

may not affect different handlers

equally. The potential exists under

Option 4 for large handlers to have an

advantage over small handlers in

competing for milk for Class I purposes

because they will be able to outbid

smaller handlers for a supply of milk.

3. Provide long-term viability. Option

4 would involve Class I differentials that

could change over time as milk supply/

demand conditions change. As such, the

system could remain viable for a long

period of time if the problems outlined

above did not jeopardize the viability of

this proposal. There is a certain

attractiveness to a system which is selfadjusting. The difficulty is in deriving a

system where the self-adjusting feature

stays current over time.

This proposal could have a significant

impact on various sectors of the dairy

industry. The impact would likely vary

by region, with large impacts on regions

where Class I differentials would change

significantly and lesser impacts in

regions with small changes in Class I

differentials. The impacts by region are

discussed below:

Midwest. Class I differentials in the

Midwest would be similar to current

differentials under Option 4. In

addition, the vast majority of milk

produced in the Midwest is used for

manufactured products, not for Class I.

As such, the impact on producers and

processors would be expected to be

relatively small. Producer groups and

cooperatives in this area fully recognize

that, due to low Class I utilization in

this area, changes in Class I differentials

will have relatively less impact here

than in other areas which have higher

rates of Class I utilization.

Northeast. In the Northeast, Class I

differentials would be substantially

reduced from current levels under

Option 4. For example, the Class I

differential in New York City would be

$1.34 less than the current differential,

while the Class I differential in

Baltimore would be $1.80 less than

under the current system. Producer

organizations in the Northeast have

historically had a difficult time

enforcing Class I over-order charges

significantly above Federal order

minimums. Cooperatives have

depended heavily upon Federal order

minimums, and more recently upon the

Northeast Dairy Compact, to try to

maintain revenues from Class I sales.

Processors in this area have

historically had significant marketing

power over cooperatives. Substantial

drops in Class I differentials would

likely increase processor marketing

power and prevent cooperatives from

establishing over-order prices that

would reflect the full Class I value thus,

dairy farmers would see a decline in

their revenue.

Producer income levels in this area

would be expected to decrease with a

resulting decline in producer numbers,

milk production and, eventually,

manufacturing capacity. The decline in

manufacturing capacity, over time,

would likely be the most significant

impact on the processing side of the

industry in the Northeast.

Southeast. In the Southeast, Class I

differentials would be substantially

reduced from current levels under

Option 4 in many areas. For example,

the Class I differential in Atlanta would

be set at $0.70 less than the current

system, while the Class I differential in

New Orleans would be $2.37 less than

under the current system. It is unclear

if over-order charges in most parts of the

Southeast could be increased enough to

compensate for the drop in Federal

order Class I differentials. Thus,

producer income and milk production

would be expected to decrease in total

in this area. Much of this area is deficit

of milk production and, at certain times

of the year, for fluid needs. Dropping

the Class I differentials substantially

would likely increase this deficit and

make it increasingly difficult to meet the

AMAA requirements for meeting the

needs of the fluid market.

Southwest. In the Southwest, Class I

differentials would be substantially

reduced from current levels under

Option 4. For example, the Class I

differential in Dallas would be set at

$1.76 less than the current system,

while the Class I differential in Denver

would be $1.54 less than under the

current system. It is unlikely that overorder charges in most parts of the

Southwest could be increased enough to

compensate for the drop in Federal

order Class I differentials. Thus,

producer income and milk production

would be expected to decrease in total

in this area. The impacts would likely

vary within this region as lower

production costs in West Texas and

New Mexico could offset the drop in

Class I revenues, but higher production

cost areas (e.g., East Texas) would likely

show substantial drops in milk

production.

Pacific Northwest. In the Pacific

Northwest, Class I differentials would

be reduced from current levels under

Option 4 in many areas. For example,

the Class I differential in Portland,

Oregon, would be set at $0.77 less than

the current system, while the Class I

differential in Seattle would be $0.59

less than under the current system. It is

unlikely that over-order charges in most

parts of the Pacific Northwest could be

increased enough to compensate fully

for the drop in Federal order Class I

differentials.

This proposal would, all else being

equal, result in lower blend prices to

producers in most parts of the country.

It is expected that mailbox prices to

producers would also decline in most

regions. The vast majority of producers

pooled on Federal orders are considered
4902 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

24Copies of this analysis can be obtained from

Dairy Programs at (202) 720–4392, any Market

Administrator office, or via the Internet at

http://www.ams.usda.gov/dairy/.

as small businesses. Thus, this proposal

would have a negative impact on small

business producers through a loss of

income.

In addition, it is expected that in

regions that are deficit of milk for some

or all uses, an increased reliance on

over-order prices would result from this

proposal. Experience has shown that in

an unregulated or partially-regulated

environment, such as where substantial

over-order premiums are paid, large

producers often have greater leverage

with milk buyers than small producers.

This advantage can take many forms

including volume premiums, lower

hauling rates, and the ability to

negotiate individually with handlers in

a manner difficult for small producers.

This proposal could likely increase

the regulatory burden on handlers that

are small businesses. Maintenance of

transportation credit records and

increased verification that may be

required could burden small business

handlers. Moreover, setting Class I

differentials at levels significantly below

the full economic value of Class I milk

at location has the impact of

deregulating the effective price of Class

I milk. As such, small handlers would

be competing for milk supplies with

large handlers with no assurance of

similar prices. Equity among handlers is

one of the benefits of the Federal order

system. By setting Class I differentials at

a level well under the full economic

value, some of the handler equity is lost.

It is expected that such a scenario

would provide a greater burden on

small business handlers than on large

business handlers.

It is difficult to quantify the impact to

consumers under this option. Federal

order Class I differentials around the

country would likely be lower than

under the current system at many

locations. Increased over-order charges

may make up part of the difference, at

least at locations with strong supply

organization cooperation. It is expected

that the overall impact on consumer

prices would be slight.

Option 4 presents certain attractive

provisions when viewed as a theoretical

model for establishing Class I

differentials. While it is intellectually

appealing to have frequently adjusting

Class I differentials, this type of

proposal contains significant challenges

to actual implementation. A substantial

set of calculations would be necessary,

together with strong assumptions

regarding transportation costs, to

determine Class I differentials under

this option. The proponents of Option 4

utilized the USDSS model to estimate

their Class I differentials. Proponents

were unclear as to the specific points for

calculating transportation. Arguably, the

distance from each farm to each

distributing plant that the farm supplies,

as well as the distance from each supply

plant or reserve processing plant to each

distributing plant, would need to be

determined.

Option 4 is not a pure pricing

concept, but an allocation of costs. It

proposes ‘‘Class I differentials’’ at

location, thereby intimating value of

milk at location. However, such a

surface conclusion is erroneous when it

becomes operational. It essentially

becomes a flat price proposal insofar as

milk value (price) is concerned.

This option in essence proposes that

regulators intervene in the contractual

relationships among producers,

processors and haulers. Rather than

creating a system whereby producers are

paid a price for a product (valued to

include all costs of producing and

delivering the product to market), this

proposal seeks to administratively

isolate transportation cost and

reimburse that cost at a fixed rate. To

attempt to intervene in marketplace

relationships in this way, particularly

under the umbrella of price, does not

seem appropriate.

As a result of this analysis, it is

concluded that Option 4 would merely

result in a greater degree of regulation

with less money returned to producers.

Thus, based on the issues discussed,

Option 4 is not further considered as a

replacement for the Class I price

structure.

Based on the qualitative analysis,

three pricing options were selected for

further quantitative analysis. The

Department determined that the three

options selected represented a broad

spectrum of possible Class I price

structures. These three options are

Option 1A, Option 1B, and Option 5.

To further analyze these options,

beyond the evaluation criteria and basic

quantitative analyses, a multi-regional

model of the U.S. dairy sector,

developed by the Economic Research

Service of USDA, was used to generate

both the ‘‘model baseline’’ results and

analysis of the three pricing options.

The model has been specified to

generate a long-term outlook that is

consistent with the Department’s official

baseline forecast for the dairy sector.

The model baseline serves as a

benchmark for comparing price and

income changes of an option. For

example, price impacts are reported as

differences from the baseline for each of

six years (1999–2004) and from the

6-year average. A more detailed

explanation of the model and the

economic impact results are included in

the initial regulatory impact analysis.24

Based on this analysis, Option 5 was

eliminated from further consideration as

a viable replacement for the Class I price

structure. Although Option 5 appeared

appealing in the qualitative analysis, the

quantitative analysis revealed that

Option 5 would create an unsustainable

situation, based on the degree of

increased price levels, given the

dynamics of milk marketing. The

analysis of Option 5 follows:

Option 5: Decoupled Baseline Class I

Price with Adjustors. Option 5, as

proposed by Mid-America Dairymen,

Inc. (Mid-Am), is a price structure that

would decouple Class I prices from the

volatility of the commodity markets.

Since the Class I price would be

decoupled from the basic formula price,

the proponents suggest that 1996

average Class I prices become the base,

with adjustments made utilizing

changes in fluid use rates and short term

costs of production (i.e., feed costs).

Thus, for Class I purposes the BFP

would be floored at $13.63 per

hundredweight, the 1996 annual

average BFP. This price level would be

used to establish Class I prices using

current differentials.

A supply/demand adjustor would be

used to change prices in each of the

orders to reflect long-term trends.

Proponents suggest using a 12-month

rolling average Class I utilization,

rounded to the nearest full percentage.

Class I prices would be adjusted by

$0.12 per hundredweight for each 2

percent change in the rolling average

utilization. For example, a Class I

utilization change from 44 percent to 46

percent in a market would result in a

$0.12 per hundredweight gain in the

market’s Class I differential. Once the

utilization level changes, the new

utilization rate becomes the base for

future changes. Thus, if a market falls

from 44 percent to 42 percent, the new

base for comparing a 2-percentage point

change up or down is 42 percent.

In addition to the supply/demand

adjustor, a cost of production indicator

would be developed whereby Class I

prices would be increased in a timely

manner when input costs to dairy

farmers are increasing. One such

economic indicator might be feed costs.

The table below illustrates the initial

Class I differentials under the proposed

consolidated orders. These differentials

are not location-specific within the

applicable orders. For purposes of this
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4903

analysis and to provide a basis for

comparison within the proposed

consolidated orders, a weighted average

Class I differential for each order has

been calculated for each order based on

October 1995 data. This weighted

average differential is computed by

multiplying the percentage of Class I

milk in each of the current orders that

comprise the consolidated order by the

applicable current order differential and

adding the resulting amounts. The

weighted average differential is not

location-specific for the consolidated

orders. Initially the differentials will be

the same. However, as Option 5 impacts

production and utilization, and when an

economic indicator (such as feed costs)

is calculated, the differentials will vary.

TABLE 5.—INITIAL CLASS I DIFFERENTIALS IN PROPOSED ORDERS BASED ON 1995 DATA UNDER OPTION 5: DECOUPLED

BASELINE CLASS I PRICE WITH ADJUSTORS

Proposed order 1

Weighted

average

differential

($/cwt) 2

Initial

differential

($/cwt)

Change in

differential

($/cwt)

Northeast ...................................................................................................................................... 3.14 3.14 0.00

Appalachian .................................................................................................................................. 2.79 2.79 0.00

Southeast ..................................................................................................................................... 3.04 3.08 0.00

Florida ........................................................................................................................................... 3.89 3.89 0.00

Mideast ......................................................................................................................................... 1.91 1.92 0.00

Central .......................................................................................................................................... 2.52 2.41 0.00

Up Midwest ................................................................................................................................... 1.32 1.41 0.00

Southwest ..................................................................................................................................... 3.01 3.01 0.00

AZ-Las Vegas ............................................................................................................................... 2.46 2.46 0.00

Western ........................................................................................................................................ 1.84 1.84 0.00

Pacific NW .................................................................................................................................... 1.90 1.90 0.00

1Based on the 11 proposed orders contained in this proposed rule.

2Weighted average differential for the consolidated order is computed by summing the product of the percentage of Class I milk for each current order multiplied by the applicable current order differential.

Analysis Based on the Evaluation

Criteria

Option 5 performs about equal to the

current system in five of the nine

evaluation criteria. The option performs

poorer than the current system in the

other four evaluation criteria.

Option 5 was evaluated against the

objective criteria as follows:

1. Ensure an adequate supply of milk

for fluid use. With a high baseline and

a supply/demand adjustor (and possibly

an economic adjustor), Option 5

performs on a national level about the

same as the current system, particularly

in the short term.

2. Recognize quality (Grade A) value

of milk. As with all of the options,

Option 5 does recognize the quality

(Grade A) value of milk. Use of the

current differentials to achieve the Class

I price recognizes this value.

3. Provide appropriate market signals.

Option 5 decouples the Class I price

from the basic formula price and thus

the commodity market. A rolling

average Class I utilization is proposed as

the appropriate measure of supply/

demand. A rolling average further

delays any market signal sent by Class

I utilization. Moreover, the option

proposes to change the Class I price

only when the rolling average

utilization changes by 2 percent or

more. Option 5 essentially freezes

prices, albeit, at a historically high level.

In fact, it appears to suggest that the

market signal for fluid use milk should

be fairly static.

Proponents have suggested an

economic indicator (feed cost adjustor)

of some kind be used to adjust prices

short term. While it is likely true that

inclusion of such an index would mute

declines in milk prices when feed costs

are rising, market driven declines in

milk prices also could be accelerated if

feed costs were declining at the same

time. Thus, even combined with a

supply/demand adjustor, this option

would not perform as well in providing

appropriate market signals as the

current system.

4. Recognize value of milk at location.

Option 5 would include the current

system of differentials. Therefore, this

option does recognize the value of milk

at location and performs as well as the

current system.

5. Facilitate orderly marketing with

coordinated system of Class I prices. As

long as no adjustment is made to the

baseline prices, alignment would be

maintained fairly well. However, Option

5 has no provision to align prices when

price changes occur. A possible $0.24

price spread between two markets

within one month could exist.

Moreover, misaligned prices could

create disorderly conditions as industry

participants between and among the

markets seek other measures to regain

alignment in prices. Hence, Option 5

performs worse than the current system

because it would lead to disorderly

marketing conditions.

6. Recognize handler equity with

regard to raw product costs. As long as

no adjustment is made to the baseline

prices, handler equity would be

maintained fairly well. Option 5 does

ignore the relationship of handlers in

adjacent markets. If prices are increased

or decreased in a market, the handler

regulated in an adjacent market may be

affected by the misalignment of prices.

Misaligned prices could create

disorderly conditions as industry

participants between and among the

markets seek other measures to regain

alignment in prices.

Option 5 was evaluated against the

administrative criteria as follows:

1. Minimize regulatory burden.

Option 5 is not likely to increase the

regulatory burden on handlers when

compared to the current system. The

addition of adjustors would create some

additional burden on regulators;

however, this would not be substantial.

2. Minimize impact on small business.

Option 5 performs worse than the

current system with regards to small

businesses. It is likely that the

individual market supply/demand

adjustor will create some disruption in

inter-market price alignment over time.

Such a system may result in the need for

over-order charges in some markets.

Small handlers would likely be affected

in their ability to compete with large

handlers for a raw milk supply.

3. Provide long-term viability. The use

of a historic baseline price as the major

portion of a price fails to factor into the
4904 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

25Pratt, James E., Phillip M. Bishop, Eric M. Erba,

Andrew M. Novakovic, and Mark W. Stephenson,

‘‘A Description of the Methods and Data Employed

in the U.S. Dairy Sector Simulator, Version 97.3,’’

Research Bulletin 97–09, A Publication of the

Cornell Program on Dairy Markets and Policy,

Department of Agricultural, Resource, and

Managerial Economics, Cornell University, July

1997.

competitive price of milk any of the

influences of the national milk market.

It ignores advances in technology and

increased efficiencies. In addition, it

fails to recognize trends in the overall

economy such as inflation and interest

rates. Thus, this option does not provide

long-term viability.

Upon implementation, all Class I

differentials would be equal to current

differentials. With the baseline

utilizations established at 1996 levels,

producers would experience Class I

price increases since 1996 was a record

high year for milk prices. Every existing

order area would see increases in Class

I prices of $0.85 per hundredweight

above the baseline in the initial year.

However, even with this increase, some

producers may see declines in blend

prices as a result of the proposed

consolidation of orders contained in this

proposed rule.

Initially, Option 5 would not have a

significant impact on the

competitiveness of small businesses,

producers, or processors because prices

would remain relatively the same.

However, as the supply/demand

adjustor modifies the differentials based

on changes in Class I utilization, price

alignment between markets will become

an issue that would affect a small

business’ ability to compete. This option

would increase the retail cost of fluid

milk in the initial year or two but would

lower the cost of manufactured dairy

products.

This option appears attractive on the

surface since higher Class I prices will

help most producers. If utilization and

feed costs do not move abruptly, or if

the feed cost formula is designed in

such a way as to moderate any abrupt

price movements, then variability in

Class I prices would be moderated.

However, it seems likely that milk

prices will be increasing or decreasing

in the same direction as feed prices (i.e.,

higher feed prices means less milk

production thus higher milk prices,

lower feed prices means more milk

production thus lower milk prices.)

Another attractive feature of this

option is that the use of a feed cost

adjustor would adhere to requirements

of the AMAA that the Department

consider such costs and other economic

conditions in the establishment of

prices. In addition, an automatic

utilization adjustor could reduce the

need to have hearings to change Class I

differentials if changes in production or

consumption in an area make the

existing differentials inappropriate.

Although attractive on the surface,

further analyses of Option 5 reveals

significant problems. First, analysis

completed by the multi-regional ERS

model indicates that the increase in

prices experienced will not be

sustainable. The results of the model

analysis indicate that the higher floored

Class I prices will impact the all-milk

price, and after 3 years, producers will

begin seeing a decrease in the revenue

initially generated by Option 5. This

will occur because the higher Class I

prices will stimulate milk production,

which will then lead to lower

manufacturing prices. Because it is the

blend price that is paid to producers,

the increase in the Class I prices will not

be enough to offset the decrease in

prices of the other classes of use and the

changes in utilization which will affect

the differential level. Further details of

the model results are included in the

economic impact analysis published in

conjunction with this proposed rule.

Next, Option 5 may cause disorderly

marketing with the introduction of

inter-market disparities based on

temporary changes in use. Producers in

high Class I markets would benefit at

the expense of producers in low Class

I markets. In addition, flooring the Class

I price will shift volatility to milk prices

in manufacturing markets. If the feed

cost adjustor only affects Class I prices,

high utilization markets will gain

relative to producers in lower Class I

use markets, who would also bear the

higher feed costs.

Finally, Option 5 uses current

differentials to establish Class I prices.

Although, the 1990 hearing resulted in

changes to many of the current Class I

differentials, many of the current

differentials are similar to those that

were prescribed in the 1985 Farm Bill.

Thus, arguments could be made that

using the current 1996 Class I

differentials as a base for a new Class I

pricing surface runs counter to the 1996

Farm Bill mandate that the new Class I

differentials cannot be based on the

differentials described in the 1985 Farm

Bill.

As discussed, Option 5 will create

several problems if implemented as a

Class I price structure. Furthermore,

questions arise as to whether or not

Option 5 is legal as it may violate the

mandates of the 1996 Farm Bill. Finally,

proponents may no longer be actively

supporting this option as a viable

replacement for the Class I price

structure. Thus, based on this

qualitative and quantitative analysis,

Option 5 is eliminated from further

consideration as a Class I price structure

replacement.

With the elimination of Option 5,

only two Class I price structure options

remain as possible replacements for the

current Class I price structure, Option

1A and Option 1B. These two options

present national price structures

developed utilizing the USDSS model.

The options vary in their reliance and

application of the USDSS model but

both are based on economic principles

contained within the model. Both price

structures have been evaluated

qualitatively against the evaluation

criteria and quantitatively utilizing the

multi-regional ERS model discussed

earlier. In addition to analysis

conducted by the multi-regional ERS

model, a static Federal order pool

analysis has been conducted for Option

1A and Option 1B to provide an

estimate of how the options would have

impacted producer prices during

October 1996. The results of the pool

analyses will be addressed in a

discussion comparing the two price

structures.

It should be noted that both Option

1A and Option 1B may require

additional fine-tuning of the Class I

differentials and adjustments for

location when actual implementation of

the selected price structure occurs

within the Federal order program.

However, this fine-tuning would only

slightly alter the impacts of either

option. The price surfaces presented

provide a reasonable indication of the

level of Class I differentials that may

result under each price surface.

Option 1A: Location-Specific

Differentials. Option 1A would establish

a nationally coordinated system of

location-specific Class I price

differentials reflecting the relative

economic value of milk by location. An

important feature of the option is that it

would also include location adjustments

that geographically align minimum

Class I milk prices paid by fluid milk

processors nationwide regardless of

defined milk marketing area boundaries

or order pooling provisions. It is based

on the economic efficiency rationale

presented in Cornell University research

on the U.S. dairy sector.25 A basic

premise of Option 1A, confirmed by the

Cornell research, is that the value of

milk varies according to location across

the United States. Option 1A combines

these concepts of spatial price value and

relative price relationships together

with marketing data and expert

knowledge of local conditions and
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4905

marketing practices to develop a

national Class I price structure.

Compared to other Class I price

structure options which have been

proposed by interested parties and/or

are under consideration by the

Department, this option reflects the

current Class I pricing surface more than

the others. Although similar to the

current Class I price surface, there are

distinct differences.

Under Option 1A, Class I differentials

are lowest in geographical areas

evidencing the largest supplies of milk

relative to local/regional fluid milk

needs. The differentials become

progressively higher as they move from

these areas to markets with less

production relative to demand for fluid

milk. Nine 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.

Class I differentials under this option

range from a low of $1.60 per

hundredweight in the base zones of the

Upper Midwest, Southwest, and West,

where there are abundant supplies of

milk in excess of fluid milk use, to a

high of $4.30 per hundredweight in

Florida, where there are deficit supplies

of milk for fluid use, thus reflecting the

location value of milk for fluid use. The

nine zones, differential ranges, and basis

for establishing the Class I differential

levels are as follows:

Zone 1. The suggested differentials

within Zone 1 range from $1.60 to $1.90

per hundredweight. Geographically this

zone is very large and encompasses the

entire Northwestern United States. It

consists of Washington, Oregon,

Montana, Idaho, Northern and Central

California, Northern and Western

Nevada, Northern and Western

Wyoming, and Northern Utah.

The area defined includes the top

milk production state as well as two

more of the top ten milk producing

states. Milk production in this region

has grown and continues to do so. Milk

production in this zone tends to be

concentrated in three areas: Western

Washington and Oregon, the Southern

Valley of Idaho and Northern Utah, and

the Central Valley of California. Due to

the numerous mountain ranges it

encompasses, much of the zone is rural

and sparsely populated. The exception

is the heavily populated Western

Coastal areas.

Class I utilization for this zone is

fairly low and a significant amount of

manufacturing is required to balance the

markets. Manufacturing facilities are

readily accessible in the milk producing

areas. Zone 1 has excess supplies of

milk, and therefore, could be an

additional source of milk for other

regions of the country.

It is expected that Zone 1 will

continue to maintain adequate supplies

of milk for the Northwestern United

States. The supplies of milk are within

relatively short distances of plants thus

not requiring significant location

adjustments within the zone.

Zone 2. The suggested differentials

within Zone 2 would range from $1.60

to $2.65 per hundredweight. Zone 2 is

a large region encompassing the

Southwestern United States. It consists

of Arizona, New Mexico, Colorado,

Southern California, Southeastern

Nevada, Southern Utah, Southeastern

Wyoming, Southwestern Kansas, West

Texas, and the Panhandle of Oklahoma.

The area defined includes portions of

two of the top ten states in milk

production as well as two more in the

top twenty. Milk production in this

zone has grown significantly over the

last several years, but has recently

slowed. Milk production in this zone

tends to be concentrated in five areas:

the Southern Valley of California, the

Phoenix area of Arizona, North Central

Colorado, the El Paso area of Texas and

New Mexico, and the Roswell area of

New Mexico. Much of this region is

rural and sparsely populated due to the

mountainous and arid terrain. The only

heavily populated area is the Coastal

region of Southern California. For the

rest of the zone, populated areas tend to

congregate around the capital cities of

the Southwestern states.

Class I utilization for this area is

slightly greater than the average for the

United States. Manufacturing is needed

to balance these markets; however, only

a limited number of plants are located

within the zone. Milk supplies in the

zone are ample for Class I demand, but

not always within a short distance of

these needs. Distant manufacturing

facilities are used at times for balancing.

Other regions of the country have relied

on this zone as a supplemental supply

source. However, a slight change in the

manufacturing capacity of this zone

could change milk availability for other

regions. Some location adjustments are

needed for alignment purposes with the

more deficit markets to the East.

Zone 3. The suggested differentials

within Zone 3 would range from $1.60

to $1.80 per hundredweight.

Geographically this zone encompasses

the Upper Midwest region including the

states of Minnesota, Wisconsin, Iowa,

and North Dakota, the Michigan Upper

Peninsula, and parts of South Dakota,

Nebraska, Missouri, and Illinois.

This zone includes two of the nation’s

top five milk producing states,

Wisconsin and Minnesota, as well as the

substantial milk supplies available in

parts of surrounding states. The vast

majority of milk in Zone 3 is used for

manufacturing purposes throughout the

year. In addition, as was readily

apparent in the fall of 1996, this area

provides large quantities of milk to

distant markets at times of shortages for

fluid purposes in those markets. The

$1.60 differential equates to the Class I

differential in base zones to the

Southwest and West that also use

substantial quantities of milk for

manufacturing purposes throughout the

year. The 20-cent range provides some

flexibility in setting Class I differentials

that align with neighboring zones and in

encouraging shipments to high Class I

demand areas within the zone.

In addition, a Class I differential of

$1.60 to $1.80 in this zone will provide

a greater incentive for manufacturing

organizations in this zone to pool milk.

Historically, there have been small pool

draws (that at times fluctuate between

positive and negative) and negative

location adjustments. Generally, overorder charges have been required to

ensure adequate milk supplies for fluid

purposes. Hence, the additional revenue

generated in this region will be used to

move some of these over-order charges

under the Federal order program in the

form of transportation credits. As a

result, the $1.60 to $1.80 Class I

differentials will help to establish

higher pool draws and enable more

market participants to share in the

benefits of servicing the fluid market.

For a number of years, prevailing

over-order charges in this zone have

resulted in effective Class I prices to

fluid milk processors that are well above

the Federal order minimums herein

proposed. Thus, Class I processors

should see no increase in their milk

procurement costs, but would likely

only see a partial redistribution of their

costs from over-order charges to Federal

order obligations.

Zone 4. The suggested differentials

within Zone 4 would range from $2.65

to $3.65 per hundredweight.

Geographically, this zone is fairly small

and primarily covers two states:

Louisiana, west of the Mississippi River,

and central and east Texas.

The zone defined has a significant

amount of milk production and

population. Texas ranks as the sixth

largest milk-producing state and is the

second most populated. Milk

production in this zone is concentrated

in two areas: East of Dallas and
4906 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Southwest of Dallas. Population centers

are spread throughout the region with

significant population along the Gulf

Coast of Texas and Louisiana.

Class I utilization is moderately high

and the zone has primarily been

considered a fluid market. Much of the

manufacturing in this zone is based on

weekly and seasonal balancing.

Excesses tend to be limited to Spring

flush periods while Fall usually brings

a deficit. Local demand along the

Southern Coastal area requires supplies

to travel significant distances to meet

fluid demands. Seasonal deficits are

handled by various other regions of the

country.

The differential range proposed is

needed to move milk supplies south and

east to align with Southeastern deficit

markets. Zone 4 may depend

increasingly on milk suppliers from

other regions of the country. However,

the range of differentials suggested

should be adequate to maintain a local

milk supply.

Zone 5. The suggested differentials

within Zone 5 range from $2.00 to $3.00

per hundredweight. Geographically, this

zone ranges from Maine in the east to

Oklahoma and southeastern Kansas in

the west. The zone encompasses parts of

the milk-producing areas of New York

and Pennsylvania and the more

dispersed production in the eastern

mountains, the Ohio and midMississippi River basins, and reaches

into the southwestern United States.

This zone is populated with a mix of

rural areas plus a number of mediumsized metropolitan areas. The suggested

price flow is generally from north to

south and from west to east within this

long narrow zone.

The range of differentials from $2.00

to $3.00 provides a transition from the

surplus areas of the North and West to

the deficit areas of the Southeast.

Zone 6. The suggested differentials

within Zone 6 range from $3.00 to $3.75

per hundredweight. Geographically this

zone encompasses all of South Carolina,

most of the states of North Carolina,

Georgia, Alabama, Mississippi, and

parts of Louisiana and Florida.

This is a zone of deficient milk

supplies and declining milk production.

This zone contains many rural areas

with a heavy concentration of

population along a corridor from

Raleigh, North Carolina, to Atlanta,

Georgia. It is a zone which currently has

a high Class I utilization and little

access to manufacturing milk facilities.

The differentials increase moving

toward the south and southeastern parts

of Zone 6. The Atlantic and Gulf Coast

areas are also in the higher end of the

range because these areas are not heavy

milk production areas. Zone 6 may

depend increasingly on milk supplies

from outside the areas; however, the

differential range proposed should be

adequate to provide a milk supply to

meet the fluid demand in the zone.

Zone 7. The proposed differentials

within Zone 7 range from $3.75 to $4.30

per hundredweight. Geographically it

encompasses all of the lower two-thirds

of Florida. Annual milk production in

the zone does not meet Class I needs or

provide an adequate volume. Milk

supplies needed to meet the demand in

this zone are procured from distant

areas of the country. The price increases

as the surface moves from north to south

allowing milk to move to the deficient

areas of Florida. Population density

relative to viable milk-producing areas

within this zone is creating increasing

land-use pressure. The differentials

proposed should be adequate to attract

necessary milk supplies to meet the

fluid demand.

Zone 8. The suggested differentials

within Zone 8 range from $1.80 to

$2.00. The zone covers parts of 12 states

ranging from the southwest corner of

South Dakota to the western corner of

New York. This zone, together with

parts of Zone 5, form an intermediate

area between Zone 3, where milk is

used primarily for manufacturing

purposes, and Zones 4, 6, 7, and 9,

where milk is used primarily for Class

I purposes.

The price range in this zone would

provide for alignment with markets to

the north, south, and east, and set

differentials at a level that would

recognize the supply/demand

conditions in this area. Alignment of

Zone 8 with neighboring zones,

particularly to the east and south,

minimizes disruptions to the existing

competitive relationships for Class I

handlers in these areas.

Zone 9. The proposed differentials in

Zone 9 range from $3.00 to $3.25 per

hundredweight. Geographically Zone 9

encompasses the north Atlantic coastal

area of the United States. The zone

includes the major cities of Boston, New

York, Philadelphia, Baltimore, and

Washington, D.C. The differentials in

Zone 9 allow for recognition of the need

to move milk to major metropolitan

areas on the Atlantic coast. The 25-cent

range will provide the pool structure to

compensate for individual locations

within a narrow geographic area.

Zone 9 represents a major

consumption area. The zone will need

to look to the milk production areas

north and west of the cities for milk

supplies. The differentials proposed for

this zone should allow the area to

maintain adequate milk supplies

relative to fluid demand.

This price variance in Class I

differentials across the country

presented in Option 1A is less than the

range in relative values for milk (i.e.,

shadow prices) determined through the

USDSS model and lower than the

difference in the current price structure.

The range of differentials developed by

the USDSS model is $3.60 based on

October 1995 data, typically a more

deficit month, and $3.40 based on May

1995 data, typically a more surplus

month. The price spread for Option 1A

is $2.70. The ranges discussed above are

set forth in Map 1. The differentials

adjusted for location established for

each county are set forth in Maps 2A,

2B, and 2C. Table 6 sets forth examples

of differentials adjusted for location at

selected cities.

TABLE 6.—COMPARATIVE CLASS I DIFFERENTIALS ADJUSTED FOR LOCATION AT SELECTED CITIES UNDER OPTION 1A—

LOCATION-SPECIFIC DIFFERENTIALS

City

Class I differential

Difference

Current Option 1A

Dollars per hundredweight

New York City, NY ....................................................................................................................... 3.14 3.15 .01

Charlotte, NC ................................................................................................................................ 3.08 3.10 .02

Atlanta, GA ................................................................................................................................... 3.08 3.10 .02

Tampa, FL .................................................................................................................................... 3.88 4.00 .12

Cleveland, OH .............................................................................................................................. 2.00 2.00 .00

Kansas City, MO .......................................................................................................................... 1.92 2.00 .08

Minneapolis, MN ........................................................................................................................... 1.20 1.70 .50
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4907

TABLE 6.—COMPARATIVE CLASS I DIFFERENTIALS ADJUSTED FOR LOCATION AT SELECTED CITIES UNDER OPTION 1A—

LOCATION-SPECIFIC DIFFERENTIALS—Continued

City

Class I differential

Difference

Current Option 1A

Chicago, IL ................................................................................................................................... 1.40 1.80 .40

Dallas, TX ..................................................................................................................................... 3.16 3.00 (.16)

Salt Lake City, UT ........................................................................................................................ 1.90 1.90 .00

Phoenix, AZ .................................................................................................................................. 2.52 2.35 (.17)

Seattle, WA .................................................................................................................................. 1.90 1.90 .00

Analysis Based on Evaluation Criteria

Option 1A performs equal to or better

than the current Class I system in each

of the evaluation criteria. This is largely

explained by the adjustments made to

the current system based on current

marketing conditions and USDSS model

results. However, Option 1A leaves

essentially unchanged the role of market

forces and the Federal government, in

determining Class I prices and the

incentives to move milk to deficit areas.

Option 1A was evaluated against the

objective criteria as follows:

1. Ensure an adequate supply of milk

for fluid use. Option 1A performs

essentially the same as the current price

structure in ensuring an adequate

supply of milk for fluid use. Proposed

changes from current differential levels

by region or locality to more accurately

reflect current milk supply-demand

conditions and inter-market price

alignment contributes to more

appropriate market by market supply

adjustments. Option 1A will have

minimal impacts on farm level milk

prices and should continue to ensure

adequate supplies of milk for fluid use.

2. Recognize quality (Grade A) value

of milk. Option 1A does recognize the

quality value (Grade A) of milk through

the addition of a differential that begins

at $1.60 per hundredweight in the base

zone.

3. Provide appropriate market signals.

Option 1A adjusts and refines the

existing Class I price structure to more

accurately reflect recent prices. In some

geographical areas, Class I differentials

would be modestly increased. In certain

other areas, Class I differentials would

be lowered somewhat, suggesting that

they now exceed levels necessary to

adequately supply the associated

markets with their fluid milk needs.

4. Recognize value of milk at location.

The spatial values of milk as reflected

in Option 1A recognize the value of

milk at location more accurately than

the current system for two principal

reasons. First, in structuring the

differentials in Option 1A, the effect of

current Class I differential levels on

milk supplies, demand, and dairy

farmer returns regionally during the past

decade were reviewed. Second, the

results of the USDSS model, explained

previously, that obtained the relative

values of milk and milk components at

geographic locations throughout the

United States, were used. Together, the

results of these studies provided the

basis to construct the Option 1A price

surface.

5. Facilitate orderly marketing with

coordinated system of prices. A primary

element of Option 1A is the

coordination of Class I differential levels

and location adjustments within and

among regional marketing areas. As

such, Option 1A is an improvement

over the current price structure which

evolved in a piecemeal fashion. The

Class I differentials and location

adjustments in Option 1A will facilitate

orderly marketing of milk for fluid use

through the nationwide coordination of

prices.

6. Recognize handler equity with

regard to raw product costs. Class I

differentials proposed under Option 1A

reflect differences in economic costs of

procuring and marketing milk

depending upon geographic location.

This coordination and alignment of

prices based upon cost differences and

current marketing conditions better

ensures handlers of equity in competing

for available milk supplies and sales of

fluid milk products.

Option 1A was evaluated against the

objective criteria as follows:

1. Minimize regulatory burden.

Option 1A would not change the

regulatory burden of the Federal order

program. Because Option 1A is similar

to the current Class I pricing structure,

it would not result in increased

reporting, record keeping, compliance,

or administrative costs to handlers. The

role of regulation in influencing Class I

prices would also be about the same as

the current system.

2. Minimize impact on small

businesses. In regions where more of the

actual value of fluid milk would be

reflected in the differentials than is

currently reflected, small businesses

may have a marginal improvement in

their relative competitive bargaining

position vis-a-vis large businesses. This

is based on the concept that large

businesses (producers, cooperatives or

handlers) are better able to negotiate

premiums above minimum order prices

due to advantages attained from size.

Overall, this option is not expected to

materially impact small businesses

differently than the current price

structure.

3. Provide long-term viability. To the

extent the proposed location adjusted

Class I differentials under Option 1A

will correct instances of price

misalignment and more accurately

reflect the economic value of milk by

location, the long-term viability of

Option 1A is expected to exceed that of

the current price structure.

Option 1A utilizes the USDSS model

results as a basis for development. All

results, including the preliminary

results based on 1993 annual data and

the preliminary results based on May

1995 and October 1995 data, were used.

However, the variance of price

differentials under Option 1A are

somewhat less than the range in relative

values of milk (shadow prices)

determined through the USDSS model.

There are several explanations for the

differences, including the fact that the

model generates value differences

between geographic locations, not actual

prices. That is, it computes the marginal

value of an additional hundredweight of

milk supplied to a plant at a specific

location for fluid use. This approach

results in a pricing or value surface for

Class I milk but does not take into

account marketwide pooling and other

factors affecting the supply of and

demand for milk.

Since the USDSS model only

determines the spatial value differences

for fluid milk between location and not

the price level, Option 1A utilizes $1.60

as the minimum price in the three base

zones. Currently, the lowest differential

in Federal orders is $1.04 ($1.20 in

Minneapolis) in the Upper Midwest

order.

A review of current marketing

practices has revealed that the $1.04 per
4908 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

26Milk Production, Disposition and Income, 1996

Summary, National Agricultural Statistics Service,

USDA, DA 1–2 (97).

27References: Grade ‘‘A’’ Pasteurized Milk

Ordinance, 1993 Revision, U.S. Department of

Health and Human Services, Public Health Service,

Food and Drug Administration and General

Instructions for Performing Farm Inspections

According to the USDA Recommended

Requirements for Manufacturing Purposes and Its

Production and Processing For Adoption by State

Regulatory Agencies, USDA, AMS, Dairy Division,

August 1, 1976.

28This is the value associated with Class I milk.

The amount of this value actually returned to a

producer is dependent upon a marketing order’s

Class I utilization and is reflected in the blend

price. For example, in the proposed Upper Midwest

order approximately $.06/hundredweight would be

returned to producers to cover the costs associated

with maintaining Grade A milk supplies.

29Federal Milk Order Statistics, 1996 Annual

Summary, USDA, Marketing and Regulatory

Programs, Agricultural Marketing Service, Dairy

Division, Statistical Bulletin 938.

hundredweight base zone differential

may not be established at a level high

enough to ensure adequate milk

supplies for fluid use. First, a portion of

the Class I differential must reflect the

value associated with maintaining

Grade A milk supplies since this is the

only milk available for fluid use.

Originally the differential needed to be

established at a level that would

encourage conversion from Grade B to

Grade A status. With approximately 96

percent of all milk already converted to

Grade A,26 this value now needs to

reflect the cost of maintaining Grade A

milk supplies. Although it may be

difficult to quantify the cost to maintain

Grade A status, there are specific

associated costs, as described below.

There are several requirements for

producers to meet to convert to a Grade

A dairy farm and then maintain it. A

Grade A farm requires an approved

water system (typically one of the

greatest conversion expenses), specific

facility construction and plumbing

requirements, certain specifications on

the appearance of the facilities, and

specific equipment. After achieving

Grade A status, producers must

maintain the required equipment and

facilities, and adhere to certain

management practices.27 Often, this will

require additional labor, resource, and

utility expenses. It has been estimated

that this value may be worth

approximately $0.40 per

hundredweight.28

Traditionally, the additional portion

of the Class I differential reflects the

marketing costs incurred in supplying

the Class I market. These marketing

costs include such things as seasonal

and daily reserve balancing of milk

supplies, transportation to more distant

processing plants, shrinkage,

administrative costs, and opportunity or

‘‘give-up’’ charges at manufacturing

milk plants that service the fluid Class

I markets. This value has typically

represented approximately $0.60 per

hundredweight.

Originally recognizing these two

factors in the base zone was sufficient

to bring forth enough milk to meet Class

I demands given the abundant volumes

of milk and the abundance of

manufacturing plants. However,

recognizing just these two factors at the

values specified may no longer be

adequate to ensure sufficient supplies of

Class I milk in the Upper Midwest

region.

The Upper Midwest region is

considered a surplus market for fluid

use because its average Class I

utilization is only approximately 20

percent.29 However, as a result of the

abundance of manufacturing facilities

that require milk, the Upper Midwest

region is actually a highly competitive

area in which to procure Grade A milk.

Because of this competitiveness,

manufacturing facilities are willing to

pay more than the Federal order

minimum price, the basic formula price

(BFP), for Grade A milk used in

manufactured products. For example,

during 1995, Minnesota manufacturing

plants paid, on average, $0.77 per

hundredweight more than the BFP for

Grade A milk; price premiums in excess

of the BFP ranged from $0.38 per

hundredweight in June to $1.24 per

hundredweight in December. In 1996,

the average pay price for Grade A

manufacturing milk in Minnesota was

$0.94 per hundredweight more than the

BFP, ranging from $0.68 per

hundredweight in October to $1.18 per

hundredweight in November. Similar

pay price patterns occur in Wisconsin

for Grade A milk used in manufactured

products. In 1995, the average pay price

for Grade A milk used in manufacturing

was $0.85 per hundredweight more than

the BFP, with pay prices ranging from

$0.55 per hundredweight above the BFP

in July to $1.22 per hundredweight in

December. During 1996, the average pay

price for Grade A milk used in

manufacturing was $0.93 per

hundredweight more than the BFP,

ranging from $0.82 per hundredweight

(January) to $1.10 per hundredweight

(September). Table 7 sets forth specific

data for pay prices for Grade A milk

used in manufacturing for 1995 and

1996.

TABLE 7.—COMPARISON OF PRICES PAID FOR GRADE A MILK USED IN MANUFACTURING PRODUCTS IN MINNESOTA AND

WISCONSIN TO THE BASIC FORMULA PRICE

Year/Month

Basic

formula

price

Minnesota Wisconsin

Grade A pay

price @

3.5% 1

Diff. between

BFP and

grade A pay

price

Grade A pay

price @

3.5% 1

Diff. between

BFP and

grade A pay

price

$ /hundredweight

1995:

January .......................................................................... 11.35 12.13 0.78 12.24 0.89

February ........................................................................ 11.79 12.56 0.77 12.63 0.84

March ............................................................................. 11.89 12.52 0.63 12.64 0.75

April ................................................................................ 11.16 11.77 0.61 11.92 0.76

May ................................................................................ 11.12 11.67 0.55 11.79 0.67

June ............................................................................... 11.42 11.80 0.38 12.07 0.65

July ................................................................................ 11.23 11.81 0.58 11.78 0.55

August ............................................................................ 11.55 12.14 0.59 12.14 0.59

September ..................................................................... 12.08 12.95 0.87 13.04 0.96

October .......................................................................... 12.61 13.66 1.05 13.74 1.13

November ...................................................................... 12.87 14.11 1.24 14.09 1.22

December ...................................................................... 12.91 14.12 1.21 14.13 1.22
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4909

30Table 35—1996 Annual Average Announced

Cooperative Class I Prices in Selected Cities, Dairy

Market Statistics, 1996 Annual Summary, USDA,

AMS.

31Federal Milk Order Statistics, 1996 Annual

Summary, USDA, Marketing and Regulatory

Programs, Agricultural Marketing Service, Dairy

Division, Statistical Bulletin 938.

TABLE 7.—COMPARISON OF PRICES PAID FOR GRADE A MILK USED IN MANUFACTURING PRODUCTS IN MINNESOTA AND

WISCONSIN TO THE BASIC FORMULA PRICE—Continued

Year/Month

Basic

formula

price

Minnesota Wisconsin

Grade A pay

price @

3.5% 1

Diff. between

BFP and

grade A pay

price

Grade A pay

price @

3.5% 1

Diff. between

BFP and

grade A pay

price

Average ......................................................................... 11.83 12.60 0.77 12.68 0.85

1996:

January .......................................................................... 12.73 13.78 1.05 13.55 0.82

February ........................................................................ 12.59 13.56 0.97 13.44 0.85

March ............................................................................. 12.70 13.68 0.98 13.72 1.02

April ................................................................................ 13.09 14.01 0.92 14.11 1.02

May ................................................................................ 13.77 14.57 0.80 14.65 0.88

June ............................................................................... 13.92 14.71 0.79 14.78 0.86

July ................................................................................ 14.49 15.32 0.83 15.39 0.90

August ............................................................................ 14.94 16.00 1.06 15.96 1.02

September ..................................................................... 15.37 16.33 0.96 16.47 1.10

October .......................................................................... 14.13 14.81 0.68 15.06 0.93

November ...................................................................... 11.61 12.79 1.18 12.47 0.86

December ...................................................................... 11.34 12.39 1.05 12.18 0.84

Average ......................................................................... 13.39 14.33 0.94 14.32 0.93

1Fluid Grade A pay price for milk used in all manufacturing products in Minnesota and Wisconsin as reported by the National Agricultural Statistic Service adjusted by butterfat differential used under Federal milk orders.

Because manufacturing facilities are

willing to pay these values above the

BFP to ensure adequate supplies of milk

into their plants, fluid processors must

pay at least these values to attract the

necessary supplies of fluid milk to the

bottling plants. Although data

indicating the exact value that fluid

plants are willing to pay to ensure this

supply is not published, an indication

of the market value of this milk can be

obtained from the announced

cooperative Class I prices.30 Other than

in Miami, Florida, which is a deficit

Class I market with a 1996 annual

average Class I utilization of nearly 90

percent,31 the announced cooperative

Class I prices are the highest in the

Upper Midwest region. These prices

range from $1.19 per hundredweight

above the minimum Class I price in

Minneapolis, Minnesota, to $1.79 per

hundredweight above the minimum

Class I price in Milwaukee, Wisconsin,

and Chicago, Illinois.

Option 1A presumes that the $1.04

per hundredweight minimum Class I

differential is no longer adequate to

ensure a sufficient supply of milk due

to the competitive nature of the

manufacturing facilities in this region.

Thus, Option 1A establishes an

additional competitive factor into the

development of the base zone Class I

differential. Option 1A values this

competitive factor to be worth about

$0.60 per hundredweight. This value

reflects approximately two-thirds of the

actual competitive costs incurred by

fluid plants to simply compete with

manufacturing plants for a supply of

milk.

An additional benefit of establishing

the minimum Class I differential at a

level that more accurately reflects the

actual value of milk for fluid purposes

is the added monies generated in the

Federal order pool. Class I milk

provides the vast majority of pool value

in Federal orders. If an order has a low

Class I differential and a low Class I

utilization, it frequently does not have

enough pool value to provide proper

price signals to pool participants. In

these orders, the Class I price is

established by the suppliers of milk at

levels above the Federal order

minimums. When these over-order

markets dictate substantially higher

prices than the order minimums 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. The

$1.60 minimum differential level

proposed is perceived to be the lowest

value necessary under present supply

and demand conditions to maintain

stable and viable pools of milk for Class

I use in markets that are predominantly

manufacturing oriented. Applying this

minimum differential to each of the

three low pricing areas will ensure that

low utilization and surplus markets will

have similar differentials. However,

having a larger portion of Class I value

pooled could mute price signals to

producers more than prices determined

strictly by market forces. If the blend

price exceeds the marginal value of milk

in manufacturing, there would be an

incentive to overproduce for fluid

needs.

Quantitative analysis using the ERS

multi-regional model which assumed

the eleven market order consolidation,

four classes of utilization, and the BFP

as proposed, suggests that most

producers for the 6-year average would

see little to modest changes in revenue

due to Class I price increases resulting

from Option 1A when compared to the

baseline. However, some producers

would experience Class I price

decreases. Producers located in the

following Federal milk markets would

experience revenue reductions due to

average Class I price decreases: New

Mexico-West Texas—($0.19/cwt),

Eastern Colorado—($0.12/cwt), Central

Arizona—($0.11/cwt), Southwest

Plains—($0.11/cwt), and Texas—($0.10/

cwt). All other orders for the 6-year

average would have a Class I price

increase. The Chicago Regional,

Michigan Upper Peninsula, and Upper

Midwest orders would experience the

largest increases: $0.46, $0.51, and $0.56

per hundredweight, respectively.

Overall, the magnitude of price and

income changes under Option 1A is

small when compared to the baseline.

Option 1A results in a 10-cent increase

in the average Class I price for all

current Federal orders. Further details
4910 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

of the impact of these Class I price

changes on the all-milk price and cash

receipts based on the model results are

available in the economic analysis

statement.

Option 1B—Relative Value-Specific

Differentials. Option 1B establishes a

nationally coordinated system of

relative value-specific Class I price

differentials and adjustments that

recognizes several low pricing areas.

Option 1B relies on a least cost optimal

solution from the USDSS Cornell model

to develop a Class I price structure that

is based on the most efficient assembly

and shipment of milk and dairy

products to meet all market demands for

milk and its products.

The results of the USDSS model

provide information regarding the

relationship of prices between

geographic locations but do not

determine the level of Class I

differentials. Option 1B utilizes

geographic relationships as its

foundation and maintains the current

Class I differential of $1.20 at

Minneapolis, Minnesota. A location

adjusted price differential for every

county is established by evaluating

differences between nearby Class I

differential pricing points generated by

the model. The marginal values (shadow

prices) are used to determine the price

structure because they reflect the value

of additional milk supplied to a plant at

a specific location for fluid use. This

price surface recognizes several low

pricing areas located primarily in the

Upper Midwest and Western regions.

Option 1B would move the dairy

industry into a more market-oriented

system. By establishing differentials on

the basis of optimal milk movements,

market conditions will play a greater

role in determining Class I prices. To

the extent that higher Class I prices are

needed and negotiated to attract milk

supplies, the higher prices will accrue

to those producers who service the fluid

market. Hence, Option 1B places more

emphasis on negotiations between dairy

farmers and processors to determine

actual Class I prices. The location

adjusted differentials established for

each county are set forth in Maps 3A,

3B, and 3C and in General Provisions

§ 1000.52. Table 8 sets forth the location

adjusted differentials at selected cities.

TABLE 8.—COMPARATIVE CLASS I DIFFERENTIALS AT SELECTED CITIES UNDER OPTION 1B-RELATIVE VALUE-SPECIFIC

DIFFERENTIALS

City Current Option 1B Difference

Dollars per hundredweight

New York City, NY ....................................................................................................................... 3.14 2.07 (1.07)

Charlotte, SC ................................................................................................................................ 3.08 1.89 (1.19)

Atlanta, GA ................................................................................................................................... 3.08 2.46 (0.62)

Tampa Bay, FL ............................................................................................................................. 3.88 3.81 (0.07)

Cleveland, OH .............................................................................................................................. 2.00 1.54 (0.46)

Kansas City, MO .......................................................................................................................... 1.92 1.45 (0.47)

Minneapolis, MN ........................................................................................................................... 1.20 1.20 0.00

Chicago, IL ................................................................................................................................... 1.40 1.65 0.25

Dallas, TX ..................................................................................................................................... 3.16 1.68 (1.48)

Salt Lake City, UT ........................................................................................................................ 1.90 1.08 (0.82)

Phoenix, AZ .................................................................................................................................. 2.52 1.14 (1.38)

Seattle, WA .................................................................................................................................. 1.90 1.00 (0.90)

Because Option 1B would involve

changes in both the level of Class I

differentials and the method for

establishing them, it is proposed that

they be implemented through a

transitional phase-in program. The use

of a phase-in program would provide

dairy farmers and processors the

opportunity to adjust marketing

practices to adapt to more marketdetermined Class I prices.

Three possible alternatives are

presented for phasing in Option 1B.

Each utilizes the difference between the

current differentials and the Option 1B

differentials as the basis of the phase-in

over a 5-year period, beginning in 1999

and being completed by 2003. The first

transitional option simply spreads the

phase-in over the 5-year period, with 20

percent of the adjustment in 1999, 40

percent in 2000 and so forth. The base

differentials resulting from this

transitional phase-in are set forth in

Table 9. The first alternative would be

to phase-in to these differentials as

shown in Table 9.

TABLE 9.—OPTION 1B BASE DIFFERENTIALS

City Current

Option 1B—Base differentials 1

1999 2000 2001 2002 2003

Dollars per hundredweight

New York City, NY ............................................................ 3.14 2.93 2.71 2.50 2.28 2.07

Charlotte, NC .................................................................... 3.08 2.84 2.60 2.37 2.13 1.89

Atlanta, GA ........................................................................ 3.08 2.96 2.83 2.71 2.58 2.46

Tampa Bay, FL ................................................................. 3.88 3.87 3.85 3.84 3.82 3.81

Cleveland, OH ................................................................... 2.00 1.91 1.82 1.72 1.63 1.54

Kansas City, MO ............................................................... 1.92 1.83 1.73 1.64 1.54 1.45

Minneapolis, MN ............................................................... 1.20 1.20 1.20 1.20 1.20 1.20

Chicago, IL ........................................................................ 1.40 1.45 1.50 1.55 1.60 1.65

Dallas, TX ......................................................................... 3.16 2.86 2.57 2.27 1.98 1.68

Salt Lake City, UT ............................................................. 1.90 1.74 1.57 1.41 1.24 1.08

Phoenix, AZ ...................................................................... 2.52 2.24 1.97 1.69 1.42 1.14
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4911

TABLE 9.—OPTION 1B BASE DIFFERENTIALS—Continued

City Current

Option 1B—Base differentials 1

1999 2000 2001 2002 2003

Seattle, WA ....................................................................... 1.90 1.72 1.54 1.36 1.18 1.00

1Base differential obtained by taking the difference between the current differential and the final Option 1B differential (year 2003) and multiplying by 20 percent. This value is then subtracted from the current differential to yield the 1999 base differential. This value is then deducted

from each consecutive year’s value until the Option 1B differentials are achieved in 2003.

The second alternative for phasing-in

Option 1B would consist of adding a

decreasing ‘‘transitional payment’’ to

the base differential. It would be equal

to the decrease in revenue that would

otherwise occur during the phase-in

period of Option 1B. Over this four-year

period, it is projected that $388.6

million would be removed from the

Federal order system through the

lowered Class I differential. To provide

the industry an opportunity to prepare

for the changed pricing structure under

Option 1B, a transitional payment

would be added to the base differential

for Class I milk. The payment would be

higher in the first year and gradually be

reduced thereafter to result in

implementation of the Option 1B

differentials in 2003. The additions to

the base differential would equal $0.55

per hundredweight in 1999, $0.35 per

hundredweight in 2000, $0.20 per

hundredweight in 2001, and $0.10 per

hundredweight in 2002. This offsetting

of revenue is designed to temporarily

reduce the impacts of implementing

Option 1B, thus allowing producers an

opportunity to adjust their marketing

practices to adapt to more marketdetermined pricing. Table 10 sets forth

the location adjusted Class I

differentials under this revenue-neutral

phase-in alternative for selected cities.

TABLE 10.—OPTION 1B CLASS I DIFFERENTIALS WITH REVENUE NEUTRAL PHASE-IN PAYMENTS

City Current

Class I diff. with revenue neutral

1999 1 2000 2 2001 3 2002 4 2003 5

Dollars per hundredweight

New York City, NY ............................................................ 3.14 3.48 3.06 2.70 2.38 2.07

Charlotte, NC .................................................................... 3.08 3.39 2.95 2.57 2.23 1.89

Atlanta, GA ........................................................................ 3.08 3.51 3.18 2.91 2.68 2.46

Tampa Bay, FL ................................................................. 3.88 4.42 4.20 4.04 3.92 3.81

Cleveland, OH ................................................................... 2.00 2.46 2.17 1.92 1.73 1.54

Kansas City, MO ............................................................... 1.92 2.38 2.08 1.84 1.64 1.45

Minneapolis, MN ............................................................... 1.20 1.75 1.55 1.40 1.30 1.20

Chicago, IL ........................................................................ 1.40 2.00 1.85 1.75 1.70 1.65

Dallas, TX ......................................................................... 3.16 3.41 2.92 2.47 2.08 1.68

Salt Lake City, UT ............................................................. 1.90 2.29 1.92 1.61 1.34 1.08

Phoenix, AZ ...................................................................... 2.52 2.79 2.32 1.89 1.52 1.14

Seattle, WA ....................................................................... 1.90 2.27 1.89 1.56 1.28 1.00

1 1999 applicable base differential from Table 9 plus $0.55.

2 2000 applicable base differential from Table 9 plus $0.35.

3 2001 applicable base differential from Table 9 plus $0.20.

4 2002 applicable base differential from Table 9 plus $0.10.

5Final Option 1B differentials.

The third approach to phasing in

Option 1B would consist of adding a

decreasing ‘‘transitional payment’’ to

the base differential that would enhance

revenue beyond what the current Class

I system would have generated during

the four years of transitioning to Option

1B. During this four-year period, it is

projected that $878.4 million would be

added to the Federal order system

through the revenue-enhanced payment.

This would result in a net increase of

$489.8 million added to the system once

the projected decrease resulting from

Option 1B phased in during this period

is deducted. This additional money

would not only provide producers with

an opportunity to prepare and

restructure their marketing practices to

adapt to more market-determined

pricing but would also allow them to

obtain the education and resources

necessary to become more effective in a

more market-oriented environment.

Again, the payment in the first year

would be the highest with reductions

occurring thereafter to result in

implementation of the Option 1B

differentials by 2003. The addition to

the base differential would equal $1.10

per hundredweight in 1999, $0.70 per

hundredweight in 2000, $0.40 per

hundredweight in 2001, and $0.20 per

hundredweight in 2002. Table 11 sets

forth the location adjusted Class I

differentials under this revenueenhanced alternative for selected cities.
4912 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

TABLE 11.—OPTION 1B CLASS I DIFFERENTIALS WITH REVENUE ENHANCED PAYMENTS

City Current

Class I diff. with revenue enhancement

1999 1 2000 2 2001 3 2002 4 2003 5

Dollars Per Hundredweight

New York City, NY ............................................................ 3.14 4.03 3.41 2.90 2.48 2.07

Charlotte, NC .................................................................... 3.08 3.94 3.30 2.77 2.33 1.89

Atlanta, GA ........................................................................ 3.08 4.06 3.53 3.11 2.78 2.46

Tampa Bay, FL ................................................................. 3.88 4.97 4.55 4.24 4.02 3.81

Cleveland, OH ................................................................... 2.00 3.01 2.52 2.12 1.83 1.54

Kansas City, MO ............................................................... 1.92 2.93 2.43 2.04 1.74 1.45

Minneapolis, MN ............................................................... 1.20 2.30 1.90 1.60 1.40 1.20

Chicago, IL ........................................................................ 1.40 2.55 2.20 1.95 1.80 1.65

Dallas, TX ......................................................................... 3.16 3.96 3.27 2.67 2.18 1.68

Salt Lake City, UT ............................................................. 1.90 2.84 2.27 1.81 1.44 1.08

Phoenix, AZ ...................................................................... 2.52 3.34 2.67 2.09 1.62 1.14

Seattle, WA ....................................................................... 1.90 2.82 2.24 1.76 1.38 1.00

1 1999 applicable base differential from Table 9 plus $1.10.

2 2000 applicable base differential from Table 9 plus $0.70.

3 2001 applicable base differential from Table 9 plus $0.40.

4 2002 applicable base differential from Table 9 plus $0.20.

5Final Option 1B differentials.

Analysis Based on Evaluation Criteria

Option 1B performs equal to or better

than the current system when combined

with a phase-in program option because

it provides the industry time to adapt to

a more market-oriented system.

Option 1B was evaluated against the

objective criteria as follows:

1. Ensure an adequate supply of milk

for fluid use. Option 1B suggests lower

differentials than current levels in most

of the proposed markets when using a

$1.20 differential at Minneapolis,

Minnesota. Option 1B relies more on the

use of over-order premiums in many

areas to attract adequate milk supplies

for fluid purposes. Over-order prices are

useful tools for allowing the market to

find the final value of Class I milk, and

Option 1B would ensure an adequate

supply of milk for fluid use by

rewarding those producers who service

the Class I market needs. The use of

‘‘transitional payment’’ alternatives

would ensure an adequate supply of

milk for fluid purposes by providing the

industry time to adapt to adjust their

marketing practices in adapting to more

market-determined pricing.

2. Recognize quality (Grade A) value

of milk. Option 1B recognizes the

quality (Grade A) value of milk through

the use of a differential added to the

basic formula price.

3. Provide appropriate market signals.

Under Option 1B, greater reliance is

placed on market forces to establish

prices which will allow for clearer

transmission of supply and demand

signals between producers and

consumers than does the current

system.

4. Recognize value of milk at location.

Option 1B does recognize the value of

milk at location. Option 1B is based on

the least cost movement of milk and

dairy products based on the May 1995

results of the USDSS model. Thus the

resulting price structure reflects the

most efficient assembly and

transportation of milk and dairy

products and performs better than the

current system.

5. Facilitate orderly marketing with

coordinated system of prices. Like

Option 1A, Option 1B also establishes a

coordinated system of differentials and

location adjustments that sets a

minimum value for Class I milk in every

county. Prices will be aligned within

and among orders, thereby facilitating

orderly marketing of milk.

6. Recognize handler equity with

regard to raw product costs. Class I

differentials proposed under Option 1B

reflect differences in economic costs of

procuring and marketing milk

depending on geographic location. This

coordination and alignment of

minimum prices provides an equitable

foundation upon which handlers can

compete for available milk supplies and

sales of fluid products in a more marketoriented environment.

Option 1B was evaluated against the

administrative criteria as follows:

1. Minimize regulatory burden.

Option 1B would not change the

regulatory burden of the Federal order

program in terms of reporting,

recordkeeping, compliance, and

administrative costs to handlers. The

role of regulation in determining

minimum prices would be reduced, as

more responsibility would be placed on

market forces.

2. Minimize impact on small

businesses. Under Option 1B, a

substantial part of the Class I value

needed to attract adequate milk supplies

would likely come from over-order

payments negotiated outside the Federal

order system.

Smaller, less efficient businesses

would likely have a greater

responsibility under Option 1B to

bargain with processors for over-order

premiums that adequately cover their

costs. With processors less likely to face

similar raw product costs, less efficient

small processors may have to negotiate

and/or sustain over-order price levels

necessary to attract and maintain a

sufficient supply of milk, while efficient

large businesses may be in a better

competitive position to do this. The use

of a transitional payment program

would help provide less efficient small

businesses make the needed

investments to move to a more

competitive position in the market.

3. Provide long-term viability. When

Option 1B is combined with one of the

transitional phase-in program options,

the long-term viability of Option 1B is

increased and is expected to exceed that

of the current price structure. Gradually

moving from a regulated system to one

that is less regulated will require

adaptation of all entities within the

dairy industry. A transitional period

will allow market participants to make

necessary adjustments in marketing

practices to continue in the industry for

years to come.

Option 1B would establish a marketoriented approach to Class I pricing, by

reducing the traditional role the Federal

order program has maintained with

regards to Class I pricing. Historically

the Class I price established under

Federal orders represented the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4913

minimum value of Class I milk in the

marketplace based on the cost of

maintaining Grade A milk and

additional marketing costs with the cost

of alternative milk supplies placing an

upper limit on this value. Option 1B

provides an opportunity for free-market

conditions to determine more of the

value of fluid milk, but prices would

still be undergirded by minimum prices

based on the best available estimates of

milk transportation costs. Ultimately,

Option 1B should promote more market

efficiencies; however, adjustments will

be required by both producers and

processors.

Quantitative Analysis

Using ERS multi-regional model

analyses of the 11 order consolidations,

four classes of utilization, and a Class I

price mover as proposed, suggests that

most producers would experience lower

prices, when compared to the baseline,

if Option 1B were phased-in with no

transition assistance. The 6-year average

Class I price in all current Federal order

markets would decline $0.37 per

hundredweight. However, producers

located in the Chicago Regional, Upper

Midwest, Iowa, Central Illinois, Tampa

Bay and Southeastern Florida orders

would benefit from Class I price

increases ranging from $0.07 to $0.28

per hundredweight. Producers in all

other current orders would experience

losses of revenue because of Class I

price decreases ranging from $0.03 to

$1.07 per hundredweight. The smallest

decline occurs in the Upper Florida

order with the greatest declines

occurring in the current Carolina

($¥0.68), Middle Atlantic ($¥0.72),

Southwest Plains ($¥0.76), Central

Arizona ($¥0.80), Texas ($¥0.87) and

Eastern Colorado ($¥1.07) orders.

Both the increases and decreases are

mitigated somewhat by the amount of

milk used in Class I. Thus no market

would see declines in the all-milk price

in excess of $0.60 per hundredweight.

Further details of the impact of these

Class I price changes on the all-milk

price and cash receipts based on the

model results are available in the

economic analysis statement.

Because current Federal order

producers and processors have

developed and designed their marketing

practices based on the existing Class I

price structure which has been in place

for several years, moving immediately to

a more market-oriented system could be

disruptive for some producers and

handlers. To reduce this marketplace

disruption, Option 1B has been

analyzed by the ERS multi-regional

model in conjunction with transitional

phase-in program alternatives from the

current differentials.

The revenue-neutral phase-in

alternative from current differentials to

Option 1B differentials would minimize

the impact of Option 1B during the

phase-in period. Through a gradual

phase-in, both producers and processors

would be given time to adjust their

marketing practices in preparing for the

new minimum Class I price levels.

Results of the model analysis indicate

that almost all producers would

experience increased revenue because of

Class I price increases during the first

revenue-neutral phase-in year when

compared to the baseline. In fact, the

Class I price would be higher in all but

one of the current Federal order

markets. The price increases range from

$0.25 per hundredweight to $0.59 per

hundredweight and for all 32 Federal

order markets the average first year

Class I price would be up $0.39 per

hundredweight. In year two, producers

located in 25 of the Federal order

markets would continue to experience

increased revenue because of Class I

price increases compared with the

baseline ranging from $0.01 per

hundredweight to $0.48 per

hundredweight. In year three, 17 orders

would experience Class I price increases

compared with the baseline. By year

four, only the Florida, Upper Midwest,

and parts of the Central areas would

remain with price increases from the

baseline.

Like the revenue-neutral phase-in, the

revenue-enhancement phase-in would

provide producers and processors a

period of time to adjust their marketing

practices in preparing for the new

minimum price levels by initially

providing payment assistance. The use

of the revenue-enhancement phase-in

option would provide producers with

additional income to adjust their

operations and obtain necessary

education and resources to prepare for

a more market-oriented system.

Results of the ERS multi-regional

model indicate that during the first year,

all current orders would experience

Class I price increases over the baseline.

In year two, all but one order would

have increased Class I prices. By year

three, 21 orders would continue to

experience increases. During year four,

11 orders would maintain a Class I price

increase over the baseline, while 21

orders would have price decreases of

between $0.01 per hundredweight and

$1.05 per hundredweight. Further

details of the model results for both

transitional payment program options

are available in the economic analysis

statement.

Comparison of Options 1A and 1B

Option 1A and Option 1B have

similarities but rely on differing

methods to establish a Class I price

structure. First, both options recognize

that milk has a location value. Secondly,

both options establish a price surface

that assigns a price to every county in

the United States. Currently, a price at

any particular location may vary

depending upon the order under which

the milk is pooled. Finally, both options

utilized the USDSS model results to

establish the price surface.

Although similar in these respects,

the two pricing options differ on several

issues. First, the options differ on the

level at which Class I differentials are

established. Option 1A is based on the

premise that Class I differentials be

established at a minimum price that

reflects more closely the current value

of the Class I milk based on local supply

and demand conditions and agency

judgement on the costs of obtaining

alternative supplies of milk. Option 1B

relies on the premise that a lower

minimum price should be established

strictly on the basis of the best available

estimates of transportation costs to

provide for a more market-oriented

structure that allows dairy farmers and

processors more freedom to negotiate

fluid milk price levels.

Second, the two options differ in how

the price surface should be established

regardless of the level. Option 1A

provides for a surface that is smoother

and flows primarily from north to south

and west to east. Option 1B establishes

a price surface that is flatter throughout

a majority of the United States and then

increases significantly in the deficit

milk production areas of the Southeast.

A comparison of the price surfaces

established under Options 1A and 1B

from Minneapolis to Miami

demonstrates this difference.

The total distance from Minneapolis

to Miami is approximately 1775 miles.

Since Atlanta is the first major

metropolitan center located in the

Southeast order, and is considered a

deficit area, a review of the two price

surfaces between Minneapolis and

Atlanta and Atlanta and Miami

highlights the differences in the price

surface pattern. The distance between

Minneapolis and Atlanta is about 1110

miles, or 63 percent of the total

distance. The distance between Atlanta

and Miami is approximately 665 miles,

or 37 percent of the total distance.

Under Option 1A the differential

established in Minneapolis is $1.70 per

hundredweight and $1.20 per

hundredweight under Option 1B. The

Option 1A differential in Atlanta is
4914 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

$3.10 per hundredweight and under

Option 1B, the differential is $2.50 per

hundredweight. The Class I differential

in Miami under both options is about

$4.30 per hundredweight. The

difference in differentials between

Minneapolis and Atlanta under Option

1A is $1.40 per hundredweight and

$1.30 per hundredweight under Option

1B. The difference in differentials

between Atlanta and Miami under

Option 1A is $1.20 per hundredweight

and $1.80 per hundredweight under

Option 1B. The total difference between

Minneapolis and Miami under Option

1A is $2.60 per hundredweight and

$3.10 per hundredweight under Option

1B.

Under Option 1A, the change in

differentials from Minneapolis to

Atlanta represents 54 percent of the

total $2.60 differential change with the

differential changes from Atlanta to

Miami representing 46 percent of the

change. This helps to demonstrate that

Option 1A results in a smoother, more

evenly dispersed Class I price surface

from north to south.

Under Option 1B, the change in

differentials from Minneapolis to

Atlanta represents about 42 percent of

the change whereas between Atlanta

and Miami, 58 percent of the differential

change is reflected in only 37 percent of

the total distance. As demonstrated,

Option 1B results in a price surface that

is flatter over a greater portion of the

United States and significantly steeper

in the deficit areas of the Southeast.

Third, the options differ in their

reliance on the USDSS model results.

Option 1A recognizes the value

associated with the model results but

incorporates judgement on existing

specific marketing conditions and

practices to make adjustments to the

model results. Option 1B, on the other

hand, utilizes the most recently

available USDSS model results to reflect

optimal values for fluid milk at different

locations that will promote market

efficiencies within the dairy industry.

To further compare and analyze the

impacts of Options 1A and 1B on

producers and processors, static Federal

order pool analyses were completed.

The pool analyses, although static,

provide some indication on how the

revenue will be distributed in the newly

consolidated pools given the pricing

structure. The pool analyses are based

on October 1996 data. The analyses

utilized all producer milk in each of the

current Federal milk order pools. The

classification of producer milk,

including Class III–A milk, remained as

it is currently classified under each

order. The data were collected for all

plants and prices and were adjusted for

location. These data were then

combined into the 11 proposed orders,

and the pools were re-computed to

reflect the impacts on the uniform price

of consolidation only and then to reflect

the impacts of consolidation combined

with Option 1A and Option 1B price

surfaces. Class II, Class III, and Class III–

A and the basic formula price were held

at the actual prices for October 1996.

Table 12 sets forth the results of the

analyses.

TABLE 12.—CONSOLIDATION PLUS OPTION 1A AND OPTION 1B PRICE STRUCTURE IMPACTS ON PROPOSED ORDERS’

ESTIMATED UNIFORM PRICES—OCTOBER 1996

Proposed order

Estimated uniform price Difference between pool impacts of consolidation plus options 1A & 1B and consolidaConsolidation tion

only

(Col. 1)

Cons. plus

option 1A

(Col. 2)

Cons. plus

option 1B

(Col. 3) Col. 2 ¥

Col. 1

Col. 3 ¥

Col. 1

$/hundredweight

Northeast .............................................................................. 16.55 16.60 16.07 0.05 (0.48)

Appalachian .......................................................................... 17.27 17.57 16.53 0.30 (0.74)

Southeast .............................................................................. 17.12 17.12 16.69 0.00 (0.43)

Florida ................................................................................... 18.52 18.55 18.37 0.03 (0.15)

Mideast ................................................................................. 15.95 16.01 15.64 0.06 (0.31)

Upper Midwest ...................................................................... 14.78 14.85 14.79 0.07 0.01

Central .................................................................................. 15.69 15.68 15.44 (0.01) (0.25)

Southwest ............................................................................. 16.54 16.45 15.66 (0.09) (0.88)

Western ................................................................................. 15.01 14.94 14.54 (0.07) (0.47)

AZ-Las Vegas ....................................................................... 15.91 15.82 15.28 (0.09) (0.63)

Pacific NW ............................................................................ 15.35 15.34 14.98 (0.01) (0.37)

Table 12 provides an indication of the

impacts of the two Class I pricing

surfaces when combined with the

proposed orders. This pool analysis

does not reveal the impacts of the three

possible alternatives for phasing-in

Option 1B.

Conclusion

As previously indicated, the

Department, based on the evidence and

arguments currently before it, does not

believe Options 2–5 or the other ideas

discussed with less detail are viable

options. But this proceeding is still a

proposal. Therefore, commenters may

still present evidence or arguments

regarding any of the Options or ideas.

All of the provisions of Federal milk

marketing orders continue, in addition

to a pricing surface as proposed under

Options 1A or 1B. Thus, recordkeeping,

prompt payment provisions, auditing

plant receipts and utilization, and

verification of farm weights and tests

still continues. Both Option 1A and 1B

also recognize that milk used for fluid

purposes should be valued higher than

milk used in other products. The two

options differ in their approach for

establishing minimum values for fluid

milk. Option 1A focuses on establishing

a minimum price that reflects existing

marketing conditions and the current

value of milk used for fluid purposes.

Option 1B focuses on reducing

government intervention, to provide

more room for market forces to

determine the actual value of Class I

milk.

At this time Option 1B is preferred for

several reasons. First, this option is

based on model results that reflects the

best available estimates of least cost

assembly and shipment of milk and

dairy products to meet all dairy product

demands. By promoting market

efficiencies, it would be expected to
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4915

result in the most preferable allocation

of resources over time.

Option 1B would move the dairy

industry into a more market-determined

pricing system. By lowering

differentials, marketing conditions will

have a greater impact on actual Class I

prices in the form of higher prices that

are provided to those producers who

service the Class I market. In this way,

the revenue necessary to obtain milk for

fluid use may be minimized since the

Class I value is not shared marketwide

with those producers that do not service

the fluid market.

U.S. agriculture is transitioning to a

more market-determined environment,

relying less on traditional government

involvement typified by price and

income support programs. This

transition is emphasized in the 1996

Farm Bill, which specifically provided

for the gradual phase-out of traditional

price and income support programs,

including the dairy price support

program that has existed since 1950.

Because Option 1B is more market

oriented and reduces the government

presence in establishing minimum Class

I prices, three methods of transitioning

to Option 1B are offered. One variation

is a gradual phase-in to lower Class I

differentials with no transition

assistance to offset any lower revenue to

dairy farmers that may occur. This

variation would reduce Class I

differentials in market order areas by 20

percent each year until the final Class I

differentials under Option 1B are

reached in 2003.

A second variation provides transition

assistance at increases Class I

differentials initially to offset reduced

revenue that may occur to producers

due to the decline in Class I

differentials. In this variation, the Class

I differentials in all market order areas

would be increased by $0.55 per

hundredweight in the first year of the

phase-in, $0.35 per hundredweight in

the second year, $0.20 in the third year,

and $0.10 per hundredweight in the

fourth year of phase-in. This level of

assistance would restore income to

dairy farmers that might be lost in the

transition, and if the market generates

additional premiums, these assistance

levels would more than make up for

lower producer revenue due to lower

minimum Class I prices.

A third variation offers transition

assistance that initially increases the

Class I differentials even more, while

still phasing toward a more marketoriented price surface by 2004. Under

this variation, all Class I differentials in

all market order areas would be

increased by $1.10 per hundredweight

in the first year of phase-in, $0.70 in the

second year, $0.40 in the third year, and

$0.20 in the fourth year before reaching

the final Class I differentials described

by Option 1B. The assistance provided

by this variation would enable dairy

farmers to make the adjustments

necessary to succeed in a more marketoriented environment.

While Option 1B is preferred at this

time, Option 1A and other pricing

options are still under consideration.

Therefore, comments should address at

least the following questions:

—Should the Class I price structure be

designed to move the dairy industry

towards a more market-oriented

system that relies less on government

regulation in establishing the pricing

terms of trade between handlers and

dairy farmers or should the Class I

price structure be established at the

estimated current value of Class I

milk?

—What is the appropriate Class I

differential level in surplus areas?

How low can a Class I differential be

established to ensure an adequate

supply of fluid milk? What Class I

differential level is necessary for

producers to maintain sufficient

revenue for ensuring an adequate

supply of milk? Is that level $1.00,

$1.60, or is it another value and why?

—Option 1B has been presented with

three phase-in programs; which of

these phase-in programs would be

preferred and why? Is five years a

sufficient time period for the industry

to make necessary adjustments to

move towards a more marketoriented, less governmentally

regulated system?

—How will the California state program

interact with either Option 1A or

Option 1B?

—To what extent would consumers

benefit from reduced differentials

under Option 1B versus Option 1A?

BILLING CODE 3410–02–P
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BILLING CODE 3410–02–C
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4. Classification of Milk

Under this proposal, the Federal milk

order system would continue to contain

uniform classification provisions, but

with some modification. The proposed

modifications would be consistent with

the Agricultural Marketing Agreement

Act of 1937, which requires that milk

must be classified ‘‘in accordance with

the form in which or the purpose for

which it is used.’’

The proposed uniform provisions

would provide for 4 classes of use. They

are similar to the uniform classification

provisions contained in the current

orders. The purpose and application of

the current classification and

classification-related provisions are

contained in the Department’s final

decisions that were issued February 19,

1974 (39 FR 9012), July 17, 1975 (40 FR

30119), February 5, 1993 (58 FR 12634),

and October 20, 1993 (58 FR 58112).

The differences in this proposal from

the current classification system are

discussed herein and are the result of a

thorough review of Federal order

classification provisions since passage

of the 1996 Farm Bill.

Major proposed changes from the

current classification plan include the

formation of a new Class IV which

includes milk used to produce nonfat

dry milk (currently in Class III–A) and

milk used to produce butter and other

dry milk powders (currently in Class

III). Other classification changes include

reclassifying eggnog as a fluid milk

product, moving cream cheese from

Class III to Class II, broadening the Class

II classification for infant formulas and

meal replacement to include all such

formulas meeting redefined criteria for

such products regardless of the type of

container they come in, removing the

words ‘‘dietary use’’ from the fluid milk

product definition and eliminating the

term ‘‘filled milk.’’

In addition to the class uses of milk,

consideration has been given in this

proposal to a number of modifications

related to order definitions and

provisions that are necessary to

administer an effective classified pricing

plan. Related definitions include the

definitions of fluid milk, filled milk,

and commercial food processing

establishments. Also, modifications

have been considered for administrative

rules related to the classification of

milk. These include rules for classifying

skim milk and butterfat that is

transferred or diverted between plants,

general rules pertaining to the

classification of producer milk

(including the determination of

shrinkage and overage), rules describing

how to allocate a handler’s receipts of

skim milk and butterfat to the handler’s

utilization of such receipts, and

provisions concerning the market

administrator’s reports and

announcements concerning

classification. The classification and

classification-related provisions are

proposed to be restructured and

redrafted to achieve part of the goal of

standardizing and simplifying the

regulatory program.

In response to a Classification

Committee draft report released during

the developmental stage for this

proposed rule, comments letters were

received regarding the classification of

milk. The comments ranged from

suggestions that the entire classification

system be revised by providing 2, 4, or

5 classes of milk to suggestions

regarding the classification of individual

products. Some comments supported

the classification method the California

state order provides and recommended

a review of that method. The comments

will be discussed according to each

issue.

4a. Fluid Milk Product (§ 1000.15)

The new orders would include a

modified fluid milk product definition

in § 1000.15. The proposed changes to

the fluid milk product definition

include eliminating the term filled milk,

including eggnog in the list of specified

fluid milk products, and revising the

word buttermilk to read cultured

buttermilk. The revised fluid milk

product definition would read ‘‘any

milk products in fluid or frozen form

containing less than 9 percent butterfat

and more than 6.5% nonfat milk solids

that are intended to be used as

beverages. Such products include, but

are not limited to, milk, skim milk,

lowfat milk, milk drinks, eggnog, and

cultured buttermilk, including any such

beverage products that are flavored,

cultured, modified with added nonfat

milk solids, sterilized, concentrated (to

not more than 50% total milk solids), or

reconstituted.’’

The term ‘‘buttermilk,’’ as used in the

fluid milk product definition, would be

changed to read ‘‘cultured buttermilk.’’

The revised term clearly distinguishes

the ‘‘beverage’’ buttermilk product from

the buttermilk byproduct which is

produced from a continuous churning

operation.

The fluid milk product definition also

would be modified to exclude ‘‘filled

milk’’ and to include eggnog in its list

of products. Although it is apparent that

eggnog is a beverage milk product and

clearly meets many of the criteria for

being considered a fluid milk product,

it is not now included in the list of

products identified as fluid milk

products. The proposed addition of

eggnog to the list of fluid milk products

results in a change of the product’s

classification from a Class II product to

a Class I product. The elimination of the

term ‘‘filled milk’’ from the fluid milk

product definition is discussed later.

Section 15(b)(1) of the fluid milk

product definition would be modified to

exclude any product from the fluid milk

product definition if the product is a

formula especially prepared for infant

feeding or a meal replacement without

regard to the type of container used to

package the product. The reference to

‘‘dietary use,’’ which is an imprecise

term, would be deleted as a standard for

classifying milk products.

At present, ‘‘formulas especially

prepared for infant feeding or dietary

use that are packaged in hermetically

sealed containers’’ are not ‘‘fluid milk

products’’ but the exact same formula

packaged in a conventional container

may be considered to be a fluid milk

product if it otherwise meets the

standards for such products. This

possible difference in classification of

these formulas would be eliminated.

The consolidated orders would

continue to exclude from the fluid milk

product definition formulas designed as

‘‘meal replacements’’ but, as noted

above, any reference to ‘‘dietary use’’

should be removed as a classification

standard. The words ‘‘dietary use’’ have

not been helpful in distinguishing the

products that are really beverages from

other products that are meant to be

much more than just beverages.

As intended for the consolidated

orders, the words ‘‘meal replacement’’

would pertain to the type of specialty

product that one might find in a

hospital or nursing home for people

who have a swallowing disability, some

type of digestive impairment, or other

health or medical problems. Such

products include those that are

thickened with a thickening agent, such

as waxy maize starch, which make them

consumable for a person with special

dietary needs. Such products do not

compete with fluid milk products as a

beverage. They are prepared for a

limited market and are not sold as milk

to the general public.

The term ‘‘meal replacement’’ would

not include various types of shake

products that are designed for people

who are trying to gain or lose weight.

Neither would the term apply to

products that are advertised as ‘‘protein

supplements,’’ ‘‘instant breakfasts,’’ or

‘‘high in fibre.’’ These products clearly

may be consumed as beverages and are

sold to the general public. Therefore,

like other fluid milk products, it is
4924 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

proposed that they be classified[ as

Class I.

The meal replacement standard

proposed for the consolidated orders is

more stringent than the one that is

currently applied. At the present time,

for instance, products such as

‘‘Sportshake,’’ ‘‘Powergetic,’’ ‘‘Carnation

Instant Breakfast,’’ ‘‘Resource Dairy

Thick,’’ ‘‘ReadyCare Thickened Dairy

Drink,’’ and ‘‘Ultra Slim-Fast’’ are

classified as ‘‘meal replacements.’’ As

redefined in this proposal, however,

only ‘‘Resource Dairy Thick,’’

‘‘ReadyCare Thickened Dairy Drink,’’

and similar products would fall within

the meaning of ‘‘meal replacement,’’ as

described above.

Fluid milk products that contain less

than 6.5% nonfat milk solids are

excluded from the current and proposed

fluid milk product definition.

Consideration was given to eliminating

or lowering this standard because there

are some products that resemble fluid

milk products but are excluded from the

fluid milk product category because

their nonfat solids content falls slightly

below the 6.5% standard.

Several comment letters were

received opposing any adjustment of the

6.5% standard. Some interested parties

pointed out that elimination of the 6.5%

nonfat milk solids standard would

greatly expand the fluid milk product

category to include many essentially

non-milk products that contain very

little milk in them. This could greatly

increase market administrator auditing

costs in following these products and

could regulate several new facilities that

would not reasonably be considered to

be milk plants. In addition, several dairy

product manufacturers argued that their

products would be detrimentally

affected as other shelf-stable

competitive products would gain a

substantial economic advantage. The

letters stated that the increase in cost

associated with the Class I price would

force manufacturers to reformulate their

products so that no fluid milk or

substantially less fluid milk would be

used.

After carefully weighing these

arguments, it is concluded that any

competitive problems that may now

exist as a result of the 6.5% standard are

very minor and that no change in the

standard is warranted at this time.

4b. Fluid Cream Product (§ 1000.16)

No change would be made to the fluid

cream product definition. The current

definition is uniform under all the

orders and should be used in the newly

merged orders. No comment letters were

received which suggested changing the

current fluid cream product definition;

however, several comments were

received in support of the current

definition.

4c. Filled Milk

It is proposed that the definition of

filled milk be eliminated and the term

be removed from the fluid milk product

definition and other provisions within

the orders. Filled milk is a product that

contains a combination of nonmilk fat

or oil with skim milk (whether fresh,

cultured, reconstituted, or modified by

the addition of nonfat milk solids).

Filled milk was first produced and

marketed in the 1960s. In 1968, the

orders were amended to provide a

definition of filled milk. Currently, there

is little or no filled milk being produced

under Federal orders. The term filled

milk is used 18 times in a milk order.

It serves little purpose today except to

complicate and lengthen the regulatory

language. For this reason, the definition

of filled milk would be eliminated and

the term removed from the fluid milk

product definition and other provisions

within the orders.

The form of filled milk and purpose

for which it is used are the same as the

form and purpose for which whole milk

is used. Filled milk is marketed by

handlers in the same types of packages

and in the same trade channels as whole

milk, and is mainly intended to be used

as a beverage substitute for milk.

Whether made from vegetable fat and

fresh or reconstituted skim milk, or any

combination thereof, the resulting

product resembles whole milk in

appearance. Therefore, any filled milk

produced and marketed in the future

would be classified as a Class I product

under the revised fluid milk product

definition.

One cooperative association

submitted a comment supporting the

suggestion to eliminate the definition of

filled milk. No comments were received

in opposition to this idea.

4d. Commercial Food Processing

Establishment (§ 1000.19)

The definition of commercial food

processing establishment (CFPE) is

proposed to be revised by removing the

filled milk reference, for the reasons

previously discussed, and by removing

the word ‘‘bulk’’ from the definition.

The removal of the word ‘‘bulk’’ would

allow a CFPE to receive fluid milk

products and fluid cream products for

Class II use in certain sized packages as

well as in bulk.

Presently, the CFPE definition

prohibits the receipt of fluid milk

products for Class II use in relatively

small pre-measured packages that might

reduce the CFPE’s production costs.

Although there were no comment letters

directed specifically to this point, this

problem has come to the attention of

market administrator personnel. While

proposing that packaged fluid milk

products be permitted to be transferred

to a CFPE in any size, it is also proposed

that only milk which is shipped in

larger-than-consumer-sized packages

(i.e., larger than one gallon) should be

eligible for a Class II classification. If

milk is received in gallon containers or

smaller, the milk should be priced as

Class I milk since there is no way of

guaranteeing that such products will not

be sold for fluid use. Permitting milk in

any sized container to be sold to a CFPE

for Class II use if the container had a

special label, such as ‘‘for commercial

food processing use only,’’ was

considered, but such a provision would

be impractical and it would be

prohibitively expensive for a handler to

prepare specially labeled products for

small accounts. The current restriction

barring a CFPE from having any

disposition of fluid milk products other

than those in consumer-sized packages

(one gallon or less) should be retained

under the new orders.

These two restrictions are based upon

practical considerations. The integrity of

the classified pricing system would be

much more difficult to maintain if the

market administrator were forced to

audit every CFPE on a regular basis. By

prohibiting the sale of fluid milk

products in consumer-sized packages to

a CFPE for anything but Class I use,

there would be less need to regularly

audit CFPE’s to be sure that such

products are not being sold to the

public. Similarly, since packaged fluid

milk products in containers larger than

one gallon are rarely, if ever, found in

retail outlets, it is unlikely that such

products will be sold for fluid use. By

restricting fluid milk product

disposition by CFPE’s to packaged

products not larger than one gallon in

size, there is reasonable assurance that

milk priced as Class II will not be

disposed of as fluid milk sold by the

glass from a bulk dispenser.

One handler submitted a comment in

support of the Committee’s suggestions

regarding the commercial food

processing establishment definition;

none were received in opposition to

these suggestions.

4e. Classes of Utilization (§ 1000.40)

Historically, the fluid or beverage uses

of milk have been classified in the

highest-priced class (Class I), and soft or

spoonable products, those from which

some of the moisture has been removed,

have been classified in the intermediate

class of milk (Class II). The final
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4925

decision issued on February 5, 1993 (58

FR 12634) provided 3 uniform classes of

milk for all orders. Classes I and II

continued the traditional classification

of milk, while the lowest-priced class

(Class III) contained the hard, storable

products. In a final decision that became

effective December 1993, a fourth

class—Class III–A (actually a subsection of Class III)—was established for

most orders for milk used to produce

nonfat dry milk.

It is recommended that the fluid and

beverage uses of milk continue to be the

highest-priced class of milk, Class I. Soft

or spoonable products, or those used in

the manufacture of other food products

or sweetened condensed milk, would be

classified as Class II products. Class III

would contain primarily the hard

cheeses, but also such storable products

as plain or sweetened evaporated or

sweetened condensed milk (or skim

milk) in a consumer-type package.

Finally, a new Class IV would contain

all skim milk and butterfat used to

produce butter or any milk product in

dried form.

Comments filed regarding the number

of classes of utilization for the proposed

merged orders varied from supporters of

one class, which would eliminate all

manufacturing classes, to supporters of

5 classes of milk. Comments concerning

the addition of an export class were also

received. Some comments urged the

immediate suspension or termination of

Class III–A, while others recommended

a thorough review of Class III–A.

Many commenters suggested that

there be one class of milk. A dairy

farmer stated that dry milk powder can

be used for making cheese or fluid milk

and could be easily stored, and later

dumped on the market again which

could influence the milk price. A large

cheese manufacturer maintains that

multiple classes of utilization for

competing manufactured product uses

create market distortion and regulatory

adjustments, and argues that a single,

market-clearing price for all non-fluid

uses would allow competitive forces to

determine supply and demand.

Another commenter, also a dairy

producer, stated that manufacturing

Class II and Class III products is the

only means of storing excess milk.

According to the producer, at one time

much of the country’s milk was

produced at Grade B standards and,

consequently, at a lower cost of

production. However, he contends, this

is not true today. The producer asserts

that the current Federal order system of

milk classification is the reason why the

dairy industry is not unified and unable

to come to a consensus and that milk is

the only commodity in the country that

is priced according to its use.

A major dairy foods association

suggested that there be two classes of

milk (i.e., Class I and all other).

However, if multiple classes of milk are

maintained, the association proposed

that some products be reclassified to

Class III and that Class III–A be

discontinued. The association also

stated that no new milk classifications

should be established such as an export

class of milk. Another commenter

suggested that more than one class of

non-fluid utilization of milk is

unnecessary and does little to enhance

producer income.

A manufacturer of shelf-stable

products also supported a two-class

system for clarification and

simplification reasons, and stated that

such a system would also eliminate the

need for future hearings to determine

the classification of new products. The

commenter strongly opposed the

reclassification of Class II products in

aseptic containers to Class I and argued

that these products do not compete with

current Class I products, but rather

compete in the juice market.

Another handler stated that it

supported 3 classes of milk, but stated

that many products that are currently in

Class III should be reclassified as Class

II. The handler contended that

classification should be based upon

demand elasticity and suggested that the

criteria for placing various products into

classes should be expanded. Very few

products are processed to utilize true

surplus supplies of milk, it stated.

A major cooperative association’s

comment letter supported a 4-class

system where Class IV would include

butter and nonfat dry milk products,

thus serving as the class for marketclearing products. The cooperative

stated that a 3-class system would not

provide enough differentiation for

market clearing. It stated that a distorted

market may result when pooled

handlers must pay the same prices for

milk used in nonfat dry milk as for milk

used in cheese. Another cooperative

also supported the separate

classification for cheese (Class III) and

butter and powder (Class IV).

Two trade associations recommended

5 classes of milk for the merged orders.

One association recommended that the

5 classes be divided into Classes I, II, III,

IVA, and IVB and that products be

classified on the basis of product yields.

The other association stated that the 5

classes of milk should consist of Classes

I, IIA, IIB, IIIA, and IIIB, and that Classes

IIA and IIB should be classified on the

basis of protein and butterfat, whereas

Classes IVA and IVB should be

classified on the basis of solids not-fat

and butterfat.

A few comments addressed the issue

of an export class. One comment letter

supported the concept of continuing to

develop export markets and providing

for Class III–A or Class IV to compete in

the international marketplace. A

Missouri dairy farmer wrote that an

export class is needed so that the cost

of clearing the U.S. market can be

shared across Federal order and state

order lines.

Another commenter, a dairy products

manufacturer, recommended an export

class be established for Class I products.

The handler stated it is engaged in the

packaging and selling of UHT (i.e., ultra

high temperature) processed shelf-stable

dairy products sold within the United

States and abroad. According to the

handler, its inability to compete with

the price offered by its competitors is

the principal reason it has been unable

to increase its volume of business in the

international market. The handler

contends that changes in the Federal

order system are needed to allow the

American dairy industry to become

competitive in the international market.

The handler suggested that the export

class price be established just above the

Class III level because it would allow

milk to flow into either the cheese

market or export markets, whichever

provides the greater opportunity. The

handler claims that the addition of an

export-oriented, value-added, product

class would yield greater returns to

producers than exporting skim or whole

milk powder (i.e., currently Class III-A

products).

A northwest cooperative association

also recommended that consideration be

given to establishing an export-oriented

class to facilitate the development of

export markets and to promote fair

trade. Products produced for the world

market would be included in a class

with a price that reflects ‘‘world

market’’ levels. With such a class,

according to the cooperative, the dairy

industry would be in a better position

to promote exports and contribute to the

U.S. balance of trade. The commenter

contends that processors with exporting

potential will benefit from an export

class and that producers also will

benefit because expanded exports will

lead to reduced dairy surpluses.

After careful consideration of the

comments and arguments, 4 classes of

utilization are proposed for the

consolidated orders, as described below.

Inclusion of an export class is not

proposed because classification is based

on form and use without regard to sales

area. In addition, it would be difficult to

support a concept of dual pricing of a
4926 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

product—one price for domestic use

and a lower price for export. Moreover,

to adopt such dual pricing would be

inconsistent with the principles of the

World Trade Organization.

4f. Class I Milk

Under this proposal, Class I milk

would be all skim milk and butterfat

contained in milk products that are

intended to be consumed in fluid form

as beverages. Class I should include all

the products included in Class I in the

1993 uniform classification decision

plus eggnog.

The 1974 uniform classification

decision classified eggnog as a Class II

product. The decision recognized that

eggnog was prepared to be consumed as

a beverage and that it was classified in

9 of the 32 orders as a Class I product.

However, the decision stated that

eggnog was a highly seasonal product

with limited sales. It was also estimated

that approximately 40% of the sales of

this product was in the form of

imitation eggnog. The decision stated

that a Class II classification would

enhance the competitive position of the

product in the marketplace.

In 1991, the recommended decision of

the national hearing changed the

classification of eggnog from its

historical Class II classification to Class

I. However, the 1993 final decision for

the proceeding reversed the

recommended decision classification.

The primary reason for the change in

the product’s Class I classification back

to the historical Class II classification

was based on exceptions to the

recommended decision. At the same

time, however, the final decision left

low-fat eggnog as a fluid milk product

with a Class I classification, as it was

prior to the 1990 national hearing.

Class I products are generally

classified on the basis of their fluid form

and intended use. Eggnog, a highly

seasonal product, is clearly intended to

be consumed as a beverage. Since this

product is manufactured, packaged and

distributed to the consumer as a

drinkable beverage, it is proposed to be

classified as a Class I product. The

modest change in the ingredient cost of

the finished product should have little

or no effect on its sales in the

marketplace. Comments received

regarding the reclassification of eggnog

were generally in support of its

reclassification into Class I.

A western producer organization

supports the recommendation to

include all milk consumed in beverage

form in Class I. The organization rejects

a two-class system as proposed by

processor groups, arguing that such a

system makes no economic sense since

not all non-fluid uses of milk are

market-clearing in nature and thus

should not be placed in the same class.

A shift to a two-class system would

benefit processors and manufacturers at

the expense of producers, according to

this commenter.

Class I Used-to-Produce. In order to

simplify the accountability for milk

products classified as Class I that may

contain nonmilk ingredients and/or

previously processed and priced skim

milk and butterfat, we recommend

adding a ‘‘used-to-produce’’ category to

Class I. The used-to-produce

accountability method would preclude

the need to develop and maintain

nonstandard conversion factors and

non-milk credits (i.e., salt, flavoring,

stabilizers) for milk product

accountability. This method should

improve the accuracy of handler

reporting and minimize audit

corrections without sacrificing any

statistical information, pricing

considerations, or classification criteria.

No comments were received in response

to the recommendation that this

category be added to the proposal.

4g. Class II Milk

Most of the products included in

Class II as a result of the 1993 uniform

classification amendments would

continue to be classified as Class II

products under the new orders, with 3

exceptions. The exceptions include: (1)

Cream cheese, which would be

reclassified from a Class III product to

a Class II product; (2) eggnog, as

discussed already, which would be

reclassified as a Class I product; and (3)

any fluid product in a hermeticallysealed, all-metal container which would

be classified as a Class II product.

The 1993 national hearing decision

included cream cheese in Class III. The

decision placed spreadable cheeses and

cheeses that can be crumbled into

separate pieces in Class III, while other

more liquid ‘‘spoonable’’ products were

placed in Class II. The decision stated

that cream cheese is used as a substitute

for butter because it functions as a

spread and, thus, classified cream

cheese in Class III.

The classification of cream cheese

should be changed from Class III to

Class II. The milk used in Class II

products, generally described as ‘‘soft’’

products, is used to process or

manufacture products for which

handlers know a consumer demand

exists. Generally, these products have

some of the water removed from

producer milk or contain a high enough

butterfat content that they will not be

used as beverages. Products included in

Class II are those that are neither as

perishable as fluid products nor perform

a balancing function for the market.

Many Class II products have longer

shelf-lives than fluid milk products,

while being less storable than markets’

surplus uses of milk.

The primary distinction between

Class II products and the products used

to balance the market is existing

consumer demand. Although cream

cheese may be used as a substitute for

butter, it is not made to be stored when

no other outlets are available, as is

butter. It is a consumer convenience

product that is produced to meet

consumer demand and not to utilize

surplus supplies of milk. Handlers do

not process milk into perishable or

semi-perishable dairy products if they

do not have a consumer market for those

products. Accordingly, it is proposed

that cream cheese be reclassified from

its current Class III classification to

Class II.

Three comment letters stated that

there is no basis for reclassifying cream

cheese into Class II and it should remain

with other cheeses in Class III. At least

2 comment letters supported the revised

classification of cream cheese. One

commenter argued that cream cheese

competes for consumer market share

with butter, which is currently a Class

III product, and should be classified

according to its ‘‘use’’ which supersedes

any ‘‘form’’ criterion argument. The

letter stated that while the

reclassification will have no appreciable

effect on the blend price, it may be

financially detrimental to plants that

produce cream cheese.

Some comments addressed the

classification of cottage cheese and

ricotta cheese, in addition to cream

cheese. A national manufacturer of

cheese products supports the

reclassification of milk used to produce

cottage cheese and ricotta cheese from

Class II to Class III. The handler states

that due to falling demand for cottage

cheese, it should be placed with other

cheeses in Class III. Another cottage

cheese manufacturer made the same

suggestion.

These suggestions should not be

incorporated in this proposal. Great care

should be taken in reclassifying dairy

farmers’ milk to any class below Class

I. Such reclassification may occur when

it is necessary to dispose of surplus milk

or to allow intermediate dairy products

to compete with a nondairy substitute to

the benefit of dairy farmers. Neither of

these reasons would appear to fit the

situation facing milk used in cottage

cheese.

The declining market for cottage

cheese is likely the result of several

factors besides its price. Some of these
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4927

factors may be the substitution of newer

or improved dairy products for cottage

cheese, changing consumer tastes, or

consumer preference for lower fat

products. There is no indication that

reducing the ingredient cost of this

product by a fraction of a cent per

container would do much to stimulate

consumer preference for it.

As discussed above, the phrase in

§§ 1000.15(b)(1) and 40(b)(v), ‘‘or

dietary use (meal replacement)’’ would

be removed and any fluid product

packaged in a hermetically-sealed, allmetal container would be reclassified as

a Class II product. Formulas especially

prepared for infant feeding should

continue to be classified as Class II

products without regard to the type of

container in which they are packaged.

Although no change is intended for

the present classification of buttermilk

for drinking purposes and buttermilk for

baking purposes, some changes are

needed to clarify the distinction

between the 2 products. First, as noted

previously, drinking buttermilk should

be labeled as ‘‘cultured buttermilk.’’ In

addition, some changes are needed to

distinguish this product, which is a

Class I product, from buttermilk biscuit

mix, buttermilk for baking, or simply

baking buttermilk, which is a Class II

product.

Currently, the criteria used to

distinguish drinking buttermilk from

buttermilk for baking is that the latter

product must contain food starch in

excess of 2% of the total solids in the

product. However, this criteria is not

specified in the orders themselves, but

rather in administrative guidelines that

have been issued. This guideline should

be formalized by stating the standard in

the general provisions that will contain

the classification section for the

consolidated orders. As now specified

in Section 1000.40(b)(2)(v), the Class II

classification is limited to ‘‘buttermilk

biscuit mixes and other buttermilk for

baking that contain food starch in excess

of 2% of the total solids, provided that

the product is labeled to indicate the

food starch content.’’ It should be

emphasized that the proposed standard

not only requires buttermilk for baking

or buttermilk biscuit mix to contain the

required amount of food starch but, in

addition, the label must indicate the

food starch content of the product.

Class II Used-to-Produce. The 1993

uniform classification amendments

changed the accountability method of

several products from a disposition

basis to a used-to-produce basis. Except

for some fluid cream products, all

products were moved to the used-toproduce category. The change resulted

in simplification and improved

accuracy in the reporting and auditing

of these products. This method should

be extended to the remaining Class II

products that are currently accounted

for on a disposition basis, specifically

creamers, light cream, milk and cream

mixtures, and heavy cream.

4h. Class III and Class III–A (i.e., Class

IV) Milk

The July 1993 national hearing

decision provided that hard, storable

products be included in Class III. Class

III–A became effective in 3 Federal

orders in November 1992 and was

implemented in 27 Federal orders in

December 1993. The amendments

established a Class III–A milk class that

included only nonfat dry milk. It is

recommended that the products

currently included in Class III continue

to be classified in that class with two

exceptions. As discussed under the

Class II section, the classification of

cream cheese should be changed from

Class III to Class II. Also, butter and all

milk powders that are currently in Class

III should be moved to Class IV.

The 1993 Class III–A decision stated

that the separate class for milk used to

produce nonfat dry milk (NFDM) was

needed to allow handlers to recover the

cost of producing NFDM. The Class III–

A price is calculated from a product

price formula, which provides a make

allowance, to arrive at a price for milk

used to produce NFDM.

There has been a good deal of

criticism of Class III–A. Some of the

arguments made by critics of III–A are

that:

• Class III–A has resulted in lower

uniform prices under Federal milk

orders;

• A significant amount of milk was

not pooled when the Class III–A price

exceeded the uniform price adjusted for

location;

• The wide gap between the Class II

price and the Class III–A price was

destroying the market for bulk

sweetened condensed milk; and

• The Class III–A pricing system was

undermining the Class II and Class III

price by allowing milk that is

manufactured into NFDM at a lower

price to be utilized in increasingly large

quantities to make soft products and

cheese.

Supporters of Class III–A argue that it

should be retained for several reasons.

One argument that appeared in several

letters was the need to remain

competitive with butter/powder plants

under California’s 4a pricing program.

The Pennsylvania Farm Bureau noted

that as the dairy industry moves toward

the elimination of support prices and

more into the international market,

Class III–A pricing will offer a way to

capture changing price relationships

between cheese, butter, and powder.

Michigan Milk Producers Association

(MMPA) and Independent Cooperative

Milk Producers Association (ICMPA)

argued that the elimination of Class III–

A will competitively disadvantage those

parties who currently provide market

balancing services. They note that as

long as California remains outside of the

Federal order program, the West Coast

nonfat dry milk price, plus a

transportation differential, will continue

to effectively establish a price ceiling for

Midwest nonfat dry milk. This product,

according to MMPA and ICMPA, is still

a market-clearing product for Michigan,

Indiana, Kentucky, and parts of Ohio.

A major Northeast cooperative

association, Agri-Mark, also opposed

any suggestion to eliminate Class III–A.

According to Agri-Mark, arguments that

Class III–A pricing has encouraged

unneeded nonfat dry milk production

are false. Class III–A pricing, in AgriMark’s view, has allowed nonfat dry

milk manufacturers to resume their role

of efficiently balancing Class I markets

and disposing of reserve supplies. While

vigorously supporting the retention of

Class III–A pricing, Agri-Mark also

stated that it is necessary to modify

Class III–A pricing in two primary areas.

The first modification involves the

replacement of the Central states price

with a Class III–A price calculation

using a California nonfat dry milk price

announced each week. The second

modification involves including milk

used to manufacture buttermilk powder

in the Class III–A definition.

Agri-Mark contends that Class III–A

should be continued in all Federal

marketing areas in order to allow their

nonfat dry milk manufacturing plants to

remain competitive with California and

therefore be available to balance Class I

needs and facilitate the handling of

reserve milk supplies in each market. It

is also Agri-Mark’s view that the current

Class III–A pricing formula has worked

well and has not given an advantage to

nonfat dry milk manufacturers relative

to cheese manufacturers.

Agri-Mark acknowledges that the

problem of using nonfat dry milk to

replace fresh milk in traditional dairy

uses when Class III–A prices are

significantly below Class II and III

prices does exist; however, it argues that

the elimination of Class III–A pricing

will not alleviate this problem because

low-priced nonfat dry milk

manufactured in California will still be

available to replace local fresh milk. In

the absence of Class III–A, local fresh

milk may be unable to find a nearby

outlet, particularly on a seasonal basis,
4928 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

32See Issue Number 3 of this proposed rule for

a comprehensive discussion of Class III and IV

prices.

resulting in disorderly marketing

conditions.

Another commenter, the Alliance of

Western Milk Producers (AWMP), stated

that separate butter/powder and cheese

milk pricing classes would not be

detrimental to producers, but rather that

a single price class would cause

producers economic disaster. The

AWMP supports a two-class system for

manufactured products. It recommends

that Class III include cheese and Class

IV include butter, nonfat dry milk, and

whole milk powder.

Darigold, a cooperative association

based in Seattle, Washington, submitted

a comment in support of separate

classes for butter/powder (Class III–A)

and for cheese (Class III) and offered

several arguments why separate classes

for butter, powder, and cheese should

be adopted. Darigold states that the

reconstitution of nonfat dry milk should

be viewed as a means to economic

efficiency rather than a pricing

disruption or distortion. Darigold points

out that it is inefficient to have milk

transported several hundred miles if

cheaper solids could be transported at a

lower cost. Darigold also states that

reconstitution is actually consistent

with the purposes of Federal orders

because it promotes the goal of making

adequate supplies of milk solids

available within a deficit market.

Darigold also states that reconstitution

of nonfat dry milk into higher-classed

dairy products is much more demanddriven than price-driven and that the

increased use of nonfat dry milk in the

processing of higher-valued products

may be explained by the shortages of

milk and continuing declines in milk

production that have occurred in some

regions, not by price incentives

associated with Class III–A. The

cooperative also states that milk

movements in recent years to the Upper

Midwest would have occurred even

without Class III–A because milk

production was decreasing in the Upper

Midwest but growing in the West.

Darigold maintains that concerns

about ‘‘artificial drying’’ (i.e., drying

milk just to be able to obtain nonfat dry

milk solids as a substitute for fresh milk

in Class II products) overstate the

problem and should be kept in

perspective. In addition to

acknowledging that such practice would

be inconsistent with Federal order

program goals, the cooperative points

out that it would also be inconsistent

with economic efficiency. Darigold

states that only a limited amount of

nonfat dry milk reconstitution has been

driven by a price difference between

Class III and III–A sufficient to offset the

costs of drying and reconstitution.

Furthermore, it is argued that

suggestions to increase the Class III–A

price to make it closer to the Class III

price is unsound policy. The commenter

argues that it makes no economic sense

to artificially increase the lowest class

price which typically clears the

market.32

Dairylea, a cooperative association

with members in the Northeast, also

supports continuation of Class III–A for

milk used to produce nonfat dry milk

stating that the incorporation of this

class allowed for a more equitable

sharing of costs among all producers in

balancing weekly and seasonal supplies

of a market via nonfat dry milk

production. While acknowledging that

the substitution of nonfat dry milk for

fresh milk in Class II and III products

decreases producer blend prices,

Dairylea contends that this would

continue to occur in the absence of

Class III–A pricing because lower-priced

powder from California would be

available.

Some commenters, while supporting

Class III–A, urged the Department to

broaden the class to include more

products, such as dry whole milk. In

addition, several comments were

received urging the reclassification of

sweetened condensed milk from Class II

to Class III or to the same class which

includes nonfat dry milk. The

commenters explained that sweetened

condensed milk is primarily used in

commercial food processing

establishments and in the confections

industry and that it is interchangeable

with powdered milk products and sugar

in ingredient markets for processed

foods and candy. They argued that

manufacturers of sweetened condensed

milk are currently at a competitive

disadvantage with manufacturers of

nonfat dry milk. Another commenter

also stated that it was losing business

because nonfat dry milk is substantially

cheaper than fluid dairy ingredients.

A major dairy manufacturer stated

that product classifications should not

create price discrimination among milk

products used for similar purposes.

Therefore, it supports the same

classification for nonfat dry milk,

sweetened condensed milk, and

condensed skim milk, which are largely

interchangeable. According to the

commenter, the current system of

classification places sweetened

condensed milk at a significant

disadvantage and has virtually

destroyed the market for sweetened

condensed milk. The commenter also

stated that other products that compete

with nonfat dry milk, including

evaporated milk, should be placed in

the same class as nonfat dry.

A great deal of consideration was

given to the argument that bulk

sweetened condensed milk/skim milk

should be reclassified to be in the same

class as nonfat dry milk, i.e., Class IV in

the proposed new orders. In fact, such

a change was recommended in a

preliminary Dairy Program

Classification Committee report. With

the change in class pricing formulas

proposed for the new orders, however,

the problems leading to this

recommendation will be removed.

Consequently, bulk sweetened

condensed milk and skim milk should

remain in Class II.

Bulk sweetened condensed milk/skim

milk is used as an intermediate product

in ice cream, candy, and other

manufactured products. However, these

manufactured products can also be

made from powdered milk. When

powder prices are low relative to the

Class II price, there is an economic

incentive for powder to be substituted

for bulk sweetened condensed milk. As

a result, there must be an economic

relationship between the Class II price

and the cost of using alternative dry or

concentrated products to make Class II

products. Under current pricing

provisions, the Class II price can be

excessive relative to using nonfat dry

milk since the Class II price is a measure

of the value of milk in cheese (the Class

III price) plus a differential.

As proposed in this rule, the Class II

price for the new orders would be based

upon the Class IV price plus a

differential of 70 cents. This fixed

difference precludes the much wider

price differences that have existed at

times between Class II and Class III–A

prices. Consequently, sweetened

condensed milk should continue to be

classified as a Class II use.

4i. Shrinkage and Overage

The shrinkage provisions of the new

orders should be modified to reflect a

pro rata assignment of shrinkage based

on handler utilization. In other words,

each handler’s ‘‘shrinkage’’ or lost milk

should be classified according to the

handler’s use of milk that was not lost

in transit or processing. Adoption of

such modification will simplify both

order language and accounting

procedures.

Shrinkage is experienced by handlers

in milk processing operations and in the

receipt of farm bulk tank milk at

receiving stations and processing plants.

Milk is unavoidably lost as it remains in

pipe lines, adheres to tanker walls and/
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4929

or other plant equipment, and is washed

away in the cleaning operations. In

addition, unexpected losses, including

spillage or leaking packages, also

contribute to shrinkage.

A shift from the current shrinkage

allowance provisions to a pro rata

assignment of shrinkage based on

utilization would improve market

efficiencies, create a more equitable

situation among handlers, and facilitate

accounting procedures involving

shrinkage and overage assignment. Over

time, changing conditions within milk

markets have led to the adoption of a

rather complex shrinkage provision.

This provision can be both modified

and simplified without compromising

the objectives of the Federal milk

marketing program. The proposed

provision should meet the goals of

simplification and improvement of

Federal milk marketing orders.

Arguments in support of the proposal

illustrate the advantages of a shift to pro

rata shrinkage assignment as opposed to

either continuation of the current

shrinkage class assignment and

allocation system or adoption of other

alternatives. Several of the major

cooperative associations expressed

support for the suggestion to prorate

shrinkage based on plant utilization.

According to one commenter, plants

should account to the pool at a price

that is the intended use for milk

processed at that plant. The commenter

added that this will encourage and

assure plant efficiency.

Simplification of order language was

one of the more frequent comments

received in response to the preliminary

reports on classification. The shrinkage

provision undoubtedly falls within this

category. As pointed out earlier, the

shrinkage provision has become rather

complex. A comment letter submitted

by one industry member argues that the

retainment of the shrinkage provision is

unnecessary and that any milk which is

not accounted for should be classified as

Class I. While this suggestion seems to

provide an incentive to inefficient plant

operators to minimize the amount of

milk loss by placing a higher value on

shrinkage than presently exists in the

current system, a more equitable

method is to assign shrinkage pro rata

based on a handler’s utilization. This

will prevent any handler with solely

Class III utilization from being

responsible to the pool for shrinkage

assigned to Class I.

Other comment letters suggested that

shrinkage should be eliminated, along

with some other order provisions,

because it reduces income to dairy

farmers. Some commenters argued that

the costs associated with record

keeping, reporting and auditing plant

loss has little value to the producer,

consumer, or handler. One cooperative

association expressed support for the

elimination of accounting for animal

feed and dumped products; no opposing

comments were received.

One handler proposed that shrinkage

be assigned all at the lowest

classification or all Class I with a

monetary credit. The monetary credit

would be based on a fixed allowance

depending on where the handler’s loss

is assumed. The handler stated that this

would eliminate a substantial number of

words from the order language. This

handler also suggested expanding the

shrinkage rules to allow for aseptic

packaging because shrinkage in aseptic

packaging is far greater than in a plant

processing milk in containers, according

to the handler. The handler suggested a

4% shrinkage allowance for aseptic

packaging.

In Section 30 of each order, pool plant

operators and certain other handlers are

required to report their total receipts

and disposition of skim milk and

butterfat. In Section 40, the total

reported receipts are classified

according to usage. Any positive

difference between receipts and

utilization is referred to as shrinkage

and any negative difference is called

overage. The proposed orders would

provide that for each pool plant and

each cooperative association bulk tank

handler, the market administrator

would determine the shrinkage or

overage by subtracting the handler’s

utilization of milk from its receipts of

milk, and then prorate the shrinkage to

the respective quantities of skim milk

and butterfat in each class by using the

handler’s total reported utilization. In

contrast to the current lengthy provision

for assigning shrinkage, the new

shrinkage provision would remove the

necessity for computing shrinkage

allowances on various sources of

receipts.

Currently, the shrinkage provision

maintains allowances for various

sources of receipts. Milk that a handler

receives at its plant on the basis of

weights determined from its

measurement at the farm and butterfat

tests determined from bulk tank samples

(farm weights and test) receives a 2

percent allowance to be classified as

Class III. If the handler receives milk on

other than farm weights and tests from

a cooperative bulk tank handler or

another pool plant, a 1.5 percent

allowance is given to the receiving

handler and a 0.5 percent shrinkage

allowance is given to the bulk tank

handler or other pool plant selling the

milk. Any shrinkage assigned to pooled

milk is assigned to Class III up to this

allowance.

If a handler receives fluid other

source milk, it receives a pro rata share

of the total loss which is assigned to

Class III without limit. Any shrinkage

exceeding the total of these two

assignments is assigned to Class I.

When comparing the dairy industry to

other industries, there is a difference in

how waste, or shrinkage, is handled. A

non-dairy manufacturing plant has a

certain amount of waste, and it pays the

same for wasted material as that going

into the product made. It does not pay

less or assign a lower value for the

‘‘shrinkage’’ as is done in the dairy

industry. Although some may argue that

shrinkage should be assigned to the

lowest class because handlers receive no

return on milk losses experienced in the

receiving and processing operations, a

pro rata assignment should result in

handlers’ limiting milk loss throughout

the dairy process. In a bottling plant,

shrinkage would be assigned to Class I

in a larger proportion than the current

method. This would have the effect of

creating more costs for a Class I handler.

In other words, placing a higher value

on shrinkage by having milk assigned

pro rata to all classes, as is

recommended, would encourage a

handler to reduce costs associated with

shrinkage, resulting in more efficient

dairy operations. Also, as proposed

here, shrinkage would be assigned to

Class II for the first time. This would

also encourage less shrinkage, hence,

greater efficiency.

Pro-rata shrinkage assignment would

more closely reflect the nature of the

plant’s operation. If milk is to be

classified on the basis of form and use,

it would appear logical that any loss

associated with a particular use should

be classified the same as the usage. If a

handler has a high Class I utilization, it

seems appropriate that the same

utilization percentage would apply to its

loss/shrinkage. A handler with a multiclass operation would have shrinkage

prorated to all classes of utilization

based on the percentage used in each

class. If a handler has only Class III

utilization, all shrinkage would be

assigned to Class III.

In doing its cost accounting for Class

I fluid milk, a handler would have to

factor in the extra cost for shrinkage as

part of its calculations. The handler

would feel secure knowing that its

competition is going to have the same

method of prorating shrinkage applied

to its operation. The benefit of greater

uniformity is apparent. Class I handlers

would have a greater incentive to

operate more efficiently if they are to

account for milk lost at the higher class
4930 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

value; hence, greater consideration

would be given to minimizing shrinkage

to reduce costs.

The additional money paid into the

pool by handlers operating pool

distributing plants with high Class I

utilization would not be offset by a

lesser amount paid into the pool by

handlers operating plants that

manufacture primarily Class II and III

products. Therefore, the blend price to

producers would be enhanced by this

change in the shrinkage rules, but it is

estimated that it would be less than an

average of one cent per cwt.

Historically, overage has been

allocated pursuant to Section 44

(Classification of producer milk) starting

with Class III. Since shrinkage would be

assigned pro rata based on the

utilization in each class, it would

appear logical to assign overage on the

same basis. Utilization would be

adjusted to arrive at gross utilization.

The references to overage and shrinkage

would be removed from Section 44. In

computing a handler’s value of milk, the

method of pricing overage in Section

60(b) would not change. However, the

reference to Sections 44(a)(14) and 44(b)

would be replaced with Section 43.

Also, as explained under the discussion

of ‘‘General classification rules,’’

Section 41 would be removed entirely

and the remaining shrinkage provision

would be incorporated in Section 43.

There would be minimal impact on

the blend price by assigning overage

before allocation begins rather than in

the current step 14 of Section 44. The

total value of milk classified plus the

overage value would be the same using

either method. However, if a handler

had receipts from an unregulated supply

plant or a plant regulated under another

Federal order, the assignment of such

receipts may be slightly different than

the current assignment method.

Animal feed and dumped products

should be removed from Class III in

Section 40 and included in shrinkage.

This would place less of a regulatory

burden on handlers who are required to

file reports regarding these types of

disposition. It would also simplify

market administrator auditing

procedures considerably.

The suggestion to include a dollar

credit at the difference between Class III

and Class I prices for unaccounted milk

was also considered. This alternative

would result in additional time and

resource allocation, and would not

simplify the orders, but rather

complicate them.

4j. Classification of Transfers and

Diversions (§ 1000.42)

Certain changes should be made to

the classification of transfers and

diversions section of the orders to

simplify and clarify order language. At

the present time, in many orders if any

milk that is diverted from one order to

another for requested Class II or III use

is assigned to Class I, the dairy farmer

who shipped that milk is defined as a

producer under the order receiving the

milk with respect to that portion of the

milk assigned to Class I. In other orders

under similar conditions, the dairy

farmer becomes a producer on the

receiving order for all of the milk

diverted even though only a portion of

the milk was classified as Class I. When

this type of adjustment is necessary, the

diverting handler is informed by the

market administrator’s office that there

is not enough Class II or III use

remaining in the receiving plant to

absorb all of the milk diverted. In such

case, the diverting handler may pick

which load or loads of diverted milk

will become producer milk under the

receiving order.

Since the orders are not precisely

clear on how inter-order diverted milk

should be handled, some modification

is needed in the order language. Under

most orders, and as provided in this

proposed rule, milk may be diverted

from one order to another for a

requested use other than Class I.

However, if there is not enough Class II,

III, or IV utilization in the receiving

plant to be assigned to the diverted

milk, some milk may have to be

assigned to Class I. When this happens,

the practical administrative problems

involve determining which milk of

which dairy farmers and which loads of

milk will be shifted as producer milk

from one order to another.

Market administrators should be

given some flexibility to handle these

administrative problems on a market-bymarket and case-by-case basis. As a

practical matter, most milk diverted

between orders is diverted by

cooperative associations that reblend

proceeds to their members. In most

cases, it makes little difference to a

cooperative association whether a dairy

farmer is a producer on one order or

another order; any differences in blend

prices between the orders will be

washed out in the reblending process. In

the case of nonmember producers

diverted inter-order, however,

differences could arise in a producer’s

net proceeds for the month depending

upon how much milk was pooled in

each order. Therefore, these situations

should be handled in such a way as to

be least disruptive to individual dairy

farmers.

A market administrator does not

know until handlers’ reports have been

received that some portion of milk

reported as diverted to another order

cannot be absorbed by the amount of

non-Class I utilization in the receiving

order’s plant. In such case, the diverting

handler should be given the option of

designating the entire load of diverted

milk as producer milk at the plant

physically receiving the milk.

Alternatively, if the diverting handler

wishes, it may designate which dairy

farmers on the diverted load of milk will

be designated as producers under the

order physically receiving the milk. As

a last resort, the market administrator

would prorate the portion of diverted

milk among all the dairy farmers whose

milk was received from the diverting

handler on the last day of the month,

then the second-to-last day, and

continuing in that fashion until the

diverted milk that is in excess of Class

II, III, and IV use has been assigned as

producer milk under the receiving

order.

A conforming change that should be

made in each order relates to milk that

is transferred or diverted for Class II or

III use. Presently, milk may be

transferred or diverted on a requested

Class II or III basis. However, with 4

classes of utilization recommended for

the new orders, milk could be diverted

for requested Class IV use also. Rather

than specifying ‘‘Class II, III, or IV,’’

however, the orders should simply state

‘‘other than Class I’’ to accommodate a

system of more than 3 classes. This

language is simpler, shorter, and

accomplishes the same end.

Comments received from interested

parties involving transfers and

diversions suggested general

simplification and clarification of order

language, as well as some suggestions

on how to facilitate the administration

of these provisions. Generally, the

comment letters suggest that the orders

be amended so that inter-market

transfers are allocated to Class I in the

same manner as transfers within

markets. These letters state that,

otherwise, a barrier to the movement of

milk is created. It was argued that such

modification would help to assure

distributing plants an adequate supply

of milk for fluid use whenever and

wherever it is needed. Other comments

argued that if a shipment between

orders is designated as Class I, it is only

logical and fair that the entire shipment

should be Class I, rather than be subject

to current pro rata allocation

procedures. Proponents of this view

argued that this would lead to a more
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4931

equitable situation in the treatment of

inter- and intra-order transfers, allow for

greater equity among handlers, and

contribute to the simplification and

reduction of administrative procedure

and cost.

A cooperative association and a

handler filed comments endorsing a

prelimary suggestion of allowing milk to

be diverted inter-order for any use, but

a dairy farmer association submitted one

comment critical of the idea. The

association which opposed the idea

implied that milk received on a diverted

basis from another order would get a

priority Class I assignment over local

producer milk. This was not the

intention behind this suggesion. Any

milk that was diverted from one market

to another would have been assigned

based upon the lower of the receiving

plant’s Class I utilization or the

receiving market’s Class I utilization. In

view of the concern about the possible

impact of permitting milk to be diverted

for any use between orders, no change

in this regard is proposed for the

consolidated orders.

Inter-order transfers would continue

to be allocated based on the lower of the

receiving plant’s or receiving market’s

utilization rate. Preference should not

be given to such other order bulk milk

in the manner suggested by various

commenters. Even within markets with

high Class I utilization rates, there are

times when milk is used in surplus

products, and classified as other than

Class I. There is no reason why milk

from an other order should be classified

as completely Class I when local milk

inevitably is classified other than Class

I. Both types of receipts should share

equally in the Class I and surplus

utilization.

In § 1000.42(d)(2)(i), the phrase,

‘‘excluding the milk equivalent of both

nonfat milk solids and concentrated

milk used in the plant during the

month,’’ is proposed to be added to this

sub-paragraph to more directly arrive at

transfer and diversion classification on

the basis of the assignment of a nonpool

plant’s utilization to its receipts. The

recommended modification will prevent

unnecessary accounting steps which

serve no purpose in verifying the

utilization at the nonpool plant. In

classifying receipts of fluid milk and

cream products at nonpool plants from

Federal order plants, an accounting

balance function serves no purpose.

In § 1000.42(d)(2)(vi), the allocation

process for bulk fluid milk transferred

from pool plants to nonpool plants is

proposed to be modified such that any

remaining unassigned receipts of bulk

fluid products be assigned, pro rata

among such plants, to the extent

possible first to any remaining Class I

utilization and then to all other

utilization, in sequence beginning with

the lowest class at the nonpool plant.

This change returns the order language

to the assignment sequence that was

adopted in the Uniform Classification

Decision of 1974. Receipts from pool

plants should not be given preference by

assigning such milk to the available

Class II use before assigning receipts

from dairy farmers who constitute the

regular source of milk for such nonpool

plant. Generally, milk transferred or

diverted from pool plants to nonpool

plants is surplus milk and would be

used in storable manufactured products,

such as nonfat dry milk and butter. By

assigning transferred or diverted milk to

a nonpool plant’s Class II utilization

first, the pool plant operator is forced to

account for this milk at the Class II

price, even though the nonfat dry milk

or other surplus product that was made

with the milk is of a lesser value. This

process will prevent the assignment of

receipts at a higher utilization than the

actual utilization.

Receipts of bulk fluid cream products

at nonpool plants from pool plants and

plants regulated under other Federal

orders, similarly, would be assigned to

the lowest class utilization first.

Generally, a plant operator will use its

regular source of supply in the highest

valued uses before using alternative

supplies. Thus, if a nonpool plant

receives cream from a pool plant or a

plant regulated under another Federal

order, it is likely that the regulated

plants were trying to dispose of their

excess cream. The nonpool plant

receiving the cream will most likely use

it for manufacturing purposes; therefore,

it should be assigned to the lowest class

first. The priority given to regular source

supplies is recognized and the provision

modified to reflect this.

4k. General Classification Rules

(§ 1000.43)

For classification purposes, the milk

of a cooperative bulk tank handler—i.e.,

‘‘a 9(c) handler’’—should be treated as

‘‘producer milk’’ of a pool plant

operator. This change will shorten and

simplify the allocation section.

Accordingly, paragraph (a) of Section

43, as revised, no longer contains a

reference to the classification of

producer milk with respect to a handler

described in Section 9(c).

The computation and classification of

shrinkage and overage have been added

to this section. This will eliminate

Section 41, the section previously used

for this purpose. Also, the last

paragraph of Section 43 should be

removed because milk for Class IV use

now would be classified in Section 44

of the orders.

4l. Classification of Producer Milk

(§ 1000.44)

A handler may receive milk from a

producer, a cooperative association

acting as a handler on bulk tank milk,

by transfer from another pool plant, or

from ‘‘other sources’’ such as nonpool

plants, partially regulated plants, and

plants that are regulated under other

orders. Because of this diversity in

sources of receipt, it is necessary in a

milk order to go through an allocation

sequence to determine which source of

milk gets priority to a particular class of

utilization and to determine how

producer milk was used. In some orders,

this allocation sequence is done on a

system-wide basis; in others, it is done

for each plant receiving producer milk.

Section 44 is one of the most

complicated and difficult-to-understand

sections in a milk order. Consequently,

an attempt has been made to simplify

and shorten it. Part of this task was

made easier by proposed changes to

other sections (e.g., elimination of filled

milk, elimination of individual handler

pools, and modification of the treatment

of inter-order transfers and diversions).

Also, because shrinkage and overage are

prorated to a handler’s gross utilization,

these items do not have to be allocated.

All orders are not now uniform in the

classification of producer milk. For

example, some orders (e.g., Chicago

Regional) provide for system allocation

while others allocate receipts on a plantby-plant basis for a multiple plant

handler.

Under the consolidated orders, milk

would be allocated on a plant-by-plant

basis, as modified to reflect the other

changes proposed herein. The system

allocation method that is found in some

orders is based upon a set of marketing

conditions concerning the locations of

handlers’ plants and the market’s

available milk supply in relation to

those plants. These provisions were

intended to stop abuses that occurred

when milk was imported from one

market to another. Rather than permit

an inter-order transfer to be assigned at

a handler’s high Class I utilization plant,

while the handler’s producer milk was

assigned to lower use value at another

of its plants, the system allocation

provisions assigned the transfers on the

basis of the handler’s utilization at all

plants combined. The objective was to

prevent more distant other order milk

from being assigned to Class I use at the

expense of producers who were located

nearer to the city markets and who

represented the normal source of supply

for the markets’ fluid milk needs.
4932 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

The 11 new orders proposed here do

not fit within the parameters of the

classical model where a major

consumption area is surrounded by

production areas. The marketing areas

proposed for the consolidated orders

span several states and have a number

of major population centers. They also

have pockets of milk production that, in

a number of cases, are in higher-priced

areas than some of the fluid milk plants

within the marketing area. This milk

may not be economically available to a

fluid milk plant several hundred miles

away. In fact, it may be that a plant near

the periphery of a multi-state market

may find its closest and cheapest source

of supply from outside the market rather

than from within the marketing area.

Accordingly, the foundation on which

the system allocation rules are based

does not support current marketing

conditions. Therefore, all orders are

proposed to be modified to allocate milk

only on a plant-by-plant basis rather

than on a system basis.

Another change that should be made

in the allocation section concerns the

‘‘98/2’’ rule. At the present time, only 98

percent of the packaged fluid milk

products transferred between orders is

allocated to Class I; the remaining 2

percent is allocated to Class III. This

provision, originating from the June 19,

1964, ‘‘compensatory payment’’

decision, was adopted to provide an

allowance for ‘‘route returns.’’

According to that decision, ‘‘it is

reasonable to expect some route returns

will be associated with inter-market

transfers just as there are in connection

with milk locally processed in the

receiving market * * * a small

allowance of 2 percent for such returns,

which must fall into surplus use, should

be included to avoid such overassignment in Class I.’’ (29 FR 9120).

The 2 percent Class III allowance on

inter-market packaged transfers would

be eliminated. As explained above in

connection with the proposed changes

to the shrinkage provisions, animal feed

and dumped products would no longer

receive an automatic Class III

classification, but instead would be

treated as shrinkage and prorated to the

plant’s utilization. Similarly, inter-order

packaged transfers would no longer

receive an automatic Class III

classification for 2 percent of those

transfers but instead should be allocated

100 percent to Class I utilization.

In § 1000.44(a)(3)(iv), some new

language to most, but not all, orders is

proposed to be added to make it clear

that any fluid milk products received by

a regulated handler from a producerhandler will be assigned to the receiving

handler’s lowest utilization available

whether such products are physically

received at the regulated handler’s plant

or whether they are ‘‘acquired for

distribution’’ at some other location.

The additional words, ‘‘acquired for

distribution,’’ would clarify the

application of this provision in those

orders that do not now contain this

language.

A key basis for exempting producerhandlers from regulation rests on the

presumption that producer-handlers

will be responsible for disposing of their

surplus milk. This is why milk received

from a producer-handler is downallocated to the lowest possible

utilization. If this were not done, a

producer-handler could undercut the

minimum order Class I price by selling

its surplus milk to regulated handlers

for fluid use.

In some isolated cases, producerhandlers have avoided lowest-class

pricing of their surplus milk by selling

their packaged fluid milk products to

regulated handlers at a non-plant

location, such as a warehouse, from

which it is then distributed on routes by

the regulated handler. Under some

orders, this milk would not be

considered a receipt from a producerhandler and thus would not be priced.

As proposed herein, however, such

fluid milk products that are acquired at

the non-plant location will nevertheless

be treated as if they had been received

at the regulated handler’s plant and will

be priced accordingly.

In addition to the changes discussed

above, Section 44 is proposed to be

shortened and simplified by removing

unnecessary references that serve to

confuse the language rather than make

it easier to understand. Where possible,

simpler language has been used to

replace lengthy section references.

4m. Conforming Changes to Other

Sections (§§llll.14, llll.41,

and llll.60)

Paragraph (b) of §llll.14 should

be removed to reflect the fact that all

packaged fluid cream products now

would be accounted for on a used-toproduce basis. Also, as previously

noted, the simpler and shorter treatment

for shrinkage shortens the existing

provision to the point where it is no

longer necessary to keep a separate

section for it. Therefore, Section 41

should be eliminated and the revised

contents of that section should be

incorporated as a new paragraph (b) in

Section 43. Finally, conforming changes

should be made to Section 60 (Handler’s

value of milk for computing the uniform

price) to reflect the elimination of filled

milk from the order, and to reflect

changes in references due to other

modifications such as the changes in the

treatment of shrinkage and overage.

4n. Organic Milk

During the development stage of the

order reform process, a proposal was

received from Horizon Foods to exempt

organic milk from pricing and pooling

under Federal milk orders.

In 1990, Congress passed, and the

President signed into law, the Organic

Food Production Act of 1990 (7 U.S.C.

6501 et seq.), establishing the first

Federal standards for organic food

products. A proposed rule was issued

on December 5, 1997, and published in

the Federal Register on December 16,

1997 (62 FR 65849), to implement the

National Organic Program.

Organic dairy products can now be

found in many, if not most, major

grocery chains in metropolitan areas.

The retail price of organic dairy

products is well above non-organic

products. For example, in one

Washington-area supermarket a halfgallon of regular 1% milk sells for $1.59,

while a half-gallon of Horizon Organic

1% milk sells for $2.29. In addition to

carrying organic milk, many

supermarkets now also carry organic

yogurt, sour cream, butter, and other

organic dairy products. All of these

products are priced well above their

non-organic counterparts.

Processors of organic milk have asked

for exemption from Federal regulation.

In a May 20 letter to the Department,

Horizon Foods argued that (1) organic

milk is a different commodity; (2) the

market for organic dairy products is a

niche market; and (3) Federal order

regulation of organic milk is contrary to

the intent of the Organic Foods

Production Act because it does not

‘‘facilitate interstate commerce in fresh

and processed food that is organically

produced.’’ Horizon’s proposed solution

is to exempt organic milk from the

producer milk definition if the milk is

produced on a certified organic farm

and if the broker pays the producer at

least 110% of the month’s Class I price

for such milk.

The proposal to exempt organic milk

from Federal order pricing should be

denied for several reasons. First,

contrary to the assertions of Horizon

Foods that all organic milk is priced at

110% of the Class I price, regardless of

how the milk is used, there is evidence

that some organic milk is pooled and

priced as non-organic milk under some

orders, including the Chicago Regional

and Southern Michigan orders, for

example. Second, if special treatment is

provided for organic milk, a ‘‘Pandora’s

box’’ would be opened for special

treatment for other kinds of milk as
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4933

well. Third, although the retail price of

organic milk is well above non-organic

milk, many people believe that organic

milk competes with the regulated

market and, therefore, also must be fully

regulated. Fourth, if Congress wished to

exempt organic milk from Federal milk

order regulation, they could have done

so either in the Organic Foods

Production Act or in the 1996 Federal

Agricultural Improvement and Reform

Act; but they did not. Fifth, there is no

indication that all processors of organic

milk price their receipts the same way

as Horizon Foods. Even if they did,

however, the one class/one price system

currently used by Horizon could be a

temporary phenomenon due to the

rapidly expanding market for organic

products. The day may come when the

organic market becomes saturated and

milk in excess of fluid needs must be

disposed at competitive prices. If and

when this happens, it is likely that some

form of classified pricing will be

implemented. Finally, the Act provides

for classifying and pricing milk on the

basis of its form and use. As a result,

different costs that may be associated

with producing organic milk or other

types of milk are not relevant. For these

reasons, it would be inappropriate at

this time to exempt organic milk from

pooling or to provide any other type of

special treatment for it under the guise

of Federal order reform.

4o. Allocation of Location Adjustment

Credits

A provision that is now common to

most orders is not suggested for the

proposed consolidated orders. This

provision, which allocates location

adjustment credits that are applied to

transfers of bulk fluid milk products

between pool plants, is commonly

found in Section 52 of most current

orders (See, for example, §§ 1001.53(h),

1007.52(b), 1030.52(c), or 1079.52(d)).

Under most orders, intra market

shipments of milk between handlers are

assigned to Class I use, unless both

handlers agree on a lower classification.

Milk that is assigned to Class I use is

priced at the receiving plant subject to

a location adjustment credit that may

apply if it is demonstrated that such

milk is actually needed for Class I use.

If the credit is applied, the milk is

priced at the transferring plant. This

assignment of location adjustment

credits is intended to prevent the use of

pool proceeds to pay the hauling cost

for the transfer of bulk milk between

pool plants when the intended use of

the milk is for other than Class I use.

To carry out this concept, the

provision typically assigns a pool

distributing plant’s Class I use first to its

milk receipts directly from producers,

then to bulk milk received from a

cooperative bulk tank handler, then to

milk received by diversion from another

pool plant, and then to packaged fluid

milk products received from other pool

plants. The remaining Class I use in the

distributing plant is then assigned to

bulk milk received by transfer from

other pool plants. In some orders, this

remaining Class I use is assigned pro

rata to all of the pool plants from which

bulk milk was obtained. In other orders,

the remaining Class I milk is first

assigned to pool plants with the same

Class I price and then, in sequence, to

pool plants with progressively lower

Class I prices.

This provision has varying usage in

orders today. Some orders use it; but

most orders never use it. Accordingly, it

is not clear whether it should be

included in the consolidated orders.

This proposed rule is based on the

premise that Class I milk does not have

the same value at every location. For

this reason, Class I differentials have

been established for each order with

location adjustments that result in

establishing a unified Class I price

structure that applies to every county

and city in the contiguous 48 states.

Given this approach, it may no longer be

necessary to classify a bulk movement

of milk as Class I milk in one section of

the order and then in another section of

the order depart from the principle of

pricing such Class I milk at the plant

where it was physically received.

Some of the proposed orders have

transportation credit provisions that

provide for hauling credits on bulk milk

received by transfer from a plant

regulated under another Federal order

and assigned to Class I use at the

receiving plant. To arrive at the

classification of such milk, the milk is

assigned to the lower of the receiving

plant’s or the receiving market’s Class I

utilization. With the long distances

exhibited by milk movements today and

the use of transportation credit

provisions that help defray the costs for

such movements, it may not be

appropriate to continue location

adjustment credit provisions that could

discourage milk from being transferred

from pool plants located closer to

distributing plants needing

supplemental supplies of milk.

In actual practice, a distributing plant

does not receive a fixed amount of milk

each day of the week. Some days are

heavy bottling days when more milk is

needed for Class I use. On such days, a

distributing plant may not be able to

obtain enough local milk to meet its

Class I needs and may have to import

plant milk from more distant locations.

At the end of the month, however, when

the allocation of location adjustment

credits takes place, it may appear that

there was more than enough local milk

to meet the distributing plant’s fluid

needs, even though this was not the case

when recapped on a daily basis.

Nevertheless, the allocation provision

allocates location adjustment credits

based on monthly volumes of milk, not

daily volumes, so the supply plant

could be in a position where it receives

no Class I location adjustment credit

even though the milk was indeed

shipped for Class I use.

Finally, the current application of the

provision in question can result in a

situation where there is more incentive

to receive bulk milk transferred from a

plant regulated under another Federal

order than from a plant regulated under

the same order, whether or not any

other transportation credits are

involved. Should this occur, it can

result in a transfer of Class I sales to the

transferring plant’s Federal order

market.

5. Provisions Applicable to All Orders

In addition to the terms and

conditions of milk orders previously

described, there are a number of other

provisions that need to be contained in

milk orders that describe and define

those affected by the regulatory plan of

the program and that provide for

common descriptions of entities,

persons, terms of measurement, pooling,

and other administrative needs so that

an order can be administered

effectively. Many of these provisions

can be uniform across all proposed

consolidated orders. However, different

marketing conditions in the

consolidated areas, together with

institutional factors, do not lend

themselves to an entirely uniform set of

provisions for all orders. Consequently,

in each of the proposed consolidated

orders there are provisions that are

unique to each order.

As part of the reform process, an

Identical Provisions Committee (IPC)

was established to investigate and

recommend needed order provisions

that could be uniformly applied across

the consolidated system of Federal milk

orders. The IPC was formed with a three

point purpose: to develop Federal order

provisions that can or should be

uniform among orders, to explain why

the adoption of the recommended

provisions are needed, and to simplify

and streamline proposed order

provisions where feasible. While the

previously discussed issues such as

classification, the basic formula price,

and Class I milk pricing lend themselves

to uniform applicability across all
4934 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

orders, the IPC mission tended to focus

on other aspects of milk order

provisions such as uniform definitions,

pooling criteria, reporting requirements

and handler payment obligations.

This part of the proposed rule

discusses the nature of the proposed

consolidated order provisions, explains

why they are needed, and details

whether or not a provision can be

uniformly applied in all consolidated

orders. When a provision does not lend

itself to uniform application, the

provision is described in subsequent

sections of this proposed rule where the

provisions unique to each of the

individual orders are discussed.

To the extent that provisions can be

uniformly applicable across all of the

proposed consolidated orders, they are

included in Part 1000, the General

Provisions of Federal Milk Marketing

Orders which are, by reference, already

a part of each milk order. Thus, as

proposed here, the General Provisions

includes the definitions of route

disposition, plant, distributing plant,

supply plant, nonpool plant, handler,

other source milk, fluid milk product,

fluid cream product, cooperative

association, and commercial food

processing establishment. In addition,

the General Provisions include the milk

classification section of the order,

pricing provisions, and most of the

provisions relating to payments. These

additions to the General Provisions

should make milk order provisions

more understandable to the general

public by removing the differences that

now exist and by consolidating uniform

provisions in one place. Thus, an

interested person would only have to

read one ‘‘nonpool plant’’ section, for

instance, to understand how that term is

applied to all orders. By contrast, at the

present time, ‘‘nonpool plant’’ is

defined in every order and there are

slight differences in the definition from

one order to the next.

Pooling Issues

How producers share in the

additional revenue that is derived from

classified pricing is one of the most

important features of a milk marketing

order. How milk is pooled sets the basis

for returning a blend price to producers

by accounting for the use-value, or

classified value, of milk charged to

handlers. Marketwide pooling is the

method advocated for distributing these

returns as indicated by an

overwhelming majority of public

participants. It is the prevailing method

employed in the current system of milk

orders, and should continue to be

employed in the consolidated orders.

There were a number of proposals and

public comments considered in

determining how Federal milk orders

should pool milk and which producers

would be eligible to have their milk

pooled in the consolidated orders. In the

broadest sense, most public comments

and proposals advocated a policy of

liberal pooling, thereby allowing the

greatest number of dairy farmers the

ability to share in the economic benefits

that arise from the classified pricing of

milk. While there were also a number of

public comments supporting identical

pooling provisions in all orders, other

proposals voiced comments on the need

to have pooling provisions reflect the

unique and prevailing supply and

demand conditions in each marketing

area. Fundamental to most pooling

proposals and comments was the notion

that the pooling of producer milk

should be performance oriented in

meeting the needs of the fluid market.

The pooling provisions proposed for the

consolidated orders provide a balance

between reasonable and needed

performance criteria and a liberal

pooling policy.

The pooling provisions for the

consolidated orders are overall less

restrictive in the movement of milk

between orders and make it easier for

producers to become associated with

and pooled on a market. Additionally,

the provisions are more ‘‘market

oriented’’ because they allow milk to

become pooled and priced where the

greatest needs are exhibited for

satisfying fluid demands. Additionally,

there is enhanced flexibility in how

plants can be pooled without

diminishing the ability of the regulatory

plan to satisfy the fluid demands of a

market. For example, this decision

recognizes that in some markets, fluid

milk processors handle a significant

volume of milk for Class II uses. Much

of the time this milk may be processed

in a separate processing plant. To

accommodate this, unit pooling is an

option if at least one plant of the unit

qualified as a pool distributing plant

and the other plants of the pool unit are

located in the marketing area and

process only Class I or Class II products.

The separate processing plant would

also need to be located in the same or

lower price zone than the qualifying

pool distributing plant. For supply

plants, system pooling offers flexibility

where handlers operate more than one

supply plant. Further, the consolidated

orders have identical performance

requirements for pooling cooperative

and proprietary handlers alike, thereby

making plant ownership irrelevant for

pooling purposes.

Pool plant eligibility continues to be

dependent upon plant operators and

handlers meeting certain performance

standards geared to satisfying the fluid

demands of the market. Because of

differences between the consolidated

markets, mainly the level of Class I

demand and the seasonality of milk

production, a uniform standard for pool

plants for the consolidated markets is

not recommended. Such standards need

to be specific to each of the consolidated

orders. Additionally, the market

administrator should be authorized to

react to changing market conditions if

there is a need to change performance

standards and to promote the efficient

movement of milk and in satisfying

expected demands of the fluid market.

These needs are reflected and

accommodated in the definitions of the

types of pool supply plants in the

consolidated orders. Providing for

differences between markets ensures

more equitable distribution of the

benefits and burdens of marketwide

pooling.

Taken as a whole, the pooling

provisions also are designed to properly

specify which producers are associated

with the marketwide pool, thereby

assuring their ability to share in the

economic benefits that accrue from

classified pricing. Orders do require

some criteria for determining when a

producer has an association with a

market under which their milk will be

pooled and priced. In this context, a

minimal ‘‘touch-base’’ requirement for

producer milk is called for in most

consolidated orders for pooling

qualification. This provision allows a

producer’s milk to be received at a pool

plant a minimum number of times to be

eligible for diversion to nonpool plants

thereby ensuring that the milk is

available for fluid use if needed.

The producer and producer milk

provisions for the consolidated orders

also recognize that disorderly marketing

conditions can arise from the actions of

handlers that seek to pool milk on an

order only when more favorable

alternatives are not otherwise available.

Reasonable measures are provided to

prevent producers who are not regularly

a part of a marketwide pool from

deriving the benefits of the marketwide

pool if certain performance criteria are

not met. Similarly, it is recognized that

producer milk might not be pooled

because of changes in class-price

relationships in any given month.

Public comments and proposals offered

to address these issues included ‘‘lockin’’ or ‘‘lock-out’’ provisions that, as

proposed, would have the effect of

regulating producers. They are not

recommended. The provisions
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4935

presented for both the producer and

producer milk definitions provide

reasonable measures and safeguards for

determining conditions where

producers and their milk should

participate in a marketwide pool

without causing producers to become

regulated in their capacity as producers.

A suggestion for ‘‘open pooling,’’

where milk can be pooled anywhere, is

not provided for in the consolidated

orders. There are two reasons for this.

First, open pooling is not based on

performance, that is, open pooling

provides no reasonable assurance that

milk will be made available in satisfying

the fluid demand of a market. Second,

advocates of open pooling have

presented this pooling option in the

context of a ‘‘package’’ of other order

provisions, including Class I pricing,

that conflict with the method of Class I

pricing recommended in this decision.

For this reason open pooling is

unworkable. For this reason also,

proposals to create and fund ‘‘stand-by’’

pools are similarly rejected.

Where a handler’s plants are regulated

continues to be based primarily on the

basis of where sales are made, rather

than where plants are physically

located, with only minor exceptions.

The change in where a distributing

plant will be regulated will require a

reasonable measure of at least three

consecutive months of more sales in

another market area before the

regulatory status of a plant and producer

milk associated with the plant will shift

to another milk order. Supply plants

will be regulated under the order in

which the greatest portion of its

qualifying shipments have been made.

The proposed definition of an exempt

plant recognizes that some handler

operations are too small to have a

significant impact on the competitive

relationship of competing fluid

processors in the market. In recognition

of this, the amount of milk for an

exempt plant has been liberalized

without references to daily average

deliveries criteria that are currently

applicable in some orders.

Route Disposition

Route disposition is a measurement of

sales used to determine a distributing

plant’s association with a marketing

area. It is defined to mean the amount

of milk delivered by a distributing plant

to a retail or wholesale outlet (except a

plant), either directly or through any

distribution facility (including

disposition from a plant store, vendor or

vending machine), of a fluid milk

product in consumer-type packages or

dispenser units that is classified as Class

I milk.

The recommended route disposition

definition differs from the definition

contained in some current orders.

Presently, the route disposition

definition of several orders makes

reference to plant movements of

packaged fluid milk products between

distributing plants with respect to

determining if such transfers should be

considered ‘‘route disposition’’ of the

transferring or receiving plant. As

proposed here, however, this issue is

addressed in the pool plant section,

which deals with the pooling standards

applicable to a distributing plant.

Plant

A plant definition is included in all

orders to specify what constitutes an

operating entity for pricing and

regulatory purposes. As provided in

§ 1000.4 of the General Provisions, a

plant is the land, buildings, facilities,

and equipment constituting a single

operating unit or establishment at which

milk or milk products are received,

processed, or packaged. This is meant to

encompass all departments, including

those where milk products are stored,

such as a cooler. The plant definition

does not include a physically separate

facility without stationary storage tanks

that is used only as a reload point for

transferring bulk milk from one tank to

another, or a physically separate facility

that is used only as a distribution point

for storing packaged fluid milk products

in transit for route disposition.

To account for regional differences

and practices in transporting milk, some

orders provide for the use of reload

points for transporting bulk milk that do

not have stationary storage tanks.

Farm-Separated Milk

With the advent of new technology for

on-farm separation of milk into its

components, some additional regulatory

language is needed to specify who is the

responsible handler for the milk or milk

components leaving the farm and how

these components will be classified and

priced. This determination will be

based, in part, on whether the farm

processing facility is a plant.

Ultrafiltration (UF) is a membrane

process that transfers water and lowmolecular weight compounds through a

membrane while retaining suspended

solids, colloids, and large organic

molecules. It selectively fractionates

some milk solids components and

selectively concentrates other solids

components of milk.

When a UF membrane is used, water,

lactose, uncomplexed minerals and

other low-molecular-weight organic

compounds pass through the membrane.

For example, if unaltered milk

containing 3.5 percent fat, 3.1 percent

protein, and 4.9 percent lactose is run

through a UF membrane until half of the

original volume is eliminated, the

remaining product not passing through

the membrane (i.e., retentate) will

contain all of the fat and protein but

only half of the lactose. The permeate

(i.e., that part of the original milk that

does pass through the membrane) will

contain water, lactose, non-protein

nitrogen, and about one-sixth of the

minerals.

Reverse osmosis (RO) is also a

membrane process, but the membranes

have much smaller pores than UF

membranes, allowing only the water to

pass through. The end product

essentially is concentrated milk.

At the present time, both reverse

osmosis and ultrafiltration systems are

being utilized on some farms,

principally large farms in the

southwestern United States. The

product shipped from these farms (i.e.,

the retentate) currently is sent to

processing plants for use in

manufactured products but it could be

used in a range of milk products.

The retentate received from a farm

with a UF or RO system will be treated

as producer milk at the pool plant at

which the milk is physically received

or, if the retentate is shipped to a

nonpool plant, as producer milk

diverted to a nonpool plant. In either

case, the milk or milk components will

be priced at the pool plant or nonpool

plant where the milk is physically

received.

To be considered a farm and a

producer, as opposed to a plant and a

handler, an RO or UF unit must be

under the same ownership as the farm

on which it is located and only milk

from that farm or other farms under the

same ownership may be processed

through the unit. The producer

operating the unit shall be responsible

for providing records of the daily

weights of the milk going through the

unit. Also, the producer must provide

samples for each load of milk going

through the unit and must furnish the

receiving plant with a manifest on each

load of retentate showing the scale

weight along with samples of the

retentate. Finally, the producer

operating the RO or UF unit must

maintain records of all transactions

which must be available to the Market

Administrator upon request. If the

producer does not meet these

recordkeeping and reporting

requirements, the unit will be

considered to be a plant.

RO and UF retentate will be

considered to be producer milk at the

plant which receives it. The pounds of
4936 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

RO and UF retentate received will be

priced according to the skim-equivalent

pounds of such milk. The skimequivalent pounds for RO retentate will

be determined by dividing the solidsnot-fat pounds in the retentate by the

average producer solids-not-fat in the

skim portion of the producer milk used

in the product. The butterfat pounds

would then be added to this number to

arrive at the product skim-equivalent

pounds.

In computing the fluid equivalent of

UF retentate, the fluid equivalent factor

should be computed by dividing the

true protein test in the skim milk

portion of the retentate by the true

protein test in the skim milk portion of

the producer milk used in the product.

Adding the butterfat pounds to this

computation will yield the product

equivalent pounds.

In addition to having UF and RO

equipment, some farms today may have

a separator to separate skim milk from

cream before they leave the farm. Rules

must also be established for this type of

operation.

Skim milk and cream going through a

farm separator also should be treated as

producer milk if received at a pool plant

or diverted to a nonpool plant. The

producer will be required to obtain scale

weights and tests on each load of skim

and cream shipped along with samples

of each. The same ownership,

recordkeeping, sampling and reporting

requirements that apply to RO and UF

units will also be applicable.

In formulating a policy for the

treatment of RO and UF retentate, it is

important to recognize that the milk

produced on a farm with RO or UF

equipment is fully available to meet the

needs of the fluid market, either before

or after passing through such units.

Therefore, there should be no question

concerning the propriety of pooling this

milk along with other producers’ milk.

At this writing, the Food and Drug

Administration (FDA) has not yet

decided whether UF retentate can be

reconstituted and sold as fluid milk.

However, FDA has approved the use of

UF retentate in certain cheese products

on a trial basis. Therefore, before

receiving UF retentate for use in any

product, handlers should be certain that

such use has been approved by the FDA.

Distributing Plant

A distributing plant is defined as a

plant that is approved by a duly

constituted regulatory agency to handle

Grade A milk and at which fluid milk

products are processed or packaged and

from which there is route disposition.

The time and location of route

disposition are included in the

distributing plant definition in some

current orders. However, whether route

disposition occurred during the month

or, within the marketing area, are more

appropriately determined to be pooling

issues. Therefore, they are discussed

and included in each consolidated

order’s pool plant definition.

Supply Plant

A supply plant is a regular or reserve

supplier of bulk milk for the fluid

market that seasonally contributes to

coordinating the supply of milk with the

demand for milk in a market. As defined

in this decision, a supply plant is a

plant other than a distributing plant that

is approved by a duly constituted

regulatory agency to handle Grade A

milk and at which fluid milk products

are received or from which fluid milk

products are transferred or diverted.

Pool Plant

The pool plant definition of each

proposed consolidated order provides

standards to distinguish between those

plants engaged in serving the fluid

needs of the marketing area and those

plants that do not. Pool plants serve the

market to a degree that warrants their

producers sharing in the added value

that derives from the classified pricing

of milk. While the pool plant definition

in every consolidated order provides for

a set of common principles, the

definition is specific and unique to each

consolidated order.

Each type of pool plant can be

generically described to share certain

common characteristics. However, to

the extent that marketing conditions and

other related factors vary across the

country, the proposed consolidated

orders need differing terms of

applicability and performance standards

in order to determine the regulatory

status of a plant.

All pool distributing plants in the

consolidated orders will base pool plant

status on two performance measures: (1)

the proportion of its route disposition to

bulk receipts, and (2) the proportion of

route disposition in the marketing area.

If a pool distributing plant operates in

more than one market, the plant’s

primary association with a marketing

area generally will be determined on the

basis of where the majority of fluid sales

occur. In the event that a plant is not

primarily associated with any marketing

area, it will be regulated in the

marketing area in which it is located

provided the plant meets the order’s

pooling standards. If it is not located

within any marketing area, it will be

regulated wherever it has the most route

disposition.

Performance standards for pool

supply plants are designed to attract an

adequate supply of milk to meet the

demands for fluid milk in a market.

Historically, a pool supply plant did not

include any portion of a plant that was

not approved for handling Grade A milk

and that was physically separated from

a portion of the plant that had approval.

Currently, inspection agencies most

commonly render only one type of

approval for an operation, but provision

is made to designate a physically

separated portion of the plant as a

‘‘nonpool plant.’’

Types of Pool Plants and Pool

Qualifications Pool Distributing Plant

Many orders presently refer to Grade

A milk in defining a pool distributing

plant. However, a distributing plant, by

definition, can only handle Grade A

milk, so this qualification is redundant

and has been removed from the

structure of the pool plant section. Also,

as proposed here, the proportion of

route disposition to receipts is derived

from a divisor of receipts of bulk fluid

milk products as opposed to receipts of

total fluid milk products.

The recommended ratio of route

disposition to total receipts of bulk fluid

milk products for pool distributing plant

qualification will vary among orders,

but for most orders it will be at least 25

percent. This is the lowest ratio

currently used among all orders, and

will prevent depooling of plants that

presently enjoy pool plant status. To the

extent this percentage is found to be too

low for certain milk ‘‘deficit’’ regions,

higher percentages are provided in those

proposed consolidated orders.

Performance standards are also

needed to establish a minimum

threshold of market participation, as

measured by route dispositions in a

marketing area, which when met or

surpassed, cause a distributing plant to

be fully regulated in that market.

Currently, the proportion of route

disposition in the marketing area is

expressed in some orders as a

percentage of total route disposition and

in other orders as a percentage of total

receipts of fluid milk products. A

percentage of total route disposition is

recommended for the consolidated

orders.

Some current orders require a daily

average minimum of route disposition

in the marketing area. This standard has

been removed because it is covered

under the exempt distributing plant

definition described below. The

recommended ratio of 15–25 percent of

a plant’s route disposition in the

marketing area provides a reasonable

measure of a distributing plant’s
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4937

association with a marketing area,

while, at the same time, precluding a

change in the regulatory status of plants

that are currently partially regulated or

regulated by a state regulatory program.

To facilitate proper administration

and accounting, all orders currently

provide that packaged fluid milk

products transferred from one handler

to another be treated as interhandler

transfers, with each transaction properly

identified and specifically reported to

affected market administrators. This

should continue in the consolidated

orders. However, for the single purpose

of qualifying a plant as a pool

distributing plant, a subsection in each

consolidated order is included to

address the transfer of packaged fluid

milk products to a distributing plant.

Packaged fluid milk products that are

transferred to a distributing plant shall

be considered as route disposition from

the transferring plant rather than the

receiving plant. In addition to transfers

that occur for sales in the marketing

area, this subsection is also meant to

address the concern of properly pooling

a plant with sales outside of the

marketing area that are made through

another plant. This is necessary to

preclude a plant from becoming

partially regulated if the plant shipped

significant quantities of packaged fluid

milk products to another distributing

plant.

Pool Supply Plant

Currently, pool supply plants are

generally defined by their association

with a marketing area and their ability

to move milk to pool distributing plants

that service the marketing area. Pool

supply plants should continue to be

defined in this way. However, the pool

supply plant definition does not lend

itself to uniform application in all

consolidated orders. Therefore, pool

supply plant performance standards

should be established according to

regional needs. The specific standards

adopted in each order are described in

the pool plant section of each new

order. For orders outside the

southeastern United States, provisions

are provided for two types of supply

plants: a pool supply plant and pool

reserve supply plant. Pool reserve

supply plants are generally defined as

plants located within the marketing area

that are involved primarily in

manufacturing nonfluid milk products.

They nevertheless serve to balance the

market by providing a ready supply of

fluid milk when needed and a

manufacturing alternative when milk for

fluid uses is not needed. By contrast,

pool supply plants are generally defined

as plants involved predominately in the

assembly of raw milk supplies at the

farm and shipment of these supplies to

distributing plants. There are proposed

marketing areas where just a pool

supply plant provision would be

adequate, without the additional

distinction of a pool reserve supply

plant. For those marketing areas where

it is preferable to distinguish between

plants located in and out of the

marketing area, different performance

requirements are recommended to fit

the needs of the consolidated order.

Pool Reserve Supply Plant

A pool reserve supply plant is defined

as a plant capable of handling the

reserve milk required for a marketing

area that also stands ready to make milk

available to meet the fluid needs of the

market. Such a plant must be approved

to handle Grade A milk, and must be

located in the marketing area. In

addition, the plant must provide milk in

fluid use to pool distributing plants

certain month of the year when milk

production declines. Finally, a reserve

supply plant must apply for, and

receive, formal acknowledgment of pool

status by the market administrator.

Because deliveries of a pool reserve

supply plant to a distributing plant will

specify seasonal performance standards,

they cannot be uniform across all

orders. Therefore, each proposed

consolidated order having a pool reserve

supply plant definition will differ with

respect to the level and timing of

performance required.

In qualifying a supply plant’s milk

receipts for pooling, several current

orders allow direct milk shipment from

farms to distributing plants, while other

current orders require all of the milk, or

at least some of it, to be transferred

through a plant. Transferring deliveries

through a plant may often be

uneconomical and inefficient when

compared to the direct delivery of milk

from farms. Therefore, for most of the

consolidated orders, both supply plants

and reserve supply plants are allowed

the flexibility to meet delivery

requirements by direct deliveries from

farms to distributing plants if the supply

plant operator deems that to be the most

efficient means of moving milk.

A number of orders currently provide

for special pool status for supply plants

located in the marketing area but such

status is generally limited to

cooperatives. Several of the orders

which have this provision will retain it

under the consolidated orders. In other

orders, however, especially those with

many manufacturing plants operated by

proprietary handlers, ownership

distinction as a condition for pool

reserve supply plant status has been

removed. This should promote

increased handler equity in the ability

for plants to compete for milk supplies

and for producers associated with such

plants to have their milk priced and

pooled under the order. Additionally,

there are manufacturing plants located

in some marketing areas that are

currently designated as pool plants.

This provision will ensure the retention

of pool status of such plants.

Location in the marketing area should

also be a requirement for pool reserve

supply plant status. This is

recommended because it will preclude

the pooling of a plant that is outside the

marketing area and not in a position to

economically supply the market with

supplemental milk or to efficiently

handle its reserve supplies. In addition,

it will preclude the pooling of milk on

a market when such milk has no real

association with the market at all and

only serves to lower a market’s Class I

utilization, thereby making it more

difficult to attract milk needed for fluid

use. When a distributing plant needs

more milk, a reserve supply plant

located in the marketing area can most

rapidly and economically route milk

directly to where it is needed.

For those orders providing for reserve

supply plants, pool plant status will be

conveyed by the market administrator

after notification is filed in writing by

the plant operator. The notification

should be filed no later than June 15 of

each year. Pool status would begin on

July 1 of the same year and continue for

the remainder of the year unless: (1) the

plant operator later requests nonpool

plant status; (2) the plant subsequently

fails to meet the specified performance

standards, or; (3) the plant qualifies as

a pool plant under another Federal

order. If a plant operator requests

nonpool status for any month, such

nonpool status should remain in effect

until the following June, when the cycle

of notification for pool reserve supply

plant status begins anew. Notification to

the market administrator serves to

demonstrate a commitment to the

market and to act as a deterrent to

temporary changes in pooling status to

the detriment of the market.

Pooling Options

Unit pooling. Unit pooling allows two

or more plants located in the marketing

area and operated by the same handler

to qualify for pool status as a unit by

meeting the total and in-area route

disposition standard as if they were a

single pool distributing plant. To qualify

as a unit, at least one of the plants in

the unit—i.e., the primary plant— must

qualify as a pool distributing plant on

its own standing and the other plants in
4938 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

the unit must process only Class I or

Class II milk products.

Unit pooling serves to accommodate

and provide a flexible regulatory

approach in addressing the

specialization of plant operations. It also

minimizes unintended regulatory effects

that may cause the uneconomical and

inefficient movement of milk for the

sole purpose of retaining pool status.

However, some conditions need to be

satisfied for unit pooling. The ‘‘other’’

plant(s) of the pool unit—i.e., the plants

that would not qualify for pool status as

a single plant—must be located in an

equivalent or a lower price zone than

the primary pool distributing plant. This

condition is required to assure that the

transportation of milk for Class II uses

will not be subsidized through the

marketwide pool and to assure pricing

equity to all handlers processing Class

II products that do not use unit pooling.

Unit pooling arrangements status must

be requested in writing and approved by

the market administrator for its proper

implementation and administration.

System pooling. As previously

discussed, supply plants and reserve

supply plants provide a benefit to the

market because they are required to

meet certain performance standards in

supplying the needs of the fluid market.

They also serve to balance the market.

Because handlers often operate more

than one supply plant within the

market, they should be afforded

flexibility in meeting the performance

standards for pooling. System pooling

can provide this flexibility. A system of

plants can be established if the plants

meet applicable performance standards

in the same manner as any single plant.

A system may consist of two or more

supply plants, or two or more reserve

supply plants, operated by the same

handler or by one or more cooperative

associations.

System pooling should be declared by

a handler in writing to the market

administrator so that pooling of the

system can be properly administered. If

a handler causes one of the plants to

become ineligible for system pooling,

that plant will not be part of the system

for the duration of the calendar year.

Likewise, plants, except for the

proposed Upper Midwest consolidated

marketing area, cannot be added to the

system after the written request for

system pooling is acknowledged by the

market administrator.

Adjustment of Pooling Standards

The consolidated orders should

provide the market administrator with

authority to adjust various pooling

standards, including pool plant

shipping standards in most consolidated

orders. Such a provision would replace

the ‘‘call’’ provision that is now

included in some orders. This change

allows all market administrators to

adjust the shipping standards for pool

supply and pool reserve supply plants

if they find that such revision is

necessary to encourage needed

shipments or to prevent uneconomic

shipments of milk. For most

consolidated orders, it is also

recommended that the market

administrator be authorized to adjust

the total and in-area route disposition

requirements for pool distributing

plants. This flexibility could be

particularly beneficial during a plant

breakdown, a labor strike, the sudden

loss or change in accounts, or some

other conditions that would otherwise

result in regulatory instability or market

disruption.

A finding by the market administrator

that adjustments are warranted would

follow an investigation conducted on

the market administrator’s own

initiative or at the request of interested

parties. This provision allows the

market administrator to respond

promptly to changes in local marketing

conditions. Granting the authority for

the market administrator to make

needed adjustments in the manner

specified currently exists in some

Federal orders and has proven to be

responsive, efficient, effective, and

commensurate with the authorities

already delegated by the Secretary to the

market administrator.

Nonpool Plant

A definition is provided in all orders

describing plants which receive, process

or package milk, but which do not

satisfy the standards for being a pool

plant. While providing for such a

definition may appear redundant, this

provision is useful to more clearly

define the extent of regulation

applicable to plants. Nonpool plants

should include a plant that is fully

regulated under another Federal order, a

producer-handler plant, a partially

regulated distributing plant, an

unregulated supply plant and an exempt

plant. The definitions for these nonpool

plants are not materially different than

those provided in the current orders

with the possible exception of an

‘‘exempt plant.’’

A number of Federal orders exempt

from regulation small distributing plants

which, because of their size, do not

significantly impact competitive

relationships among handlers in the

market. The level of route disposition

required before an exempt plant

becomes regulated varies in the current

orders. As recommended, any plant

with route disposition during the month

of 150,000 pounds or less would be

exempt in the consolidated orders. This

limit reflects the maximum amount of

fluid milk products allowed by an

exempt plant in any current Federal

milk order and ensures plants that are

currently exempt from regulation will

remain so.

Many current Federal orders also

provide regulatory exemption for a plant

operated by a state or Federal

governmental agency. For example,

some states have dairy farm and plant

operations that provide milk for their

prison populations. As recommended,

regulatory exemption would be

continued under the consolidated

orders unless pool plant status is

desired. Additionally, regulatory

exemption is intended to include

colleges, universities and charitable

institutions because these institutions

generally handle fluid milk products

internally and have no impact in the

mainstream commercial market.

However, in the event that these entities

do distribute fluid milk through

commercial channels, route sales by

such entities, including government

agencies, will be monitored for

determining if Federal regulation should

apply.

The determination and verification of

exempt plant status will, from time to

time, necessitate the need for the market

administrator to require reports and

information deemed appropriate for the

sole purpose of making this

determination. Such authority is

currently provided in orders and should

continue.

Handler

Federal milk orders regulate those

persons who buy milk from dairy

farmers. Such persons are called

handlers under the order. These persons

have a financial responsibility for

payments to dairy farmers for milk in

accordance with its classified use. They

must file reports with the market

administrator detailing their receipts

and utilization of milk. As

recommended, the handler definition

includes the operator of a pool plant, a

cooperative association that diverts milk

to nonpool plants or delivers milk to

pool plants for its account, and the

operator of a ‘‘nonpool plant,’’ which

would encompass a producer-handler, a

partially regulated distributing plant, a

plant fully regulated under another

Federal order, an unregulated supply

plant, and an exempt plant.

In addition, ‘‘third party’’

organizations that are not otherwise

regulated under provisions of an order

are included in the handler definition.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4939

This category includes any person who

engages in the business of receiving

milk from any plant for resale and

distribution to wholesale and retail

outlets, brokers or others who negotiate

the purchase or sale of fluid milk

products or fluid cream products from

or to any plant, and persons who, by

purchase or direction, cause the milk of

producers to be picked up at the farm

and/or moved to a plant. Such

intermediaries provide a service to the

dairy industry. These persons are not,

however, recognized or regulated as

entities required to make minimum

payments to producers. The expanded

marketing chain brought about by such

intermediaries has made it increasingly

difficult for the market administrator to

track the movement of milk from farms

to consumers. The recommended

handler definition enables the market

administrator to more readily identify

those entities for the information

needed to properly administer an order.

Producer-Handler

It has been a long-standing policy to

exempt from full regulation many of

those entities that operate as both a

producer and a handler. Generally, a

producer-handler is any person who

provides satisfactory proof to the market

administrator that the care and

management of the dairy farm and other

resources necessary for own-farm

production and the management and

operation of the processing plant are the

personal enterprise and risk of such

person. A primary basis for exempting

producer-handlers from the pricing and

pooling provisions of a milk order is

that these entities are customarily small

businesses that operate essentially in a

self-sufficient manner. Also, during the

history of producer-handler exemption

from full regulation there has been no

demonstration that such entities have an

advantage as either producers or

handlers so long as they are responsible

for balancing their fluid milk needs and

cannot transfer balancing costs,

including the cost of disposing of

reserve milk supplies, to other market

participants.

The current orders have varying

producer-handler definitions that

address specific marketing conditions

and circumstances. For example, they

specify different limits on the amount of

milk that producer-handlers may

purchase and retain their exempt status.

Some modifications are being made to

the producer-handler provisions in the

consolidated orders for standardization.

However, these changes are not

intended to fully regulate any producerhandler that is currently exempt from

regulation.

As proposed, any handler, including

a producer-handler, is exempt from the

pooling and pricing provisions of an

order during any month in which route

disposition is less than 150,000 pounds.

Thus, the producer-handler exemption

only applies to producer-handlers with

route disposition of 150,000 pounds or

more. Since such producer-handlers are

not subject to the pricing and pooling

provisions of an order as are fully

regulated handlers, it is appropriate to

continue to require producer-handlers

to rely on their own-farm production in

meeting their fluid sales and to

independently market their surplus

milk production without participation

in the marketwide pool. However, a

producer-handler should be allowed

some marginal flexibility on

supplemental milk purchases provided

they are from regulated sources.

Relatively small supplemental

purchases do not undermine the

concepts of classified pricing and

marketwide pooling. As proposed,

producer-handlers are allowed to

purchase some specified amount of

supplemental fluid milk products each

month from pool sources. As is

currently the case, any supplemental

requirements of fluid milk products by

a producer-handler will continue to be

limited to receipts from regulated

sources, thus insuring that producers

associated with the marketwide pool

share in the economic benefit of all

Class I sales over and above what a

producer-handler’s own production may

not have satisfied.

It is appropriate to continue requiring

producer-handlers to rely primarily on

their own-farm production to balance

their fluid sales and to find outlets for

their surplus production. Producerhandlers must also rely upon their own

distribution system to find outlets for

their milk. A producer-handler will be

allowed to distribute milk to the plant

of a fully regulated handler. However,

disposal of surplus milk production by

a producer-handler to the plant of a

fully regulated handler, whether in bulk

or packaged form, will be allocated at

the pool plant to the lowest class-use of

the receiving plant, thereby preserving

the Class I share of the market for

producers who bear the burden of

balancing a market’s surplus disposal.

Disposal of packaged fluid milk

products by a producer-handler to a

distribution facility operated by a fully

regulated handler should not be

permitted. It would allow a producerhandler to dispose of its surplus

production by capturing a greater share

of the Class I market thereby receiving

an unearned economic benefit not

accorded to producers pooled on the

market. This restriction also prevents a

fully regulated handler from purchasing

Class I milk at less than the minimum

order price that other fully regulated

handlers must pay. Accordingly, a

producer-handler will not be allowed to

dispose of fluid milk products using the

distribution system of another handler,

nor through any other channel, division,

or department of a pool handler and

retain exemption from full regulation

under an order. Since a producerhandler must control its own

distribution, it will not be allowed to

have disposed of milk to any

independent distributor. Route

disposition to retail stores (owned by

any entity and not located in a regulated

plant) or to a distribution facility owned

by retail stores (and not by a regulated

plant or independent entity) would be

allowed.

Notwithstanding the exemption of

producer-handlers from regulation,

there may be instances where it is to the

advantage of the person who is both a

producer and a handler to operate such

businesses as two distinct entities. The

proposed new orders provide the

producer-handler with the flexibility to

realize this advantage. Upon request by

a producer-handler to the market

administrator, the plant portion of the

operation would be a fully regulated

distributing plant while the farm

portion of the operation would be

accorded producer status.

Public comments were received

regarding the extent of regulation that

should apply to producer-handlers. The

majority of public comments supported

the status-quo regarding the regulatory

treatment of producer handlers,

emphasizing that they should remain

exempt from regulation in accordance

with current order provisions and that

the provisions should be regional in

nature so as not to affect or change the

current regulatory status of producerhandlers. One of the public comments

received proposed that the exemption of

producer-handlers from the regulatory

plan of milk orders be eliminated. This

proposal is denied. In the legislative

actions taken by the Congress to amend

the AMAA since 1965, the legislation

has consistently and specifically

exempted producer-handlers from

regulation. The 1996 Farm Bill, unlike

previous legislation, did not amend the

AMAA and was silent on continuing to

preserve the exemption of producerhandlers from regulation. However, past

legislative history is replete with the

specific intent of Congress to exempt

producer-handlers from regulation. If it

had been the intent of Congress to

remove the exemption, Congress would
4940 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

likely have spoken directly to the issue

rather than through omission of

language that had, for over 30 years,

specifically addressed the regulatory

treatment of producer-handlers.

Since producer-handlers are intended

to be exempt from most regulation,

some means must be provided to

determine and to verify producerhandler status. Accordingly, the market

administrator is provided with the

authority to require reports and other

information deemed appropriate to

determine that an entity satisfies the

requirements of producer-handler

status. Such authority is currently

provided in the orders and should

continue.

Producer

Under all orders, producers are dairy

farmers that supply the market with

milk for fluid use or who are at least

capable of doing so if necessary.

Producers are eligible to share in the

revenue that accrues from marketwide

pooling of milk. The producer

definitions of the individual orders are

described under the regional

discussions later in this document.

Responding to regional needs, producer

definitions will differ by order with

respect to the degree of association that

a dairy farmer must demonstrate with a

market.

A dairy farmer may not be considered

a producer under two Federal milk

orders with respect to the same milk. If

a dairy farmer’s milk is diverted by a

handler regulated under one Federal

order to a plant regulated under another

Federal order, and the milk is allocated

at the receiving plant (by request of the

diverting handler) to Class II, III or IV,

the dairy farmer will maintain producer

status in the original order from which

milk was diverted.

Since producer-handlers and exempt

plants are specifically exempt from

Federal order pricing provisions, the

term producer should not include a

producer-handler as defined in any

Federal order. Likewise, the term

producer should not apply to any

person whose milk is delivered to an

exempt plant, excluding producer milk

diverted to such exempt plant.

It would not be appropriate to share

the economic benefits that arise from

classified pricing through marketwide

pooling with dairy farmers whose milk

is not regularly associated with the

market. For example, a dairy farmer may

decide to deliver milk to a market’s pool

plants only when a more favorable

unregulated market is not available, or

an unregulated plant may attempt to

move its surplus milk to a market’s pool

plant only to derive an economic benefit

from the marketwide pool.

An unregulated plant operator, often

a cooperative association, may receive

all of a dairy farmer’s milk at its plant

when milk supplies are tight and,

during such times, not share the higheruse value of such milk with other dairy

farmers through the marketwide pool.

On the other hand, during a period of

flush production, the same plant may

seek to dispose of surplus milk through

a market’s pool plants to pass the cost

of balancing milk supplies to dairy

farmers that regularly supply the fluid

market through the mechanism of the

marketwide pool. Under such

circumstances, producer status should

not be accorded to those dairy farmers

under an order. Doing so would place

producers who regularly fulfill a

market’s fluid milk needs with the

burden of carrying the surplus costs of

balancing unregulated fluid markets

without the benefit of sharing in the

additional revenue that is derived from

those markets when circumstances are

more favorable.

Another circumstance can also arise

when it may be advantageous not to

pool milk, a practice commonly referred

to as ‘‘depooling.’’ When manufacturing

class prices for a month are higher than

an order’s uniform, or blend price, milk

at manufacturing plants is often

depooled because the operators of such

plants otherwise would be required to

pay into the marketwide producersettlement fund. Such payments would

benefit the marketwide pool but would

be disadvantageous to those having to

make them. This practice is generally

disruptive to the marketwide pool and

is not conducive to maintaining orderly

market conditions. In instances

involving depooled milk, it is a

handler’s decision in moving milk that

impacts producers and pool milk value.

It is also a handler’s action that

determines whether a farmer retains

producer status or becomes associated

with another marketing area.

The proposed orders that are

vulnerable to this type of abuse contain

a provision to deter handlers from

moving milk in a manner that is

disadvantageous to the market’s regular

producers. Handlers who choose to

regularly supply nonpool plants as their

primary market, and handlers who

move milk in and out of the regulated

market, should not consistently enjoy

the benefits of equalization payments

from the marketwide pool. However,

this should not apply in the event that

a handler moves milk supplied by a

producer under one Federal order to

another Federal order, nor are these

provisions intended to overlap with

order provisions for the diversion of

milk. Should a handler exceed specified

diversion limits, only the over-diverted

milk is removed from the pool; the

producer should maintain ‘‘producer’’

status for other milk delivered that

month.

The recommended method for

determining when a dairy farmer is not

properly associated with a market is

commonly referred to as a ‘‘dairy farmer

for other markets’’ provision, which is a

component of the producer definition in

some of the consolidated orders. Under

this type of provision, milk deliveries to

nonpool plants that are not reported by

handlers as diversions from pool plants

would result in the loss of producer

status for a dairy farmer’s milk for some

fixed time period. While the receipt of,

or diversion by, a pool handler of other

milk from the same producer during

that fixed time period is not restricted,

the minimum payment obligation of the

handler for that milk would not be

regulated under the Federal milk

marketing orders. Such milk would be

treated as ‘‘other source milk,’’ and the

dairy farmer’s milk would not be

included in the pool.

Where this provision is provided, the

loss of producer status would remain in

effect for the current month and for the

following two months. Exception is

made to accommodate the market

demands for milk during the ‘‘short’’

season. If milk is depooled during the

‘‘short’’ season, the loss of producer

status should remain in effect for the

current month only; otherwise, it would

discourage the pooling of milk during

the remainder of the ‘‘short’’ season.

Once the short season ends, however,

the dairy farmer should not be eligible

for producer status during the

subsequent flush production season.

Producer status will be lost until the

beginning of the following ‘‘short’’

season. The relevant time periods that

describe which months are applicable in

defining the ‘‘short’’ season are

described in each of the consolidated

orders.

Producer Milk

All orders currently provide for

defining and identifying the milk of

producers which is eligible for inclusion

in a particular marketwide pool and

should continue to do so. However, this

definition is specific to each

consolidated order and is therefore not

uniform across all orders.

In general, the definition of producer

milk for all consolidated orders

continues to include the milk of a

producer which is received at a pool

plant or which is received by a

cooperative association in its capacity as
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4941

a handler. Most current orders consider

milk to be ‘‘received’’ when it is

physically unloaded at the plant and the

proposed orders would continue that

treatment. However, to ensure that

producers are promptly paid for their

milk, milk picked up from the

producer’s farm, but not received at a

plant until the following month, will be

considered as having been received by

the handler during the month in which

it is picked up at the producer’s farm.

In this situation, milk will be priced

under an order at the location of the

plant where it is physically received in

the following month.

In order to promote the efficient

movement of milk, all orders currently

allow a handler to move producer milk,

within certain specified limits, from a

producer’s farm to a plant other than the

handler’s own plant. This is referred to

as a ‘‘diversion’’ of milk. As proposed

for the consolidated orders, the

definition of producer milk allows

unlimited diversions to other pool

plants, thereby providing maximum

flexibility in efficiently supplying the

fluid market.

Under some orders, unlimited

diversions to nonpool plants would also

be allowed once a dairy farmer has

become associated with a particular

order. Under other orders, however, a

producer would be required to ‘‘touch

base’’ at a pool plant one or more times

each month and, in addition, aggregate

diversion limits may be applied to a

handlers’ total diversions.

For pool distributing plants, route

disposition as a percent of total receipts

of bulk milk automatically limits

diversions by those plants. With respect

to pool supply plants and pool reserve

supply plants, the specific shipping

standards will ensure that a sufficient

quantity of milk is available for the fluid

market. Since some orders may allow

for unlimited diversions, the maximum

quantity of milk that a pool plant would

be able to divert and still maintain its

pool plant status would be 100% less

the pool plant shipping standards for

the month. This will mitigate the need

for suspending order diversion

limitations, an action that is quite

common in some of the current orders.

Unlimited diversions would also allow

for maximum efficiency in balancing the

market’s milk supply. The market

administrator’s ability to adjust

shipping percentages for pool supply

plants and pool reserve supply plants

will further ensure that an adequate

supply of milk is available for the fluid

market without the imposition of

diversion limits.

While it is expected that a one time

producer ‘‘touch base’’ standard and

virtually unlimited diversions would be

appropriate for most of the consolidated

Federal orders, it is recognized that it

may not be appropriate for certain

‘‘deficit’’ markets. In these cases, the

order may provide for diversion limits

to ensure an adequate supply of fluid

milk for that particular market. In these

cases, the alternate standards for

diversion privileges specify the

minimum number of days that milk of

a producer must be physically received

at a pool plant and the percent of total

producer receipts that may be diverted

by the handler. The months during

which such minimums must be met are

also identified in both cases.

In order to provide regulatory

flexibility and marketing efficiencies, all

of the proposed orders having diversion

limits allow the market administrator to

increase or decrease the delivery

requirements for producers and the

aggregate diversion limits applicable to

handlers. Granting the authority for the

market administrator to make needed

adjustments in the manner specified

currently exists in some Federal orders

and has proven to be a responsive,

efficient, and effective way to deal with

rapidly changing marketing conditions.

Cooperative Association

All current orders provide a definition

for dairy farmer cooperative associations

that market milk on behalf of their dairy

farmer members and should continue to

do so in the consolidated orders.

Providing for a uniform definition of a

cooperative association facilitates the

administration of the various order

provisions as they apply to such

producer organizations and recognizes

the unique standing granted to dairy

farmer cooperatives under the CapperVolstead Act. Moreover, dairy farmer

cooperatives are responsible for

marketing the majority of the milk

supplied to regulated handlers under

the Federal order system.

As provided herein, a cooperative

association means any cooperative

marketing association of producers

which the Secretary determines, after

application for such recognition by the

cooperative, is qualified as such under

the provisions of the Act of Congress of

February 18, 1922, as amended, known

as the ‘‘Capper-Volstead Act’’.

Additionally, most orders currently

require that a cooperative association

have full authority in the sale of the

milk of its members and that it be

engaged in making collective sales or

marketings of milk or milk products for

its dairy farmer members. This should

continue. The cooperative association

definition provides for universal

applicability in all consolidated orders.

Several current orders also provide a

definition for a federation of two or

more cooperative associations. As

recommended herein, all consolidated

orders would recognize a federation of

cooperatives as satisfying the

cooperative definition for the purposes

of determining milk payments and

pooling. Individual cooperatives of a

federation of cooperatives must also

meets the criteria as set forth for

individual cooperative associations and

their federations as incorporated under

state laws.

Handler Reports

Reports of receipts and utilization,

payroll and other reports. All current

orders require handlers to submit

monthly reports detailing the sources

and uses of milk and milk products so

that market average use values, or blend

prices, can be determined and

administered. Payroll reports and other

reports required by the market

administrator are also provided for in

the orders. The proposed language for

the consolidated orders for handler

reports is similar to that contained in

current orders. The dates when reports

are due in the market administrator’s

office differ slightly by order according

to custom and industry practice.

Announcements by the Market

Administrator

Public announcements by market

administrators. Four sections of each

consolidated order provide for requiring

the market administrator to make

certain announcements in the course of

order administration. These include:

§ 100l.45, Market administrator’s

reports and announcements concerning

classification; § 100l.53,

Announcement of class prices and

component prices; § 100l.54,

Equivalent price; and § 100ll.62,

Announcement of producer prices, or in

orders without component pricing,

Announcement of uniform price,

uniform butterfat price, and uniform

skim milk price. These announcements

are currently required by market

administrators in all orders and should

continue. As proposed, these provisions

are uniform to all consolidated orders

and are nearly identical to current order

provisions. However, § 100ll.62, is

unique to each order and is described in

each of the consolidated orders.

Payments for Milk

Producer-settlement fund. All of the

current orders provide for minimum

payment terms and obligations by

regulated handlers and such provisions

should continue to be part of the

consolidated orders. Handlers are
4942 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

charged with minimum class prices.

However, producers are returned a

uniform, or blend, price through the

marketwide pooling of milk. The

mechanism for the equalization of a

handler’s use value of milk is the

producer-settlement fund. It is

established and administered by the

market administrator for each order.

The producer-settlement fund ensures

that all handlers are able to return the

market blend price to producers whose

milk was pooled under the order.

Payments into the producer-settlement

fund are made each month by handlers

whose total classified use-value of milk

exceeds the value of such milk

calculated at the uniform price or at

component prices for those orders with

component pricing. Similarly, payments

out of the producer-settlement fund are

made each month to any handler whose

use-value is below the value of milk at

the uniform price or component prices,

as the case may be. The transfer of funds

enables handlers with a use-value below

the average for the market to pay their

producers the same uniform price as

handlers whose Class I utilization

exceeds the market average. This

provision is uniform for all consolidated

orders.

Payments to and from the producersettlement fund. The current orders vary

with respect to dates for payments to the

producer-settlement fund, due largely to

industry practices and how certain

orders evolved over time to reflect those

practices. Each consolidated order

provides for payment dates, and they

are specific for each consolidated order.

Also, as proposed, payment to the

producer-settlement fund would be

considered made upon receipt by the

market administrator. In view of the

need to make timely payment to

handlers from the producer-settlement

fund, it is essential that money due the

fund be received by the due date.

Additionally, payment cannot be

received on a nonbusiness day.

Therefore, if the due date is a Saturday,

Sunday, or national holiday, payment

would not be due until the next

business day. This is specified in

§ 1000.90 of the General Provisions.

Payments from the producersettlement fund provide for payments to

those handlers whose milk use-value is

below the value of milk at the uniform

price. As proposed, this section is

similar to those contained in current

orders. As with payments to the

producer-settlement fund, the payments

from the fund are specific to each

consolidated order. Generally, payments

from the producer-settlement fund

would be required one day after the

required date for payments into the

fund. This goal is consistent with the

average time lapse between payment

into the producer-settlement fund and

payments from the fund in existing

orders. As in the prior section,

payments would be made on the next

business day when the required

payment date falls on a Saturday,

Sunday, or national holiday.

Payments to producers and to

cooperative associations. The AMAA

provides that handlers must pay to all

producers and producer associations the

uniform price. The existing orders

generally allow proper deductions

authorized by the producer in writing.

Proper deductions are those that are

unrelated to the minimum value of milk

in the transaction between the producer

and handler. Producer associations are

allowed by the statue to ‘‘reblend’’ their

payments to their producer members.

The Capper Volstead Act and the

AMAA make it clear that cooperative

associations have a unique role in this

regard.

The payment provisions to producers

and cooperatives vary greatly among the

current Federal orders, particularly in

regard to partial payment frequency,

timing, and amount. The proposed

provisions are consistent with the needs

of the consolidated orders. Each order

currently requires handlers to make at

least one partial payment to producers

in advance of the announcement of the

applicable uniform prices. The partial

payment varies across orders by the

required payment date, rate of payment,

and volume of milk for which payment

is made. This provision continues to

require partial payments, although they

will vary by consolidated order. Full

payment is required to be made so that

it is received by producers no later than

two days after the required pay-out date

of monies from the producer-settlement

fund.

Cooperatives will be paid by handlers

for bulk milk and skim milk on the

terms described for individual

producers except that required receipt

of payment will be one day earlier.

Providing for an earlier payment date

for cooperative associations is

warranted because it will permit the

cooperative association the time needed

to distribute payments to individual

producer-members. The cooperative

payment language in each of the

consolidated orders has been expanded

to include bulk milk and skim sold by

cooperative pool plants as well as by

cooperatives acting as a handler.

All of the payment dates are receipt

dates. Since payment cannot be received

on a non-business day, payment dates

that fall on a Saturday, Sunday, or

national holiday will be delayed until

the next business day. While this has

the effect of delaying payment to

cooperatives and producers, the delay is

offset by the shift from ‘‘date of

payment’’ to ‘‘date of payment receipt.’’

Minimum payments to producers. In

a proceeding involving the current

Carolina, Southeast, LouisvilleLexington-Evansville, and the former

Tennessee Valley Federal milk orders

(Orders 5, 7, 46, and 11), a proposal was

made to clarify what constitutes a

minimum payment to producers. The

proposal was recommended by Hunter

Farms (Hunter) and Milkco Inc.

(Milkco), two handlers regulated under

the current Carolina order. Under the

proposal, a handler (except a

cooperative acting in its capacity as a

handler pursuant to paragraph 9(b) or

9(c)) may not reduce its obligations to

producers or cooperatives by permitting

producers or cooperatives to provide

services which are the responsibility of

the handler. According to the Hunter/

Milkco proposal, such services include:

(1) Preparation of producer payroll; (2)

conduct of screening tests of tanker

loads of milk; and (3) any services for

processing or marketing of raw milk or

marketing of packaged milk by the

handler.

At the May 1996 hearing,

representatives of Hunter and Milkco

testified that both handlers receive milk

from cooperative associations and

Piedmont Milk Sales, a marketing agent

handling the milk of non-member

producers. The Hunter representative

explained, due to competitive marketing

conditions in the Southeast in late 1994

and early 1995, handlers were able to

purchase milk supplies at Federal order

minimum prices without any over-order

premiums being charged. As a result of

the absence of over-order premiums, the

representative stated, Hunter received

underpayment notices from the market

administrator on milk that it had

received from Piedmont Milk Sales.

Hunter contends the problem of what

constitutes a minimum payment to

producers should be clarified in the

event that premiums again disappear in

the future. If this issue is not resolved,

according to Hunter, it will suffer a loss

of milk sales and its producers will

receive lower prices. Hunter argues that

the current policy is discriminatory and

unfair and that everyone would benefit

from a clarification of the rules defining

Federal order minimum prices.

Milkco supported Hunter’s position

and stated that it also received

underpayment notices from the market

administrator for the December 1994

through October 1995 period on milk

received from independent dairy

farmers, but did not receive
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4943

underpayment notices on milk received

under the same or similar conditions

from cooperative associations.

Carolina-Virginia Milk Producers

Association offered qualified support for

the Hunter/Milkco proposal. The

cooperative suggested expanding

handlers’ responsibilities to cover

tanker washing and tagging, supplying

milk to handlers on an irregular delivery

schedule, field work, disposing of

surplus milk during months when the

supply is above local needs, and

importing supplemental milk for Class I

use during periods of short production.

Mid-America Dairymen, Inc. (MidAm) testified and filed a post-hearing

brief strongly objecting to the Hunter/

Milkco proposal. Mid-Am argued that

the issue of minimum payments to

producers is national in scope and

suggested that the issue be addressed on

a national basis within the context of

the Federal order reform as required by

the 1996 Farm Bill. Furthermore, MidAm stated that clearly the costs for

butterfat testing are borne by all

producers, and the costs of testing milk

in tankers for antibiotics are borne by all

handlers, regardless of their source of

supply. According to Mid-Am, no

confusion exists as to who is

responsible for these tests and,

therefore, they should not be included

in the proposed amendments.

Several handlers either supported the

Milkco/Hunter proposal or stated the

proposal should be considered by the

Secretary for all Federal milk marketing

orders within the context of Federal

milk order reform.

Based on the testimony presented at

the public hearing and comments

received, the Department’s

recommendation issued on July 17,

1997 (62 FR 39470), was to consider this

issue as part of Federal order reform.

The decision stated that no changes

were being recommended for the 4

southeastern orders involved in the

proceeding because this issue is central

to all Federal milk orders and should

not be interpreted differently from one

order to another. The decision also

noted the conceptual differences among

market participants concerning what

constitutes minimum prices to

producers. The record was not extensive

in detailing the particular services to be

assigned to each party, nor in providing

guidance concerning the cost of these

services which appeared to vary

considerably from organization to

organization.

Hunter and Milkco, Inc., filed an

exception to the Department’s partial

recommended decision and urged

adoption of their proposal. These

handlers stated that their proposal

would specify the responsibility of all

handlers with respect to producer milk

and thereby rectify any inconsistency

that may currently exist in order

language concerning this issue.

Hunter and Milkco also stated that

any disagreement within the industry

concerning which services are the

responsibility of the handler is

secondary to the issue under review and

does not warrant the denial of their

proposal. The commenters contend that

the central principle surrounding this

issue is uniformity in the treatment of

handlers purchasing milk supplies from

cooperatives or independent producers.

The precise list of services is of

secondary importance, they state, and

industry disagreement concerning these

services should not prevent the

Department from embracing the central

thrust of their proposal.

Regardless of the short-term outcome

in the pending rulemaking, there is a

long-term issue that transcends

individual orders and should be

uniformly applied in the interpretation

and administration of all Federal milk

orders if possible. Accordingly,

interested parties are invited to submit

comments concerning this issue.

Payments by a handler operating a

partially regulated distributing plant.

All current and consolidated orders

provide a method for determining the

payment obligations due to producers

by handlers that operate plants which

are not fully regulated under any

Federal order. These unregulated

handlers are not required under the

scope of Federal milk order regulation

to account to dairy farmers for their

milk at classified prices or in returning

a minimum uniform price to producers

who have supplied the handler with

milk. However, such handlers may sell

fluid milk on routes in a regulated area

in competition with handlers who are

fully regulated.

Therefore, the regulatory plan of

Federal milk orders needs to provide a

minimum degree of regulation to all

handlers who enjoy routes sales of fluid

milk in a regulated marketing area. This

is necessary so that classified pricing

and pooling provisions of an order can

be maintained. It is also necessary so

that orderly marketing conditions can be

assured with respect to handlers being

charged the classified value under an

order for the milk they purchase from

dairy farmers. Without this provision,

milk prices in an order would not be

uniform among handlers competing for

sales in the marketing area, a milk

pricing requirement of the AMAA.

There are 3 regulatory options that are

available at the option of the partially

regulated handler.

It is recognized under current orders

that the purchase of Class I milk by a

partially regulated handler of milk that

is priced under a Federal order in an

amount equal to, or in excess of,

quantities sold by partially regulated

handlers in the marketing area ensures

that price equality is maintained

between these entities. In these

circumstances, a partially regulated

handler will not be required to make

payments to the producer-settlement

fund so that the use-value of milk has

been equalized between fully regulated

and partially regulated handlers.

For those instances in which a

partially regulated handler purchases no

milk from fully regulated handlers, or

where purchases are less than the

quantity of route disposition in the

marketing area by the partially regulated

handler, a payment may be made by the

partially regulated handler into the

producer-settlement fund of the

regulated market at a rate equal to the

difference between the Class I price and

the uniform price of the regulated

market.

Many current orders also allow the

operator of a partially regulated plant to

demonstrate that the payment for its

total supply of milk received from dairy

farmers was in an amount equal to the

amount which the partially regulated

plant would have been required to pay

if the plant were fully regulated. This

amount may be paid entirely to the

dairy farmers that supplied the

handlers, or in part to those dairy

farmers with the balance paid into the

producer-settlement fund of the

regulated market. This should be

adopted in all orders.

All of the current orders also provide,

under certain circumstances, for

payment options by partially regulated

handlers relating to reconstituted milk.

All of the payment options available to

a partially regulated handler are

retained under the consolidated orders.

This provision is now found in

§ 1000.76 of the General Provisions.

Adjustment of accounts. All current

orders provide for the market

administrator to adjust, based on

verification of a handler’s reports,

books, records, or accounts, any amount

due to or from the market administrator,

or to a producer or a cooperative

association. This provision continues to

be included in the consolidated orders.

The provision requires the market

administrator to provide prompt

notification to a handler of any amount

so due and requires payment adjustment

to be made on or before the next date

for making payments as set forth in the

provisions under which the error(s)

occurred.
4944 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Charges on overdue accounts. All

current orders provide for an additional

charge to handlers who fail to make

required payments to the producersettlement fund when due. Such

payments include payments to the

producer-settlement fund, payments to

producers and cooperative associations,

payments by a partially regulated

distributing plant, assessments for order

administration, and marketing service

and certain other payment obligations in

orders with specialized provisions such

as transportation credits. This should

continue to be provided for in the

consolidated orders.

In order to discourage late payments,

it is proposed that a 1.0 percent charge

per month be incorporated in the

consolidated orders. This rate represents

the mid-point in the range of charges by

all orders presently. Overdue charges

shall begin the day following the date an

obligation was due. Any remaining

amount due will be increased at the rate

of 1.0 percent on the corresponding day

of each month until the obligation is

paid in full.

As proposed, all overdue charges

would accrue to the administrative

assessment fund. The late-payment

charge is to be a penalty that is meant

to induce compliance with the payment

terms of the order. If late-payment

charges for monies due on producer

milk were to accrue to the balance owed

to either producers, cooperatives or

producers/cooperatives via the

producer-settlement fund, it could

result in such producers and

cooperatives being less concerned

whether they are paid on time, thus

being counterproductive to the purpose

of late payment provisions. Under the

provision recommended, cooperatives

and producers would not be placed in

a position where they would prefer to be

paid several days late so that they

would receive the late-payment charges

or increase the level of producer prices

due to late payment fee accrual to the

producer-settlement fund. This is of

particular concern in markets with a

single dominant cooperative.

Additionally, by having late-payment

fees accrue to the administrative fund,

monies are made available to enforce

late-payment provisions that would

otherwise have to be generated through

handlers’ administrative assessments.

Assessment for Order Administration

The AMAA provides that the cost of

order administration shall be financed

by an assessment on handlers. All

current orders provide for proportionate

per hundredweight assessments of

varying rates. As proposed, a maximum

rate of 5 cents per hundredweight is

provided. The assessment would apply

to all of a handler’s receipts pooled

under the order.

Deduction for Marketing Services

As in most current orders, the

consolidated orders should provide for

the furnishing of marketing services to

producers for whom cooperative

associations do not perform services.

Such services should include providing

market information and establishing or

verifying weights, samples and tests of

milk received from such producers. In

accordance with the Act, a marketing

services provision must benefit all

nonmember producers under the order.

They are not uniform in the

consolidated orders.

The market administrator may

contract with a qualified agent

including a cooperative association to

provide such services. The cost of such

services should be borne by the

producers for whom the services are

provided. Accordingly, it is proposed

that each handler be required to deduct

a maximum of 7 cents per

hundredweight from amounts due each

producer for whom a cooperative

association is not providing such

services. All amounts deducted should

be paid to the market administrator not

later than the due date for payments to

the producer-settlement fund.

6a. Northeast Region

The Northeast Marketing Area

The recommended consolidated

Northeast order differs significantly

from other consolidated orders. In

addition to merging three existing

Federal milk orders, the proposed

Northeast order also recommends

expansion in the western and northern

regions of New York state, and all

currently unregulated areas of the New

England states (except Maine).

While the current New England

(Order 1) and Middle Atlantic (Order 4)

order have similar pricing provisions for

adjusting producer blend prices in a

manner identical to how plant prices are

charged, the current New York-New

Jersey (Order 2) order employs a ‘‘farmpoint’’ pricing method. This decision

recommends that the pricing of milk

should employ a plant-point pricing

methodology in the consolidated

Northeast order. This method is used in

every other current marketing area and

in every recommended consolidated

marketing area. This represents a

considerable change in how milk will be

priced for those handlers and producers

who currently are priced under the

provisions of the New York-New Jersey

order.

In addition to the different pricing

provisions of the three existing orders,

other important differences and related

provisions need to be addressed in

recommending a complete Northeast

regional order that will accomplish the

goals of the AMAA. These include what

is commonly referred to in the NewYork-New Jersey order as the ‘‘pass

through’’ provision, the need for

providing marketwide service payments

in the form of cooperative service

payments and balancing payments that

currently exist in the New York-New

Jersey order and do not exist in either

the current New England or Middle

Atlantic orders. Additionally, the three

current northeast orders also provide for

seasonal adjustments to the Class III and

IIIA price, which may no longer be

necessary in light of the replacement

being recommended for the BFP.

It is fair to observe that the current

order most affected by the

recommended consolidation is the New

York-New Jersey order. In addition to

the differences already described,

certain terms and provisions of the

recommended Northeast order are also

different in how they are described and

presented but are nevertheless

consistent with existing provisions that

accomplish the goals of the AMAA. This

is less of an issue for those entities that

are accustomed to the terminology of

provisions used in the New England and

Middle Atlantic orders. The following

presents a discussion of the

recommended order provisions and

issues that are unique to the

consolidated Northeast order.

Plant

The plant definition for the proposed

consolidated Northeast order should

differ from that of the other

consolidated orders by allowing

stationary storage tanks to be used as

reload points. This exception to the

plant definition is warranted for the

consolidated Northeast order due to

certain unique conditions that affect the

ability of producers to assemble milk in

an efficient manner and subsequently

transport it to a plant that actually

processes milk into finished dairy

products, including fluid milk products.

This exception would not consider the

reload point or facility as a point from

which to price producer milk. Rather,

milk once assembled would be shipped

to a processing plant where it would be

priced.

A portion of the Northeast milk

supply is derived from some 200 small

dairy farms located in Maine. Because

much of this state is serviced by

secondary and rural winding roads, the

current New England order has
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4945

provided for reload points as a workable

solution to the inherent hauling

difficulties in transporting relatively

small loads of milk from the countryside

to reload points and facilities with

stationary storage tanks that do not

serve as a pricing point. This should

continue to be provided for in the

consolidated Northeast order. Not to

provide this accommodation would

adversely affect a substantial number of

small producers and the milk haulers

that service them.

Pool Plant

The pool distributing and pool supply

plant definitions of the proposed

consolidated Northeast order should use

the standard order language format used

in other orders, combined with

performance standards that are adapted

to marketing conditions in the

Northeast.

The proposed pool distributing plant

definition specifies that a pool

distributing plant must have 25 percent

or more of its total physical receipts of

bulk fluid milk distributed as route

disposition and that route disposition

within the marketing area be at least 25

percent. The 25 percent level of total

receipts distributed on routes is a

reasonably high enough level to

establish a distributing plant’s

association with the marketing area. The

in-area route distribution performance

requirement of 25 percent is

recommended for two reasons. First, as

one of the intents of Federal milk order

reform was to adopt liberal pooling

standards, a 25 percent level provides a

level of association with the market that

is liberal yet sufficiently high enough to

assure pooling standards that are

performance oriented. Second, it tends

to minimize changing the regulatory

status of handlers from their current

regulatory status by the Federal order

program through the consolidation of

existing orders. This also seems a

reasonable standard in light of

individual state regulatory plans

currently in place in Maine,

Pennsylvania, and Virginia are

applicable.

As already discussed, the

recommended consolidated Northeast

order and other nearby consolidated

marketing orders do not recommend

expansion to include currently

unregulated areas. This includes areas

in the states of Pennsylvania, Virginia,

and the entire state of Maine. Some

distributing plants in these areas are not

currently regulated, or are only partially

regulated to the extent they enjoy Class

I sales in regulated areas. A 25 percent

in-area route distribution level will

serve to ensure or minimize any change

in their current regulatory status under

the Federal program that result from

consolidation of the three northeast

marketing areas into a single new order.

Unit pooling, wherein two or more

plants operated by the same handler

located in the marketing area can

qualify for pooling as a unit by meeting

the total and in-area route distribution

requirements of a pool distributing

plant, is recommended for inclusion in

the consolidated Northeast order.

Providing for unit pooling provides a

degree of regulatory flexibility for

handlers by recognizing specialization

of plant operations.

Due primarily to positions offered by

many of the major Northeast dairy

cooperatives and their

recommendations on appropriate pool

supply plant performance requirements,

the consolidated Northeast order supply

plant performance requirements

initially should be set to require that in

the months of August and December, at

least 10 percent of the total quantity of

bulk milk that is physically received at

a supply plant be shipped to

distributing plant. For the months of

September through November, such

shipments by pool supply plants should

be at least 20 percent. To the extent that

a supply plant has met these

performance requirements, no

performance requirement is

recommended for the months of January

through July. However, a supply plant

that has not met these performance

requirements will need to meet a 10

percent performance requirement in

each of the months of January through

July in order to qualify as a pool supply

plant.

While this decision has recommended

providing for pool reserve supply

plants, it is not recommended for

inclusion in the provisions for the

consolidated Northeast order. However,

providing for a system of supply plants

is recommended for the consolidated

Northeast order and this provision is

sufficiently self-explanatory in the

proposed order language.

Producer-Handler

The producer-handler definition for

the consolidated Northeast order should

conform to the limitations on receipts at

its plant or acquiring for route

disposition no more than 150,000

pounds of fluid milk products from

handlers fully regulated under any

Federal order. This should cause no

change in the regulatory status of any

known producer-handler currently in

operation in the proposed consolidated

Northeast order region.

Producer

The producer definition of the

proposed consolidated Northeast order

should be defined as described in the

proposed order language for the order.

This definition describes those dairy

farmers who are properly associated

with the Northeast marketing area and

who should share in the benefits that

accrue from the marketwide pooling of

milk in this area.

The months specified in the producer

definition for defining when a dairy

farmer would not be considered a

producer under the order are so

indicated because they tend to

accurately reflect the seasonality of

supply for meeting the market demands

for milk during the ‘‘short’’ season in

the proposed Northeast marketing area.

Accordingly, the producer definition

should not include dairy farmers who’s

milk during any month of December

through June is received as producer

milk at a pool plant or by a cooperative

association handler if the operator of the

pool plant or the cooperative association

caused the milk from such producer’s

farm to be delivered to any plant as

other than producer milk as defined in

the producer milk provision of the

proposed Northeast order, or any other

Federal milk order during the same

month, in either of the two preceding

months, or during any of the months of

July through November.

Similarly a dairy farmer would not be

considered a producer under the order,

for any month of July through

November, any dairy farmer whose milk

is received as producer milk at a pool

plant or by a cooperative association

handler if the pool plant operator or the

cooperative association caused the dairy

farmer’s milk to be delivered to any

plant as other than producer milk, as

defined in this proposed order, or in any

other Federal milk order during the

same month.

Producer Milk

The producer milk definition of the

consolidated Northeast order should

follow the general structure and format

of other consolidated orders. It differs

from other consolidated orders in that it

requires cooperative handlers to

organize reports of producer receipts

that are outside of the states included in

the marketing area, or that are outside

of the states of Maine or West Virginia,

into state units with each unit

separately reporting receipts.

As previously discussed, not all

consolidated orders set diversion limits

for producer milk. For the proposed

Northeast order, no diversion limits are

established as they are, for example in
4946 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

the proposed Florida order. However,

diversions are limited in functional

terms. The maximum quantity of milk

that a pool plant would be able to divert

and still maintain pool plant status

would be 100 percent minus the

applicable shipping standard.

Component Pricing

The consolidated Northeast order

should employ a component pricing

plan in the classified pricing of milk

under the order as previously discussed

in the BFP section of this recommended

decision. This recommendation is

consistent with positions taken and

proposals offered by major cooperative

groups in the Northeast who supply a

large percentage of the milk needs of the

market. This also conforms with the

recommendations discussed earlier in

this decision on replacing the BFP.

Farm-Point vs. Plant Point Pricing

At issue in the suggested merging of

the three northeast marketing areas is

the use of two distinct pricing methods.

The Middle Atlantic and New England

marketing area employ a system of

plant-point pricing. This pricing method

is also employed in every other

marketing area in the Federal order

system. Only the New York-New Jersey

marketing area uses what is called

‘‘farm-point’’ pricing. This decision

recommends the adoption of plant point

pricing as the pricing method for the

consolidated Northeast order.

Plant-point pricing of milk that is

pooled under an order prices milk f.o.b.

the plant of first receipt. The cost of

hauling from the farm to the plant is the

responsibility of the producer. When the

receiving handler is also the hauler,

orders permit the handlers in making

payments to each producer to deduct

hauling costs up to the full amount

authorized in writing by the producer.

As originally employed in the New

York-New Jersey order (Order 2), farmpoint pricing establishes the price for

milk by the zone (distance from market

computed the nearer of the basing

points) of the township in which a

producer’s milkhouse is located. While

termed ‘‘farm-point’’ farms are grouped

by their township location. However,

this is the nearest practicable proxy for

farm location. In functional terms, when

a handler picks up milk at a producer’s

farm, the handler takes title of the milk

at the time and point of pickup.

Accordingly, there are no adjustments

in payments to producers to cover any

part of the cost of pickup or hauling in

moving milk to the handler’s plant.

Farm-point pricing fundamentally shifts

the cost of transporting milk from the

producer to the handler. Farm-point

pricing has been in effect in Order 2

since 1961. While the fundamental

concept of farm-point pricing has been

retained with respect to its overall

structure of mileage zones, other order

provisions were adopted subsequent to

its establishment and modified over

time so that farm-point pricing could

remain viable.

In the decision that established farmpoint pricing (25 FR 8610, Sept. 7,

1960), prevailing marketing conditions

served to warrant this type of pricing

system. At that time, the emergence of

bulk-tank milk began to take on a degree

of prominence in the milk supply of

Order 2. Prior to the adoption of farmpoint pricing (1959), about 8 percent of

the producers had bulk tanks,

accounting for at least 14 percent of the

volume of milk associated with the

market. About 92 percent of producers

delivered their milk at their own

expense directly to plants in 40 quart

cans. Most of the milk can-delivered

was from farms within a radius of not

more than 15 miles from the plant. The

milk of producers who had converted to

bulk tanks, in some instances, had been

hauled more than 200 miles from farm

to city plants, but the majority of bulk

tank milk was moved much shorter

distances to country receiving plants.

The decision cited that in October,

1959, milk was received from 49,719

producers at 691 plants.

When milk was delivered in cans to

a handler’s plant, the plant was the

location of where milk was weighed,

sampled for butterfat and quality, and

where cans were washed. It was at the

plant that milk was accepted or rejected.

It was the place where milk was cooled

and co-mingled with other individual

producer’s milk. More importantly, it

was the place where control of the milk

passed from producer to the plant

operator or moved by the plant to other

plants for fluid or manufacturing uses.

Minimum prices required by the order

to be paid by handlers were adjusted for

the location of the plant at which milk

was received from dairy farmers.

Bulk tank milk brought a set of new

factors. When milk is transferred from a

producer’s bulk tank to the hauler, the

point of transfer is also the point where

several functions are performed. Milk in

a producer’s bulk tank has already been

cooled, and therefore not subject to the

early delivery deadlines. The weight of

milk is determined at the bulk tank and

is also the place where samples are

taken for butterfat and quality. It is also

here that the individual producer’s milk

is accepted or rejected and loses its

identity by being co-mingled with other

milk.

Numerous problems arose in

regulating the handling of bulk tank

milk in an order where pooling

depended upon direct delivery from the

farm to a pool plant and under which

minimum class prices and the uniform

prices to be paid to producers was

reflective of the location of the plant

where delivery was made:

1. Administrative problems associated

with bulk tank handling arose,

particularly where and when milk was

regarded to have been received. Bulk

tank milk provided the opportunity to

deliver milk to different plants, some

pool and some nonpool. Where a given

tank load of milk was unloaded if it

went to two or more plants of the same

or different handlers on the same day

was difficult to determine.

2. The incentive arose (because of the

administrative difficulty of determining

when and where milk was received) for

handlers to behave in a way that would

result in the maximum exclusion of

milk from the pool for fluid use outside

the marketing area.

3. The incentive arose for the

maximum inclusion in the pool of milk

in fluid and manufacturing uses.

4. The incentive and opportunity

arose for handlers to select one of

several plants for receipt of bulk tank

milk, with or without manipulation of

hauling charges. This distorted and

impinged upon the effectiveness of the

minimum price provisions of the order,

especially in the case of relatively long

hauls of bulk tank milk.

The 1961 decision that established

farm-point pricing provided 8 scenarios

that demonstrated how handlers

behaved so as to minimize their pricing

obligations to producers. Most of the

scenarios arose from the inability to

determine when milk was received at a

plant. In order to mitigate such

circumstances, several things were

done. Foremost, was the establishment

of farm-point pricing on the basis of

bulk tank units and the designation of

each bulk tank unit as either a pool or

nonpool unit and defining the

circumstances under which

designations could be changed.

The pricing of milk at the farm

eliminated the incentive for handlers to

attempt to make it appear that the plant

of receipt was other than the plant

where milk is actually received and

handled. It was made crystal clear that

delivery and receipt of bulk milk takes

place at the farm. Once acquired by the

handler, the plant or plants to which the

milk may be delivered depended on the

decision of the handler, not the

producer. Under these circumstances,

where the milk is actually used is not

a factor to be reflected in the minimum
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4947

producer price. The operator of the bulk

tank unit was defined as the handler

and the point of receipt of milk. This

entity was responsible for establishing

the unit, and the entity held the

responsibility for reporting, accounting,

pooling and paying producers.

Additionally, the decision concluded

that the price at which the farm bulk

tank is accounted for to the pool should

be the minimum class price adjusted for

location of the farm, that payments by

handlers directly to producers be

adjusted to reflect all location

differentials based on where farms are

located and where bulk tank milk is

received.

A proposal that would have allowed

a tank truck service charge authorized

by the producer but not in excess of 20

cents per hundredweight (cwt.), and

payments to cooperatives which serve

as handlers operating a bulk tank unit

should be at the price reflecting

transportation and (the then existing)

direct delivery differential applicable at

the handler’s plant where milk is

delivered by the cooperative was not

incorporated into the order. At that

time, it was found that plant hauling

charges averaged nearly 20 cents per

cwt. This was offered as rationale for a

negotiable 20 cent per cwt. charge by

handlers for hauling. Arguments

notwithstanding, the underlying

concepts embodied in farm-point

pricing caused the Department to not

allow for any hauling deduction by

handlers.

Shortly after the implementation of

farm-point pricing, the need to amend

the order to keep farm-point pricing

viable arose. The first occurrence was in

1963. In the 1963 decision (28 FR

11956, Oct. 31, 1963), it was noted that

there had been significant changes in

marketing conditions that arose from

establishing farm-point pricing in 1961.

These included the reduction in

premiums to bulk tank producers in

general; the reluctance of proprietary

handlers to receive bulk tank milk from

individual producers in order to avoid

the hauling costs; the differences in

pricing can and bulk tank milk; and a

slowdown in the trend of conversion

from can milk to bulk tank milk. The

1963 decision, in acknowledging

changing marketing conditions,

incorporated into the Order, an

authorized 10-cent per cwt. charge for

hauling, provided that producers

authorize this maximum level in

writing.

In the 1963 decision the Secretary

found that allowing for a limited

authorized service charge for hauling

bulk tank milk at a maximum rate of 10

cents per cwt. was sufficient. This was

largely based on the fact that handlers

were not then charging for bulk tank

pickup and hauling, but rather were

paying premiums for bulk tank milk.

Additionally, can milk direct delivered

by producers to plants was still very

much the norm. While bulk tank milk

was growing, it had not yet accounted

for a majority of milk pooled on the

order. The 10-cent negotiable hauling

charge was found to provide the needed

flexibility for handlers to receive bulk

tank milk from individual producers.

This decision raised, for the first time

with respect to farm-point pricing, the

maintenance of orderly conditions and

the uniform pricing to handlers on all

milk priced and pooled under the order.

Because bulk tank milk is priced by

township zone (the best proxy for a

farm’s location) all farms in any

particular township have the same value

assigned to their milk. However, the

decision found it necessary to reflect

appropriate uniform pricing of bulk tank

milk because it has differing value

dependent on the accessibility and

relative location of individual farms

within the township. With this finding,

it was determined that responsibility for

hauling to the township pricing point

should be borne by the producer with

appropriate safeguards to protect the

producer. Therefore, a maximum

negotiable hauling charge from handlers

of 10 cents per cwt. was brought under

the order.

By 1970, marketing conditions in the

New York-New Jersey market had

changed to the point where handlers

were authorized to receive a full 10-cent

hauling credit for each cwt. of bulk tank

milk which was disposed of for

manufacturing uses. Additionally, the

negotiable 10-cent hauling charge to

producers for a handler’s cost offset

established by the 1963 decision was

retained. However, the 10-cent

negotiable limit was limited to

manufacturing milk. Can milk at this

time represented about 25 percent of the

total amount of milk pooled in Order 2,

with the balance being bulk tank milk.

Proponents supporting this change to

the order claimed, and the decision

affirmed, that the manufacturing price

for milk in Order 2 was not properly

aligned with manufacturing class prices

in adjacent Federal orders. In this

decision (35 FR 15927, Oct. 9, 1970) the

Secretary found that to the extent that

Order 2 handlers had borne the

transportation costs associated with the

pickup and movement of bulk tank milk

used in manufacturing from the farm to

the plant, Order 2 handler costs

exceeded the price which handlers in

adjacent order markets were required to

pay for milk used in manufacturing. By

adopting this transportation credit for

handlers, there was no need to adopt

other proposals that would have

lowered the manufacturing price for

milk under the other northeastern

orders or lower the Class I price for milk

in Order 2 as had been proposed and

denied.

By 1977, some 16 years since the

adoption of farm-point pricing,

marketing conditions had changed again

and the issue of providing for more

equitable competition both within the

Order 2 market and between other

orders took on primary importance. By

this point in time, can milk was about

3 percent of the market, with the

balance represented by bulk tank milk,

the near inverse of the marketing

conditions prevailing in 1961. The

transportation credit that had been

established for handlers in the 1970

decision for manufacturing milk was

now extended to all milk received by

handlers. The transportation credit was

increased to 15 cents per cwt., plus an

additional 15-cent maximum negotiable

credit above the ‘‘automatic’’ 15 cents

because total average transportation

costs was found to be about 30 cents per

cwt. For reasons nearly identical to the

1963 and 1970 decisions, ‘‘formalizing’’

the negotiable hauling charge was not

adopted because of the need of

flexibility in accounting for milk

movements from the farm to the

township pricing point (42 FR 41582,

Aug. 17, 1977). In that decision the

Secretary also raised the direct delivery

differential from 5 cents to 15 cents per

cwt. in the 1–70 mile zone for can milk

delivered by farmers to plants within

this zone, changed the transportation

adjustment rate from 1.2 cents per cwt.

for each 10 miles to 1.5 cents per cwt.

for each 10-mile zone beyond the 201–

210 zone, and 1.8 cents per cwt. for each

10-mile zone within the 201–210 mile

zone.

Cooperatives were of the strong

opinion that the cost of milk assembly

and transportation are the marketing

costs of the handler and not by

producers. However, they also indicated

that changes are warranted in the order

because of the failure of neighboring

markets to adopt farm-point pricing.

Comparative examples of handler

price inequities with respect to their

cost of milk was amply demonstrated

for both intra and inter market

situations. With respect to inappropriate

price alignment between orders, the

competitive relationships between

Order 2 and Order 4 (then known as the

Delaware Valley Order) were closely

examined. On intra-order movements of

milk, it was shown that Class I handlers

in New York City had a significantly
4948 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

lower procurement cost for direct-ship

over bulk tank milk because bulk tank

milk from ‘‘distant’’ supply plants had

higher transfer and over-the-road

hauling costs. Supply plant milk at the

city represented about 80 percent of

milk receipts at city plants. The intermarket situation demonstrated that

handlers in Philadelphia accounted for

milk at prices lower than New York

handlers. Order 4 handlers were in a

position to establish lower resale prices

for fluid milk than their competitors in

the New York market because the

burden of increased hauling costs fell

largely on Order 2 handlers. As in 1970,

other proposals were denied in light of

adopting the 15-cent hauling credit for

handlers. These other proposals

included lowering Class I and the

manufacturing price for milk in the

order by 15 cents per cwt.

By 1981, bulk tank milk accounted for

nearly the entire milk supply pooled on

Order 2—about 99.6 percent. As the

result of a hearing held in June 1980, in

the final decision (FR 46 33008, June 25,

1981) the Secretary again amended the

transportation credit provisions of the

order. The 15 cents per cwt credit for

handlers was retained, however, the 15-

cent negotiable transportation service

charge was modified to allow handlers

to negotiate with producers for any

farm-to-first plant hauling cost in excess

of the 15-cent transportation credit, plus

‘‘the amount that the class use value of

the milk at the location of the plant of

first receipt was in excess of its class use

value at the location where milk was

received in the bulk tank unit from

which the milk was transferred.’’

According to the 1981 decision, this

amendment would adjust hauling

allowances for handlers to more closely

relate the location value of milk to the

costs incurred in transporting milk from

farms and country plants to distributing

plants in the major consuming markets

of the market. Additionally, the decision

indicated that this change was necessary

to reflect current marketing conditions

and permit a more equitable competitive

situation for regulated handlers, both on

an intra market and inter market basis.

The decision also applied a 15-cent

direct delivery differential for bulk tank

milk from New York City out to the 61–

70 mile price zone, on the basis that

direct delivery differential is applicable

to milk received in cans at a plant in the

1–70 mile zone.

In the 1981 decision the Secretary

found that the majority of milk moved

to distributing plants in 1979 from the

1–70 mile zone moved directly from

farms, accounting for about 58 percent

of plants in this zone with 48 percent

being reloaded. Moreover, the decision

found that Order 2 plants located in

northern New Jersey received direct

shipped milk as did handlers located in

Order 4. Thus, inter market price

alignment needed to be structured

primarily on the basis of handlers

obtaining direct shipped milk.

A federation of cooperative

associations representing Order 4

producers proposed that Order 2 be

amended to return to plant-point

pricing, with the direct delivery

differential being reduced to 10 cents

per cwt, and that the Class I differential

at the base zone of Order 2 be increased

from the $2.25 level then in effect, to

$2.40. This federation of cooperatives

believed that this ‘‘package’’ of order

modifications would provide for proper

price alignment between Order 2 and

Order 4. While the decision did apply

different transportation rates at a rate of

1.8 cents per cwt. outside the base zone

of the Order (201–210) and a rate of 2.2

cents per cwt. inside the base zone, it

did not provide for a return to plantpoint pricing.

While the decision did not adopt

plant point pricing, the decision does

acknowledge that the amendments

adopted tended to establish plant

pricing with respect to the classified

prices to handlers. However, farm-point

pricing was retained with respect to

uniform prices to producers. With this

being the case, the basic substantive

difference between the amendments and

plant pricing is the impact on the

movement of milk to higher-priced

zones for manufacturing use. Under

plant pricing, the minimum uniform

price payable to producers applies at the

location of the plant of first receipt and

handlers receive a credit from the

producer settlement fund at such

uniform price. The decision also

concluded that plant-point pricing for

producers would provide a greater

incentive to haul direct-shipped milk to

city plants for manufacturing uses, since

there would be a credit from the pool for

the full amount that the uniform price

transportation differential at the city

plant exceeds the transportation

differential for the zone of the bulk tank

unit. Adopting plant-point pricing for

producers would have had the effect of

encouraging milk to move long

distances to city plants for

manufacturing uses when transportation

savings could be realized if such milk

stayed nearer to manufacturing plants

generally located in the milkshed.

Farm-point pricing has undergone

many evolutionary changes from its

inception in 1961. The original rationale

for farm-point pricing, free hauling and

the administrative difficulty of

determining when milk from bulk tank

units was received seems far removed

from present-day marketing conditions

and the rationale for continuing it.

There were a number of years that

hearings were necessary to first

recognize that the burden of

transportation costs rested with

handlers. This resulted in handlers

being able to successfully argue that

with this burden, it becomes much more

difficult for the order to establish and

maintain uniform prices to handlers as

required by § 608(5)(c) of the AMAA.

This is evidenced by the nature of the

decisions of 1963, 1970, 1977, and 1981.

Much ‘‘repair’’ to other order provisions

was also needed to retain farm-point

pricing. Accordingly, farm-point pricing

has outlived its intended purpose and

the Secretary proposes that it should not

be retained in a consolidated Northeast

order.

The Need for a Producer-Price

Mechanism

As discussed above, farm-point

pricing for producers did provide some

rational pricing incentives to promote

efficiency within the Order 2 marketing

area. This can reasonably be summed up

by concluding that farm-point pricing

would not provide, as plant-point

pricing would, incentives to haul directshipped milk to city plants for

manufacturing uses, since there would

not be a credit from the pool for the full

amount that a uniform price

transportation differential at the city

plant exceeds the transportation

differential for the zone of the bulk tank

unit. Adopting plant pricing would have

had the effect of encouraging milk to

move long distances to city plants for

manufacturing uses when transportation

savings could be realized if such milk

stayed nearer to manufacturing plants

generally located in the milkshed.

In an effort to address the dairy

industry structures that have evolved

over the past four decades in the three

current northeast marketing areas,

efforts were undertaken by a major

group of dairy farmer cooperatives in

the northeast to address what the

pricing implications are to producers

and handlers as the region moves to a

unified plant-point pricing method.

This has resulted in a proposal by the

Association of Dairy Cooperatives in the

Northeast (ADCNE) that include St.

Albans Cooperative Creamery, Inc.,

Land O’Lakes, Upstate Farms

Cooperative, Inc., Agri-Mark, Inc., Milk

Marketing Inc., Dairylea Cooperative

Inc., and Maryland & Virginia Milk

Producers Cooperative Association Inc.

These dairy farmer cooperatives account

for well over half of the milk that would

be pooled and priced under the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4949

proposed consolidated Northeast order.

Their proposal calls for establishing a

producer differential structure that

would ‘‘overlay’’ the Class I differential

structure that would apply in the

consolidated Northeast order.

The structure proposed is a countybased plant-point price structure,

providing for 14 zones that

accommodate the need to reflect

existing and longstanding competitive

price relationships among plants, while

integrating the farm and plant point

pricing systems currently used in Order

1, 2, and 4 and with currently stateregulated areas that fall outside of the

proposed marketing area. Further, the

ADCNE proposed prices at the major

cities in the Northeast, including

Boston, New York City, Philadelphia,

Baltimore, and Washington, D.C. to have

specific Class I differential levels that

are somewhat different from those

recommended in the Option 1A Class I

price surface. For example, this decision

recommends a New York City Class I

differential of $3.15, while ADCNE

proposes $3.20. In general, the ADCNE

proposal assumes that the Class I

differential structure that will be

adopted is Option 1A, is the Class I

pricing option they strongly support,

and is also the Class I pricing option

overwhelmingly supported in public

comments received from interested

parties from the northeast.

With respect to a producer differential

surface, the ADCNE proposed that a

debit of 5 cents per cwt. be made to the

blend price applicable at nondistributing plants in certain zones. The

need for the debit, according to the

ADCNE proposal, is to make deliveries

to distributing plants somewhat more

attractive to producers, while decreasing

the amount by which manufacturing

plants draw on the marketwide pool for

transportation values, offering also that

such a debit is economically justified

and authorized by the AMAA.

According to ADCNE, it is distributing

plants that provide the revenue, in the

form of Class I values which form the

blend price paid to producers.

Deliveries to manufacturing plants do

not contribute to increasing the value to

the marketwide pool. The debit,

according to ADCNE, is a reflection in

part of the Order 2 system, which has

priced some 50 percent of the milk in

the northeast region, and which does

not provide location-based

transportation payments for movements

from farms to manufacturing plants. The

ADCNE proposal provides that

deliveries to Class I plants are rewarded

under this system with an additional 5-

cent payment from the pool for the

marketwide benefit conferred a

distributing plant’s utilization.

For the Western New York State order

area of the order, ADCNE also proposed

a broad area in which a producer

differential of $2.40 per cwt. to

producers would be payable on

deliveries of producer milk at all plant

locations in this area. This portion of

the price surface proposed by ADCNE

purports to be reflective of the major

historical movements of milk from east

to west in the region which returned the

eastern farm point price to dairy farmers

under Order 2’s farm-point price

system, and that the Western New York

State order has not had any location

differentials, thereby establishing a

‘‘flat’’ price surface in the area. If those

plants, for producer pricing purposes,

were zoned lower in value reflecting the

westerly and northerly distance from

New York City or Philadelphia, ADCNE

is of the view that the ability of both

distributing and supply plants of plants

to attract an adequate supply of milk

could be in jeopardy. Furthermore, the

expectation that Class I utilization of the

proposed Mideast order will be nearly

10 percent higher than the Class I

utilization in the Northeast order was

also offered in support of ADCNEproposed producer differential level in

this area.

The ADCNE proposal also

recommends producer differential levels

in areas that they believed should be

included in either the consolidated

Northeast order or the Mideast order

through expansion that this proposed

rule does include for consideration.

Additionally, the ADCNE proposal also

addresses producer differential levels at

other locations outside of the Northeast

region.

Additional supporting and amplifying

comments were also provided by

Dairylea. These comments supported

the major themes offered in the ADCNE

proposal for a producer differential

overlay to Class I differential levels.

Dairylea states that moving directly to a

plant-point pricing method would

accentuate ‘‘existing inequities and

market dysfunctions.’’ Dairylea further

commented that a plant-point

differential schedule would maintain

current inter-plant price differences in

the current New England and Middle

Atlantic orders, but would worsen them

for New York manufacturing plants,

many of which are cooperatively

owned. Their view of the ADCNE

pricing proposal is that it maintains

economic incentives for milk to move to

Class I distributing plants, would

provide for more balanced procurement

equity among competing manufacturing

plants, maintain equitable producer

pricing when milk is marketed by

transporting it from a higher priced zone

to a lower priced zone, and provides a

structure that allows for adequate blend

price levels in all areas of the Northeast

milkshed.

Dairylea further comments that in

addressing adopting plant-point pricing,

existing ‘‘near-in’’ manufacturing plants

(plants located in a relatively high

differential location) would enjoy a

procurement advantage relative to their

competitors that are located in a lower

priced location. Dairylea recommends

narrowing the price difference between

manufacturing plants that compete for

producer milk and/or finished dairy

product sales. To do this, Dairylea

supports lowering producer differentials

for manufacturing plants that are

located in high-valued locations and

increasing those differentials at

manufacturing plants in areas that have

lower location values. Dairylea

advocates the ADCNE proposal for a

producer differential that is 5-cents

lower than those of Class I plants when

such plants are located in the same

pricing zones. Dairylea’s view of this

design results in maintaining, or slightly

increasing, producer differentials

applicable at Class I plants and reducing

those applicable at ‘‘near-in’’

manufacturing plants. At the same time

this would provide for increasing

producer differentials at manufacturing

plants in central, western, and northern

New York. According to Dairylea, this

producer pricing surface would present

a more equitable marketing environment

than strict plant-point pricing currently

employed in Orders 1 and 4, while at

the same time not threatening the

viability of manufacturing plants in

those areas of a consolidated Northeast

marketing area.

A major theme of Dairylea is its view

that Federal milk orders and their

provisions should foster an environment

under which manufacturing plants are

provided equal cost and procurement

ability, and not to disfavor such

manufacturing plants located in high

milk production areas where Class I

differentials are lower. This view, as

expressed, seems a departure from the

intent of Class I differentials serving to

attract an adequate supply of milk at

locations to satisfy fluid demands.

Dairylea also states that the final rule of

1991 that realigned intra-order prices in

Order 2 resulted in harm to producers

in northern and western New York.

While it is not appropriate to

specifically revisit this issue and

decision here, official notice is taken of

the final decision (55 FR 50934,

December 11, 1990) that realigned Class
4950 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

I differentials in the three existing

northeast marketing areas.

Comments supporting the ADCNE

proposal for a producer pricing surface

were also offered by Upstate Farms

Cooperative, Inc. The Upstate Farms

views served to reiterate the major

themes developed in the ADCNE

proposal.

Agri-Mark, a part of ADCNE, filed

separate and dissenting views on the

ADCNE proposal. Conceptually, AgriMark notes that plant and farm-point

pricing are different, but notes further

that the differences are not always

unfavorable. Agri-Mark submits that

under plant-point pricing, all producers

shipping to the same plant receive the

same minimum order blend price

regardless of where their farm is located.

Under farm-point pricing, farmers

shipping to the same plant receive

different prices under the order

depending on where their farm is

located. Farms closer to New York City,

Agri-Mark notes, receive a higher price

than farms farther from the city, even

though their milk ends up in the same

place.

As to the efficiency arguments touted

to be derived from farm-point pricing,

Agri-Mark notes that most

manufacturing plants, especially cheese

plants, were built in the northeast prior

to the adoption of farm-point pricing

and not in response to it. Rather, says

Agri-Mark, these plants were built at

their present locations because of their

proximity to abundant milk supplies.

The procurement problems for

manufacturing plants that Order 2

entities alert us to, did not arise in New

England manufacturing plants under

plant-point pricing even though these

plants were located as far north as

possible within the milkshed for New

England.

Simply put, Agri-Mark believes that

rather than decreasing the differential

between manufacturing plants and city

distributing plants, an increase is

justified. They are also of the opinion

that manufacturing plants located far

from higher-priced zones will maintain

an advantage even with the adoption of

strict plant-point pricing because this

milk does not need to travel long

distances to reach manufacturing plants.

The ADCNE proposal would cause AgriMark producers to receive lower prices

that competitive price relationships do

not warrant.

The Agri-Mark view of Federal milk

marketing orders differs substantially

from the views expressed by Dairylea.

Agri-Mark states that the role of Federal

milk marketing orders is to treat all

producers equitably relative to how

their milk is used and not to weaken

price integrity by promoting or causing

producers to compete for Class I sales.

This is best accomplished, according to

Agri-Mark, with appropriate pooling

requirements and Class I differentials to

satisfy the Class I demands of the

market. Agri-Mark fears that if the

regulatory pricing plan gives a

distributing plant an advantage over a

cooperative manufacturing/balancing

plant in the same zone, that plant can

use this advantage for itself instead of

passing it along to farmers to offset

transporting their milk to market. A 5-

cent debit to the Class I differential

schedule is, in the view of Agri-Mark,

significant. If so set, Agri-Mark submits,

pressure will come from distributing

plants to see this 5-cent price difference

grow.

Lastly, in their opposition to the

ADCNE proposal, Agri-Mark notes that

no manufacturing plant has been built

in any city zone for decades, noting that

the only significant plants in such areas

for the northeast are older plants

producing nonfat dry milk and butter

and serve to balance the Class I needs

of city markets, concluding that such

plants are there for common sense and

efficiency reasons. In support of this

observation, Agri-Mark notes that

existing Class I differentials have not

been adjusted to more fully account for

increases in hauling costs.

A recommendation on whether or not

to adopt a producer pricing differential

structure that differs from a Class I

differential cannot be made in this

proposed rule. The issue before the

Department is to examine the impact of

the change from farm-point to plantpoint pricing on producers as part of

recommending the adoption of plantpoint pricing for the new consolidated

order. The change to plant-point pricing

will affect approximately one-half of the

producers in the consolidated marketing

area and is a significant departure from

historical methods of distributing the

revenue that accrues from classified

pricing to producers. Plants will not

experience significant change since

plants currently regulated under Order

2 already account to the marketwide

pool at the Class I location differential

value. The issue then, tends to focus on

how to pool and distribute the revenue

as equitable as possible to producers.

There are significant differences

between Option 1A and Option 1B that

may result in price relationships never

before experienced by either producers

or handlers in the northeast. This, in

and of itself, may cause both proponents

for and against a producer price

differential to reconsider their position

in the need for and development of a

producer price surface founded on the

pricing structure of Option 1A.

Nevertheless, under either Option 1A or

Option 1B, further analysis is needed in

determining the need for adjusting

producer blend prices by a method that

differs from that currently applied to all

orders, including the development of

appropriate order language.

Competitive equity between

manufacturing plants is already ensured

by the classified prices applicable to

handlers who operate such plants. In

fact, this proposed rule suggests a

uniform Class III and Class IV price be

applicable for all locations. The more

appropriate issue this proposal seems to

address is that manufacturing plants are

often cooperatively owned. All entities,

including cooperatives in their capacity

as handlers, account to the marketwide

pool at the manufacturing price for milk

received at their plants. The price paid

to producers is the blend price for all

milk pooled on the market and that was

priced according to its use.

Cooperatively owned manufacturing

plants located in higher priced areas

will pay a higher blend price to

producers who deliver milk to that

location provided they meet the

performance requirements for being

pooled thereby demonstrating the

appropriate degree of association with

the market. In this regard, it is worthy

to note that not all manufacturing plants

in the high-valued zones in the New

York marketing area are pool plants.

Blend prices are adjusted everywhere

according to the location value of the

plant. Adjusting producer blend prices

on the basis of whether or not milk was

delivered to a distributing plant or to a

manufacturing plant seems to create a

form of producer price discrimination

that classified pricing and the

mechanism of marketwide pooling and

its related provisions attempt to

mitigate. Such pooling provisions

provide a degree of equity to producers

in the form of a uniform blend price

adjusted only for the location value on

all milk pooled on the market. Classified

pricing and marketwide pooling have

served well to mitigate the price

competition between producers seeking

preferred higher-valued outlets for their

milk, while at the same time ensuring

handlers uniform prices, adjusted only

for location, in the prices they pay for

milk. This proposal, as currently

developed, seems to take a step

backward in that it may be inadvertently

creating a degree of price competition

between producers that classified

pricing and marketwide pooling sought

to minimize.

As Dairylea commented, the 1991 rule

that realigned prices in the three current

northeast orders may not have gone far
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4951

enough is establishing a Class I

differential structure and indeed may

have resulted in harm to producers

located in northern and western New

York. Prior to the 1991 final rule, the

price difference between the New York

base zone and New York City was 59

cents. The 1991 final rule increased this

to 72 cents, but in doing so, the

differential at the base zone was

lowered by 13 cents. This resulted in a

lowering of blend prices to producers in

the far reaches of the milkshed. This

observation may provide the basis for

further examination of the Class I

differential structure presented under

Option 1A. Specifically, a 5-cent

increase in the New York Class I

differential and a similar increase in the

Class I differential at Philadelphia,

together with appropriate location

adjustments between these pricing

points, may accomplish what a

producer price differential schedule

does not seem to accomplish at its

current state of development.

A submission from New York State

Dairy Foods, Inc., (NYSDF) a trade

association representing dairy product

manufacturers and retailers voiced the

need for raising the New York City Class

I differential. NYSDF proposed an 8-

cent per cwt. increase to reflect the

reality of higher hauling rates. If this

proposal is accepted, this would raise

the Class I differential in New York City

from the current $3.14 to $3.22.

According to NYSDF, the 8-cent

increase may not be sufficient

depending on the length of time needed

to implement milk order reforms.

NYSDF also commented on their

support for retaining farm-point pricing,

but offered no compelling arguments for

doing so.

Marketwide Service Payments

Cooperative Service Payments. The

Secretary proposes that cooperative

service payments as part of a

marketwide service payment provision

for the consolidated Northeast order

should not be included in a

consolidated Northeast order. As

proposed by ADCNE a 2-cent per cwt.

payment would be made out of the

marketwide pool to cooperatives and

non-cooperative entities for funding

‘‘information and policy services’’ that

would be of marketwide benefit.

Cooperative service payments of this

sort currently are provided for under

terms of the New York-New Jersey

order, but are not provided for in either

the New England or Middle Atlantic

orders. However, under the New YorkNew Jersey order, cooperative service

payments are made only to qualified

cooperatives that meet the conditions

specified under the order and does not

provide for such payments to noncooperative entities.

Rationale offered in support for a

cooperative service type payment to

cooperatives and non-cooperative

entities were based on recognizing that

in a regulatory pool structure, private

parties provide important services that

are of benefit to everyone involved in

the marketwide pool, including the

promulgation, amendments to, and

administration of the order. Not to

provide a mechanism for the recovery of

a portion of the expense involved in

providing such services would

disadvantage those incurring these

expenses while everyone in the market

benefits as a result of these services.

Qualification criteria presented for

entities eligible to receive this payment

included a demonstration to the market

administrator that it provides

information with respect to market

order prices and marketing conditions,

that it has retained legal and economic

staff or consulting personnel available to

participate in marketing order

amendatory proceedings, to consult

with the market administrator with

respect to marketing order issues, and

that the entity pool at least 2.5 percent

of the order’s total milk volume.

As presently presented there is not a

compelling reason to adopt this sort of

compensatory plan to reimburse those

entities that incur these costs. Market

administrators and their staffs make

themselves available to meet with,

discuss, and aid in formulating

positions that are reflective of the need

of the marketing area as a normal part

of their duties. Additionally, there are

numerous provisions in the order that

require as a matter of course, the

issuance of reports, prices, and other

information that affect all marketing

order participants and to provide

service to the entities affected by the

regulatory plan of the order. Finally, no

other current or recommended

consolidated order recommends

providing for such cost compensation.

Cooperative and proprietary handlers in

the New England and Middle Atlantic

marketing areas included in the

consolidated Northeast order, as well as

entities in all other marketing areas have

not experienced or have demonstrated

any of the harm or ‘‘disadvantage’’ that

arises, or may arise, if such costs are not

shared by the entire pool of producers

in the marketing area. This proposed

rule can only assume that industry

participants that have an interest in

developing the promulgation and

amendments to marketing orders would

be willing to do so at their own expense.

The positions and arguments offered are

largely issues of the self-interest of

entities. As such, self-interest may or

may not be of marketwide benefit.

Balancing Payments. The Secretary

proposes that a marketwide service

payment plan offered for inclusion in

the consolidated Northeast order

includes a 4-cent per cwt. marketwide

service payment to qualified handlers

that perform market balancing from the

marketwide pool should not be

included in the consolidated Northeast

order.

The proposal for balancing payments

from the marketwide pool is intended to

reflect that there are costs that handlers

incur in balancing the Class I needs of

the market and in providing for clearing

the market of temporary surpluses.

According to the proponents, these

balancing costs are not fully recoverable

from Class I handlers, however the

benefit that results from this service

being provided is a benefit of all

producers in the market.

Handlers that incur the costs would

be those handlers that would receive

partial cost reimbursement.

Cooperatives would be eligible to form

common marketing agencies or

federations for purposes of qualifying

for balancing payments. Such handlers

would include those who: (1)

demonstrate ownership or operation of

a balancing plant with the capacity to

process a million pounds of milk per

day into storable products such as

cheese, butter, and nonfat dry milk and

that such handler also represent at least

2.5 percent of the total volume of milk

pooled under the order; (2) have under

contract and the obligation to pool on a

year-round basis at least 8 percent of the

market’s milk volume; (3) own a

balancing plant that must be made

available to other handlers or

cooperatives at the request of the market

administrator; (4) qualify to provide

pool producers with a temporary market

for their milk for up to 30 days at the

request of the market administrator; and

(5) demonstrate to the market

administrator that their utilization of

milk in Class I uses is greater than the

minimum shipments required for pool

plant qualification under the order.

There are several reasons for not

recommending balancing payments for

the consolidated Northeast order. First,

the proposed Northeast order

consolidates two current orders, New

England and the Middle Atlantic, that

do not currently provide for balancing

cost offsets to handlers for such

purposes and that these markets have

not experienced any undue harm or

disadvantage by not providing for this

sort of cost offset. Secondly, and in

addition to expressed opposition to
4952 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

compensate handlers for balancing the

market, an appropriate class price has

been provided for market clearing

purposes—the Class III—A price. It is a

price that is applicable in all current

Northeast orders, and is continued in

this proposed rule as the Class IV price.

While these two class prices are not the

same (as explained in the BFP section

of this decision), they are conceptually

similar in that handlers have been

provided with a market clearing price

and further compensation beyond this is

not warranted. Lastly, the proposed 4-

cent per cwt. level is unexplained with

respect to how adequately it tends to

offset balancing costs.

The ‘‘Pass-Through’’ Provision

Currently, the New York order

provides for what is commonly referred

to as the ‘‘pass-through’’ provision. The

intent of this provision is to provide for

a degree of competitive equity for

handlers that pay the order’s Class I

price for milk so that they can compete

with handlers in unregulated areas that

do not. This provision has been in place

in the New York order since 1957 and

is a part of how the order allocates and

classifies milk. In functional terms, the

pass-through provision removes the

amount of milk distributed outside of

the marketing area from the full Class I

allocation provisions of the order,

thereby providing a degree of price

relief to handlers who compete with

other handlers who are not held to the

pricing provisions of the order in

unregulated areas. Regulated New York

handlers currently compete with

unregulated handlers in the unregulated

areas of Pennsylvania and other areas in

the Northeast region.

The current provisions of the New

England and Middle Atlantic orders do

not have this provision although they

too adjoin similar non-federally

regulated areas. Handlers regulated by

these two orders also compete with

these same handlers for Class I sales.

The merging and expansion of these

three Northeast orders continue to result

in areas that adjoin the recommended

Northeast order that would not be

regulated.

While there were proposals both for

and against retaining a pass-through

provision in the consolidated order, the

need for it was expresses on the basis of

the extent the Northeast consolidated

order would be expanded to include

currently unregulated areas. Generally,

handlers support continuing to provide

for a pass-through provision, and this

position can only be considered

reinforced given the limited degree of

expansion of the consolidated Northeast

order. If the entire Northeast region

would fall under Federal milk order

regulation, the need for the pass-through

would be moot.

The Secretary proposes that a pass

through provision, even in light of the

limited expansion suggested for the

consolidated Northeast order, should

not be included. Class I prices charged

to handlers that compete within the

marketing area for fluid sales are

determined by the location value of

their plants. The Class I differential

structure recommended by either

Option 1A or Option 1B both recognize

the location value of milk for Class I

uses and are both designed to establish

Class I differential values to cause milk

to be delivered to bottling plant to

satisfy fluid demands. Accordingly, any

handler located in high-valued pricing

areas will be charged for the location

value of Class I milk at their plant

location regardless of whether or not

they compete with other handlers for

fluid sales in areas where the location

value of Class I milk at these plant

locations are lower. This location value

pricing principle should be extended to

address handlers competing for sales

with handlers who do not pay the same

price for Class I milk in unregulated

areas.

Seasonal Adjustments to the Class III

and Class IV Prices

The three northeast orders to be

consolidated into a single Northeast

order currently provide for a seasonal

adjustor on Class III and Class IIIA milk

prices. These provisions have been a

part of these three orders for more than

30 years. Prior to the adoption of the

Minnesota-Wisconsin (M–W) price

series in the mid-1970’s, these markets

established the equivalent of the

modern Class III price on the basis of

what was known as the U.S. Average

Manufacturing Grade Milk-Price Series

(U.S. average price).

The U.S. average price series was a

competitive pay price series, but

differed from the M–W in that it

recorded price averages consistently

below the M–W that was rapidly being

adopted elsewhere in the country as the

appropriate price for surplus uses of

milk and used as a price mover for

higher-valued class prices. Given the

national marketplace in which surplus

diary products compete for sales, a

mechanism was needed to align these

two differing price series. Accordingly,

seasonal adjustments to the Class III

price were developed and made a part

of these orders. These seasonal adjustors

were found not only to be warranted for

better price coordination between these

two price series, but also served to

encourage handlers to dispose of the

maximum amount of milk in Class I

uses.

By the mid-1970’s, the M–W was

adopted to replace the US. average price

series and the seasonal adjustors were

retained. The reason for retaining these

adjustments were indicated to

encourage handlers to make more milk

readily available for fluid use in the

short production months and to

facilitate the orderly disposition of

excess reserve milk supplies in flush

production months. Although some

regional price disparity was

acknowledged to result from retaining

these adjustments, they were

nevertheless retained because there was

no evidence that providing for such

adjustment had led to any interregional

problems in the marketing of the reserve

milk supply.

Agri-Mark, a major cooperative in the

northeast, has proposed that seasonal

adjustments continue in the

consolidated Northeast order. The main

thrust of their proposal is that markets

with relatively high Class I use create a

burden on the manufacturing sector in

their areas. They view seasonal

adjustments as also assisting in sending

the proper economic signal to

manufacturers. This is important,

according to Agri-Mark because the

seasonal adjustment provides an

economic ‘‘disincentive’’ for Class III

and Class IV manufacturers to use milk

in the fall when less producer milk is

available and additional supplies are

needed for Class I uses.

The Secretary proposes that as

presently formulated, seasonal adjustors

to the Class III and Class IV prices

should not be incorporated into the

provisions of the consolidated Northeast

order. This proposed rule proposes a

much more permanent replacement for

the current BFP. If the suggested BFP is

adopted in all new consolidated orders,

there is no compelling reason offered at

this time to contemplate continuing

seasonal adjustments to Class III and

Class IV prices in light of how these

prices would be derived. They are also

not proposed for orders that are

expected to have Class I utilizations

similar to those anticipated in the

consolidated Northeast order and who

similarly have important manufacturing

activity in such markets.

6b. Southeast Regional Issues

The 3 proposed orders for the

Southeastern United States—Florida,

Southeast, and Appalachian—are faced

with a different set of marketing

conditions than other orders. The

Southeastern United States is one of the

fastest growing areas of the country but

the most deficit area in terms of milk
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4953

33The Tennessee Valley order, as amended, was

not approved by producers. The order was

terminated effective October 1, 1997.

production per capita. From 1988 to

1995, the population of the 12

Southeastern states rose from 57.9

million to 63.5 million. By the year

2000, the population is expected to

reach 66.8 million people.

While population increases in the

Southeast, milk production in the 12

Southeast states (i.e., Alabama,

Arkansas, Florida, Georgia, Kentucky,

Louisiana, Mississippi, North Carolina,

South Carolina, Tennessee, Virginia,

and West Virginia) has been

decreasing—from 15.4 billion pounds in

1988 to 13.7 billion pounds in 1996.

The net result of these opposite trends

is a widening gap between the local

supply of milk for fluid use and the

demand for such milk.

Unlike other parts of the country, the

Southeast has few facilities for handling

surplus milk. Consequently, surplus

production during the months of

January through June must, in some

cases, be shipped hundreds of miles for

processing at manufacturing plants

generally to the north. For this reason,

the provisions in these orders must be

aimed at the twin goals of encouraging

supplemental milk to move to these

markets during the short production

months—generally July through

December—but they must also

discourage supplemental milk to move

to these markets when it is not needed

in the flush production months—

generally January through June—

because such milk would simply

displace local milk and increase

cooperative organizations’ costs to

dispose of the milk.

Transportation Credits

As a result of the need to import milk

to the Southeast from many areas

outside the Southeast during certain

months of the year, transportation credit

provisions were incorporated in the

Carolina, Southeast, Tennessee Valley,

and Louisville-Lexington-Evansville

orders in August 1996. These provisions

provide credits to handlers that import

supplemental milk for fluid use to the

market during the short production

months of July through December. The

provisions restrict credits to producers

and plants outside of the marketing

areas. The credits are also restricted to

producers who supply the markets

during the short season and are not

applicable to producers who are on the

market throughout the year.

Following the initial implementation

of transportation credits in August 1996,

the provisions were modified in a final

decision issued on May 12, 1997. The

amendments became effective on

August 1, 1997, in 3 of the 4 orders.33

The Secretary proposes that

transportation credit provisions should

be retained in the new Southeast and

Appalachian orders but should not be

included in the Florida order. Written

comments received in response to the

advance notice of proposed rulemaking

indicate that producers in the Southeast

favor retention of these provisions for

these two orders. The Secretary

proposes that the provisions should not

be included in the Florida order,

however, because that market is largely

supplied by 2 cooperative associations

which are able to recoup their costs of

supplying the market with

supplemental milk.

With the consolidation of orders, the

Secretary proposes that some

conforming changes should be made to

the transportation credit provisions of

the Southeast and Appalachian orders.

Section 82(c)(1) of the present orders

limits transportation credits on

transferred bulk milk to plants that are

regulated under orders other than the

southeast orders that currently have the

provisions, and section 82(c)(2)(ii)

limits the area where farms may be

located to be eligible for transportation

credits on milk shipped directly from

producers’ farms. In §§ 1005.82(c)(1),

1007.82(c)(1), 1005.82(c)(2)(ii), and

1007.82(c)(2)(ii), the references to ‘‘1011

and 1046’’ should be removed.

The addition of northwest Arkansas

and southern Missouri to the Southeast

marketing area will make those 2 areas

ineligible for transportation credits. This

change in the application of the credits

would naturally follow from the logic

for incorporating these 2 areas in the

Southeast marketing area. Specifically,

northwest Arkansas and southern

Missouri are regular sources of supply

for handlers in the Southeast marketing

area and, in addition, include plants

that compete for sales with handlers

regulated under the Southeast order.

Accordingly, the producers in these 2

areas should, and will, regularly share

in the pool proceeds of the Southeast

market. Of course, since transportation

credits are designed to attract

supplemental milk to the market for

fluid use from producers who are not

regularly associated with the market,

transportation credits should not, and

will not, apply to a farm or a plant in

northwest Arkansas or that portion of

southern Missouri that is to be included

in the Southeast marketing area.

Pooling Standards

A number of comments were

submitted regarding the issue of pooling

standards in the southeast region. The

Southeast Dairy Farmers Association

(SDFA) recommended that pooling

standards be maintained at levels that

are as strict or stricter than current

regulations and that southeastern milk

marketing orders contain pooling

requirements that reflect the deficit

nature of these markets. SDFA argued

that such provisions would discourage

the movement of milk into and out of

a Federal marketing area that does not

normally serve the area unless the milk

was actually needed. The association

stated that performance requirements

for plants are an important element in

ensuring that southeastern fluid markets

are adequately supplied on a year-round

basis and in ensuring that only those

plants that have as their principle

purpose the supplying of the markets’

fluid milk requirements receive the

benefits of higher uniform prices.

Currently, pooling standards vary

between markets and regions, and the

association believes that these varying

standards should be maintained. SDFA

supports a 50% route disposition

requirement for pool distributing plants

and recommends that the in-area route

disposition requirement be standardized

at 15% and the 1500-pound daily

average exemption be changed to

150,000 pounds per month.

The National Farmers Organization

(NFO), recommends that pooling

standards for all of the orders recognize

and accommodate the pooling on a yearround basis of milk supplies which are

actually required for that market’s Class

I needs on a seasonal basis. NFO

suggests that each order should be

viewed separately in determining the

standards and urges the Department to

carefully evaluate pooling provisions to

assure equity throughout the system.

Another commentor, Middlefield

Cheese of Ohio (Middlefield),

recommends that all orders have the

same pooling requirements. Middlefield

states that varying pooling standards

between orders create great difficulty in

procuring milk for small businesses. It

argues that uniformity would allow milk

to be economically and efficiently

marketed to where it is needed as

opposed to a ‘‘large co-op dictating

control over the milk market.’’

One of the major cooperatives

operating within the Southeast, MidAmerica Dairymen, Inc. (Mid-Am),

recommends that the pooling standard

for distributing plants in high utilization

markets should be 50% Class I. Mid-Am

also recommends that market
4954 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

administrators be given the authority to

adjust shipping requirements in all

orders.

A number of comments addressed the

issue of where a plant should be

regulated and whether there should be

a ‘‘lock-in’’ provision which would keep

a distributing plant regulated under the

order where it is located rather than

where it may have the most sales. SDFA

supports the adoption of lock-in

provisions in the consolidated southeast

orders. Prairie Farms Dairy, Inc. states

that pool distributing plants should be

regulated where located rather than

where route disposition occurs. Another

cooperative association, Milk Marketing

Inc. (MMI), states that competition for

local milk supply and a competitive pay

price with neighboring plants is much

more important to both producers and

processors than a price that is

competitive with other plants that

compete for sales in a given area.

Therefore, MMI recommends regulating

a distributing plant in the market where

it is located rather than on the location

of its sales. MMI contends that the

Federal milk order program should be

concerned with attracting milk to a

plant, not the retail location. The

cooperative states that plants in

unregulated areas should continue to be

regulated based on sales areas.

Some comments received addressed

supply plant requirements. SDFA

recommends that for the southeastern

orders the supply plant shipping

requirement be 60% of a plant’s receipts

during July through November and 40%

during December through June.

However, SDFA also acknowledges that

specific exceptions to this principle may

be necessary to accommodate specific

needs and should be considered on a

case by case basis.

SDFA states that supply plant

performance requirements should not be

changed in an effort to allow all Grade

A milk to be included in a marketwide

pool. Such a change, it contends, would

result in disorderly marketing and

jeopardize the viability of local

supplies. SDFA requested year-round

shipping requirements for supply plants

under Orders 5, 6, and 7.

SDFA also states that automatic

pooling should be provided for

manufacturing or receiving plants

located in the marketing area if the plant

is operated by a cooperative association,

but only if the cooperative has a

substantial association with the market.

MMI maintains that southeastern

orders would be well-served by

provisions which allow reserve supply

plants in the North and West to

participate in higher blend prices

throughout the year, in exchange for

greater assurance of a milk supply in the

short production months when

additional milk is needed. Land O’Lakes

(LOL) recommended the elimination of

shipping requirements for supply

plants, but suggested that supply plant

operators make a commitment to supply

the market when additional milk is

needed. LOL also supports the adoption

of a ‘‘call’’ provision in each order that

would allow the market administrator to

require supply plant shipments on an

as-needed basis.

Another cooperative operating in the

Southeast wrote that reserve supply

plant qualification should be based on

total cooperative performance but that

such plants should not be required to be

located in the marketing area. This

cooperative contends that if a

cooperative is performing a balancing

function for the market, it should not be

discriminated against just because its

plant is not located in the marketing

area.

Suggestions were also received

concerning certain specialty plants that

are located in the Southeast. SDFA

recommended amending the route

disposition definition to accommodate a

specialty fluid milk plant in

Jacksonville that disposes of long shelf

life dairy products. SDFA states that

although a large portion of its fluid

supply is disposed for Class I use,

because of the nature of its business, it

is likely that the plant would not meet

the 50% route disposition requirement

for pool status.

Proposal: The Secretary proposes that

the pool plant provisions for the

Appalachian, Florida, and Southeast

orders under consideration should

closely follow the provisions now

contained in the southeast orders. The

performance standards proposed are

appropriate for the needs of these

seasonally-deficit markets.

Section 7(a) of each Federal milk

order describes the pooling standards

for a distributing plant. To qualify for

pooling under each of the 3 orders, a

distributing plant must dispose of 50

percent of the total fluid milk products

received at the plant as route

disposition. In addition, at least 10

percent of the plant’s receipts must be

disposed of as route disposition in the

marketing area. These standards would

indicate that a distributing plant is

closely associated with the fluid market

and, therefore, should be part of the

marketwide pool.

Paragraph (b) of Section 7 would

accommodate the pooling of plants that

specialize in aseptically-packaged

products. There are at least two such

plants in the southeast markets: the

Ryan Foods Company plants in

Jacksonville, Florida and Murray,

Kentucky.

Unlike a typical distributing plant, a

plant specializing in aseptically

packaged products may have a more

erratic processing schedule, reflecting

the longer shelf life of the products

packaged at the plant. Consequently, a

plant’s Class I utilization may vary

considerably from month to month. In

the past, such variability has resulted in

shifting pool status for some of these

plants from one order to another. In

some months, the plant may have been

partially regulated, even though all of

the milk received at the plant was

priced under the order. This type of

regulatory instability is not conducive to

orderly marketing. To guarantee greater

regulatory stability for these plants, they

should be fully regulated pool plants if

they are located in the marketing area

and have route disposition in the

marketing area. However, if the plant

has no route disposition in the

marketing area during the month, the

plant operator may request nonpool

status for the plant.

The Secretary proposes that each of

the three orders also should specify

pooling standards for a supply plant.

For the Appalachian and Southeast

orders, a supply plant must ship at least

50 percent of the milk physically

received during the month from dairy

farmers and cooperative bulk tank

handlers. In the case of the Florida

order, the shipping percentage should

be slightly higher at 60 percent.

Unlike supply plant provisions in

other orders, the supply plant

provisions in the three southeast orders

should not recognize shipments directly

from producers’ farms as qualifying

shipments for a supply plant. At the

present time, there are no plants

qualifying as ‘‘pool supply plants’’

under any of the southeast orders.

Almost all of the plants that balance

the fluid needs of the Southeast are

operated by cooperative associations.

These ‘‘balancing plants’’ qualify for

pooling based upon the performance of

the cooperative association and not

based upon shipments from the plant

alone. The Secretary proposes that

balancing plant provisions should be

maintained for the three southeast

orders.

A balancing plant may qualify based

upon shipments directly from

producers’ farms as well as shipments

from the plant. To qualify as a balancing

plant, the plant must be located within

the order’s marketing area. This

requirement ensures that milk pooled

through the balancing plant is

economically available to processors of

fluid milk if needed. However, in the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4955

case of the Appalachian order only, a

balancing plant also may be located in

the State of Virginia. This provision has

been in the Carolina order and should

be continued in the Appalachian order.

The performance standards for a

balancing plant should be 60 percent of

producer receipts under each of the

orders every month of the year.

There is no necessity to seasonally

adjust the supply plant and balancing

plant shipping requirements for the

three southeast orders because the

standards proposed are flexible enough

to accommodate the disposal of surplus

milk during the flush production

season. In addition, the Secretary

proposes that each of the three orders

should contain a provision to allow the

market administrator to increase or

decrease shipping requirements and

other pooling standards by up to 10

percentage points. This provision also

should be included in the producer milk

section of all three orders with respect

to the percentage of milk that may be

diverted and the number of days in

which a producer’s milk must be

received at a pool plant.

In addition to the provisions

described above, the Secretary proposes

that each of the southeast orders should

contain a provision to allow unit

pooling of distributing plants operated

by the same handler. The proposed rule

is based upon the provision that has

been in the Southeast order since 1995.

Some distributing plants may meet

the pooling standards of more than one

order. Consequently, the Secretary

proposes that it is necessary to specify

the rules for determining where a plant

will be regulated. Under the southeast

orders, if a plant meets the pooling

standards of the order and is located in

the order’s respective marketing area,

the plant should be regulated under that

order even if it has greater sales in some

other order’s marketing area. This

provision has evolved as a result of

several price alignment problems in the

Southeast involving a plant located in

one marketing area but regulated under

another order. In every such case, a

plant’s supply of milk was put in

jeopardy as a result of a lower blend

price under the order in which it

became regulated based on its sales.

Notwithstanding the merging of several

of the smaller markets in the Southeast,

the Secretary proposes that this

provision should be retained for the

southeast orders to preclude a repetition

of this problem. There was widespread

support in comment letters for retention

of this provision.

In the case of a distributing plant that

is not located within any order’s

marketing area, the Secretary proposes

that a different standard should apply.

Since, in this case, it cannot be

presumed with certainty that a plant is

most closely associated with the market

in which it is located, its association

with a market should be determined

based upon where it has the most sales.

Producer-Handler

The Secretary proposes that the

producer-handler provisions for the

three southeast orders should be very

similar to the current provisions. To

qualify as a producer-handler, a dairy

farmer would have to have route

disposition in excess of 150,000 pounds

per month; otherwise, the producer’s

plant would be exempt from regulation

pursuant to a provision that has been

uniformly adopted for all orders.

To qualify as a producer-handler, a

dairy farmer may receive no fluid milk

products from sources other than his or

her farm and may dispose of no fluid

milk products using the distribution

system of another handler. Finally, the

dairy farmer must provide proof

satisfactory to the market administrator

that the care and management of the

dairy animals and other resources

necessary to produce all Class I milk

handled, and the processing, packaging,

and distribution operations, are his/her

own enterprise and are operated at his/

her own risk.

At the present time, there are three or

four producer-handlers operating in the

southeast markets. None of these

operations would lose their status as

producer-handlers under the provision

recommended for new southeast orders.

Producer/Producer Milk

The Secretary proposes that the

producer and producer milk definitions

recommended for the three southeast

orders should be nearly identical to the

provisions now in the individual orders.

These provisions define which dairy

farmers are eligible to share in the

proceeds of the marketwide pool.

A producer should be defined as a

dairy farmer whose milk is received at

a pool plant, diverted to a nonpool

plant, or received by a cooperative

association acting as a bulk tank

handler. It excludes a producer-handler,

a dairy farmer whose milk is delivered

to an exempt plant, or a dairy farmer

whose milk is reported as diverted milk

under the provisions of another Federal

order.

The proposed diversion limits that are

specified in the producer milk section

should be slightly different among the

three southeast orders. To qualify for

diversion to a nonpool plant, a

minimum amount of a producer’s milk

should be received at a pool plant

during the month (i.e., this is called a

‘‘touch-base’’ requirement). Under the

Appalachian order, six days’ production

should be received at a pool plant

during each of the months of July

through December, and two days’

production should be received at a pool

plant during each of the other months

of the year. Under the Southeast order,

ten days’ production should be required

to be delivered to a pool plant during

each of the months of July through

December to qualify a producer’s milk

for diversion to a nonpool plant. During

the months of January through June, 4

days’ production should be required to

be delivered to a pool plant.

Under the proposed Florida order,

which will have a higher Class I

utilization and less need to divert milk,

a producer should be required to deliver

at least ten days’ production to a pool

plant during every month of the year in

order to be eligible for diversion to a

nonpool plant. These proposed

standards are comparable to those

required under the separate Florida

orders.

The total quantity of milk which may

be diverted by a pool plant operator or

cooperative association during the

month also should vary by market as

well as by month. Under the

Appalachian order, a pool plant

operator or cooperative association

should be permitted to divert 25 percent

of their producer milk during the

months of July through November,

January and February. During the

months of December and March through

June, the total diversion limit should

increase to 40 percent of producer milk

receipts. The Secretary proposes that the

Southeast order should provide a total

diversion limit of 33 percent during the

months of July through December, and

50 percent during the other months. The

proposed diversion limits under the

Florida order should be 20 percent

during the months of July through

November, 25 percent during the

months of December through February,

and 40 percent during all other months.

The proposed ‘‘touch base’’

requirements and gross diversion limits

described above should be adjustable by

the market administrator to assure

orderly marketing and/or efficient

handling of milk in the marketing area.

This procedure is described in

§§ 1005.13(d)(7), 1006.13(d)(6), and

1007.13(d)(7).

Although a ‘‘dairy farmer for other

markets’’ provision was requested for

the new orders by some producer

organizations, it was opposed by others.

The Secretary does not propose

inclusion of this provision in the three

southeast orders at this time. Such a
4956 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

provision would restrict the free

movement of milk as needed between

market. The proposed diversion limits

and touch-base requirements in the

southeast orders should preclude the

association of milk with these markets

when such milk is not needed at pool

plants.

Report of Receipts and Utilization

The Secretary proposes that to

accommodate the payment schedule

desired for the three southeast orders,

the handler’s report of receipts and

utilization must be in the market

administrator’s office no later than the

7th day of the month. The producer

payroll report will be required by the

20th day of the month. The information

to be included in these proposed reports

is essentially identical to the current

order provisions.

Payments for Milk

The Secretary proposes that the

southeast orders should provide

uniform payment schedules for

payments to and from the producersettlement fund and to producers and

cooperative associations. Payment to the

producer-settlement fund should be

made by the 12th day of the month and

payment from the producer-settlement

fund should be made one day later.

In the case of payments to producers

and cooperative associations, the

Secretary proposes that the merged

Florida order should maintain the

longstanding three-payment schedule

that has been part of the present Florida

orders for many years. The partial

payments to producers under the new

Florida order should be made on the

20th day of the month for milk received

during the first 15 days of the month

and on the 5th day of the following

month for milk received during the

remainder of the month. The rate of

payment should be at not less than 85

percent of the preceding month’s

uniform price, adjusted for plant

location and for proper deductions

authorized in writing by the producer.

The final payment for milk received

during the previous month should be

made on or before the 15th day of the

month.

The Secretary proposes that the

Appalachian and Southeast orders

should have identical payment

schedules. The partial payment for milk

received during the first 15 days of the

month should be made on the 26th day

of the month. The rate of payment

should be 90 percent of the preceding

month’s uniform price. The final

payment should be required to be

received by the producer on or before

the 15th day of the following month.

The rate of final payment for all 3 orders

should be the preceding month’s

uniform price adjusted for butterfat,

plant location, partial payments,

marketing services, and proper

deductions authorized in writing by the

producer.

Each order now requires payment to

a cooperative association to be made

one day earlier than the payment to an

individual producer. The Secretary

proposes that this practice should

continue under the new orders.

6c. Midwest Region

Upper Midwest Order

Pool Plant

The Secretary proposes that the pool

distributing and pool supply plant

definitions of the proposed consolidated

Upper Midwest order should use the

standard order language used in other

orders, adapted to marketing conditions

in the Upper Midwest.

The proposed pool distributing plant

definition specifies that for a plant to be

a pool distributing plant, it must have

15 percent or more of its total receipts

of bulk fluid milk distributed as route

disposition. This percentage is

considerably lower than the percentage

used in the Chicago Regional order,

which varies from 30 percent to 45

percent depending on the month.

However, the current Upper Midwest

order uses a percentage based on the

marketwide Class I percentage for the

same month of the previous year.

During ‘‘normal’’ months this

percentage is approximately 15 percent.

When some milk is held off the pool for

economic reasons (primarily unusual

price differences between classes), the

percentage may vary considerably,

ranging from the ‘‘normal’’ 15 percent to

over 50 percent. Use of a constant

percentage at approximately the market

Class I percentage will reduce the

current opportunities available to

distributing plants to become partially

regulated by manipulating their

reported receipts and diversions of milk.

In addition, the proposed language

should eliminate month-to-month

uncertainty caused by basing handlers’

regulatory status on the market’s

fluctuating utilization percentage.

In addition to specifying the route

disposition percentage at 15 percent, the

proposed percentage would be

calculated on the basis of the total

receipts of bulk fluid milk products

physically received at the distributing

plant. Currently both the Chicago

Regional and Upper Midwest orders

include milk diverted from the

distributing plant in the total bulk

receipts used to compute the route

disposition percentage.

The Identical Provisions Committee

recommended that the in-area

distribution criteria for pool distributing

plants be 15 percent of total route

disposition. The Committee explained

that use of total route disposition rather

than bulk receipts as the denominator

would reduce opportunities for handlers

to manipulate the manner in which they

may report their operations to avoid

regulation. Currently in the Chicago

Regional and Upper Midwest orders the

in-area route disposition standard is

computed using the same basis (bulk

receipts, including diversions) as is

used to determine whether a plant

meets the definition of a pool

distributing plant.

The Secretary proposes that provision

be made for a single handler to form a

unit of distributing plants and

manufacturing plants, all of which must

be located within the marketing area.

The unit would have to meet the

requirements for a pool distributing

plant and at least one of the plants in

the unit would be required to meet the

pool distributing plant requirements as

a separate plant. Plants not meeting the

pool distributing plant definition would

be required to have disposition of

packaged fluid milk products, packaged

fluid cream products, or cottage cheese

and other soft manufactured products of

at least half of their receipts of Grade A

bulk fluid milk products, including milk

diverted by the plant operator.

Manufacturing plants traditionally

have been included in units with

distributing plants because the

manufacturing plants produced

products such as packaged fluid cream,

sour cream, and cottage cheese that are

marketed in conjunction with bottled

fluid milk products. In addition, some

of these plants produce a limited

quantity of fluid milk products.

Handlers have argued that the operator

of a free-standing manufacturing plant

that manufactures these complementary

products should be able to pool its milk

supply for both (or for several) plants as

if all of the products were made in the

bottling plant.

Both the Chicago Regional and Upper

Midwest orders contain a provision for

a distributing plant unit. Although the

current Chicago Regional order does not

specify the types of products that may

be manufactured at plants in the unit,

the Upper Midwest order does. The

Secretary proposes that it is reasonable

to place restrictions on the types of

products that are disposed of from the

manufacturing plants in the unit, since

these plants would receive the benefits

reserved for pool distributing plants and
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4957

shipments from supply plants to the

plants in the unit would be considered

in determining pool supply plant

qualifications.

A pool supply plant operator should

ship as qualifying shipments at least 10

percent of the plant’s receipts of milk

from producers, including milk diverted

by the handler, each month. As in the

current Chicago Regional order, it is

proposed that such shipments may be

made to pool distributing plants, pool

distributing plant units, plants of

producer-handlers, partially regulated

distributing plants, or distributing

plants fully regulated by other Federal

milk orders. The extent of shipments to

partially regulated distributing plants to

be used for qualification would be

limited to the quantity classified as

Class I. Qualifying shipments to

distributing plants regulated by other

Federal milk orders should be limited to

the quantity shipped to pool

distributing plants, and may not be

agreed-upon Class II, Class III or Class

IV utilization. Shipments directly from

farms to pool distributing plants and to

plants contained in pool distributing

plant units should be included as

shipments that help to meet the

percentage qualification standard.

The proposed 10 percent shipping

requirement is approximately 5

percentage points less than the

anticipated Class I percentage for the

proposed consolidated Upper Midwest

order. The 10 percent shipping standard

is greater than the current individual

supply plant shipping standard and

equal to the maximum shipping

percentage required of pool units during

the qualifying period in the current

Chicago Regional order. The standard

under the current Upper Midwest order,

which uses the Class I use percentage of

the same month in the previous year as

the supply plant shipping percentage,

would exceed the proposed percentage.

Also under the current Upper Midwest

order, a reserve supply plant must ship

10 percent of its receipts to pool

distributing plants during January

through June, and the marketwide Class

I percentage for the same months of the

preceding year for the months of July

through December.

Although the proposed shipping

percentage is below the estimated Class

I percentage for the proposed Upper

Midwest order, the 10 percent shipping

standard should be appropriate, in view

of the fact that many distributing plants

have a supply of milk from their own

producers. In September 1997,

approximately 27 percent of the milk

pooled or received at distributing plants

in the Chicago Regional order was

pooled as producer milk with the

distributing plant operators as the

handlers, rather than as producer milk

pooled by cooperatives and other

handlers. The milk pooled by

distributing plant handlers accounted

for approximately 12 percent of the total

milk pooled in September 1997 (or

approximately 5 percent of the total

milk that would have been pooled if all

of the milk eligible to be pooled in

September 1997 had been pooled).

Approximately 7 percent of the Class I

producer milk, or approximately 2

percent of the total producer milk,

pooled under the Upper Midwest order

is pooled by distributing plant

operators. The combination of the

supply plant shipping percentage and

the percentage of milk pooled directly

by distributing plant handlers would

appear sufficient to meet anticipated

Class I needs in the proposed Upper

Midwest order. The proposed 10

percent supply plant shipping

percentage also should be appropriate to

avoid unnecessary and uneconomic

shipments.

The proposed rule would allow the

market administrator to increase or

decrease the required shipping

percentage on a marketwide or selected

area basis if deemed necessary to assure

an adequate supply of milk to pool

distributing plants or to prevent

uneconomic shipments of milk. If the

shipping percentage is increased by the

market administrator, shipments made

for the purpose of meeting the increased

percentage may be made only to pool

distributing plants or plants contained

in pool distributing plant units.

Groups of two or more supply plants

should be allowed to form systems of

supply plants for the purpose of meeting

the shipping requirements, by shipping

the same percentage as that required for

individual pool supply plants that are

not part of such a system. These pool

supply plant systems may consist of

plants of the same handler, more than

one handler, and may contain both

proprietary and cooperative handlers.

The only requirement affecting an

individual plant within the unit is that

the plant must be physically located

within the marketing area. This

restriction is necessary to prevent

distant plants from receiving the

benefits of participating in the

marketwide pool without having an

actual association with the market.

Several plants located outside the

boundaries of the proposed marketing

area currently are included in supply

plant units by a ‘‘grandfather clause’’ in

the Upper Midwest order. The proposed

order provides that these plants may

continue to be included in a supply

plant unit if they so desire as long as

they maintain continuous pool plant

status.

The Secretary proposes that handlers

may form supply plant systems by filing

a written request by July 15, listing the

plants to be in the system. The system

would remain in effect from August 1

through July 31 of the following year.

These dates deviate from those

proposed for other orders because of the

difference in seasonal production

variations between this and other

orders. The handler or handlers

establishing the system may also delete

a plant from the system or dissolve the

system by submitting a written request

to the market administrator. Any plant

deleted from a system, or plants that

were part of a system that was

discontinued, may not be part of a

system until the following August.

Provisions that allow handlers to add

plants to a system under certain

circumstances and to allow systems to

reorganize in the event a plant changes

ownership or in the event of a business

failure by a handler are also

incorporated in the proposed order.

A system failing to meet pooling

standards would be allowed to drop

plants from the system until the system

does qualify. The handler responsible

for assuring that the system qualifies

should notify the market administrator

of which plants are to be deleted from

the system. If the handler does not

notify the market administrator, the

market administrator would exclude

plants from the system beginning with

the plant at the bottom of the list of

plants submitted by the handler

responsible for qualifying the system,

and continuing up the list until the

system qualifies.

The provisions for supply plant

systems are very similar to the

provisions currently contained in both

the Chicago Regional and Upper

Midwest orders. Unlike the Chicago

Regional and the Upper Midwest orders,

however, the proposed order does not

contain a specific shipping requirement

for individual plants within a supply

plant system. In the current Chicago

Regional order, pool supply plant

systems have twice the percentage

shipping standard of individual supply

plants, with individual plants within

the systems required to ship 47,000

pounds or three percent of their

producer receipts, whichever is less, in

five of the six months of August through

January. The current Upper Midwest

order requires handlers with supply

plants in a supply plant system to ship

five percent of each handler’s Grade A

receipts, including milk diverted by the

handler to nonpool plants, during one of
4958 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

the months of August through

December.

This proposed rule does not propose

providing for the category of supply

plants referred to as reserve supply

plants. Reserve supply plants ceased to

be included in the Chicago Regional

order in 1987, while the Upper Midwest

continues to provide for them. With

year-round shipping requirements, the

unlimited ability of the market

administrator to change shipping

percentages both in level and in area,

and the ability of supply plants to form

systems, it is proposed that there is no

compelling reason to have two

categories of supply plants.

A provision to allow plants to remain

qualified for up to two consecutive

months due to unavoidable

circumstances, such as a natural

disaster, fire, breakdown of equipment,

or work stoppage is included in this

proposed order. The provision is

contained in the Chicago Regional order

and has worked quite well in giving

handlers some administrative relief in

the face of certain unavoidable

circumstances.

Producer Milk

The definition of producer milk

determines which milk will be eligible

to participate in the Federal order pool.

The proposed order provides that milk

received at a pool plant directly from

producers or from a cooperative

association acting as a handler should

be eligible to be producer milk. Milk for

which the operator of a pool plant is the

handler that is delivered directly from

the farm to another pool plant should

also be considered producer milk.

Under certain circumstances, milk

delivered to a nonpool plant may also

be considered producer milk. Milk

delivered directly from a farm to a

nonpool plant may be considered

producer milk if at least one day’s

production is received at a pool plant

during the dairy farmer’s first month as

a producer.

In order to qualify as producer milk

the milk pooled by a cooperative

association acting as a handler

described in § 1030.9(c), the cooperative

must deliver at least 10 percent of the

milk for which it is the handler

pursuant to § 1030.9(c) to pool

distributing plants, units of pool

distributing plants, plants of producerhandlers, partially regulated distributing

plants, or distributing plants fully

regulated by other Federal milk orders.

The shipments to partially regulated

distributing plants are limited to the

quantity classified as Class I. Qualifying

shipments to distributing plants

regulated by other Federal milk orders

are limited to the same quantity shipped

to pool distributing plants and may not

be shipped as agreed-upon Class II,

Class III or Class IV utilization. These

are the same performance requirements

that would apply to supply plants.

Likewise, the same performance

requirements that apply to supply

plants would apply to cooperative

associations acting as handlers if the

market administrator adjusts the

shipping percentages.

The Secretary proposes that there

would be no significant differences in

the treatment of milk received at pool

plants under the proposed order and

under the Chicago Regional or Upper

Midwest orders. There are, however,

several differences relating to diverted

milk. The proposed order would allow

the operator of a pool plant to divert, or

ship milk directly from the farm to

another pool plant, the milk of

producers for which it is the handler,

and account for the milk as producer

milk at the shipping plant. Allowing

either a proprietary pool plant or a

cooperative pool plant to divert milk to

another pool plant is consistent with the

Chicago Regional order. In the Upper

Midwest order, milk that is received at

a pool plant and for which a cooperative

association is the handler is considered

producer milk at the receiving plant.

The Upper Midwest order specifies that

a proprietary handler may divert milk to

another pool plant and that such milk

will be considered producer milk of the

diverting proprietary handler. The

proposed language leaves to the

discretion of the cooperative association

the option of diverting milk to another

pool plant from its own pool plant or

delivering the milk to the pool plant in

its capacity as a handler of producer

milk pursuant to § 1030.9(c).

The proposed Upper Midwest order

would require that a new producer or a

producer who has broken association

with the market have at least one day’s

production received at a pool plant

during the first month in which the

producer’s milk is reported as producer

milk. Currently the Chicago Regional

order requires a new producer on the

market or a producer who has broken

association with the market to have at

least one day’s production received at

the pool plant at which the milk is

reported during the first month in

which the producer’s milk is considered

to be producer milk eligible for

diversion to a nonpool plant. In

addition, at least one day’s production

of a producer’s milk must be received at

a pool plant in each of the months of

August through January to be eligible for

diversion to a nonpool plant. The

current Upper Midwest order requires

that a new producer or a producer who

has broken association with the market

be received at a pool plant prior to the

milk being diverted to a nonpool plant.

There is little or no justification for

forcing producer milk to be received at

a pool plant to maintain or prove

association with the market. Supply

plants and cooperatives would be

required to ship a fixed percentage of

their total milk supply, not just that

portion received at their plants, to the

fluid market. Since both cooperatives

and proprietary handlers can move milk

directly from the farm to the fluid

market there is little reason to force milk

into a pool plant for regulatory purposes

only. Certainly the extra cost to the

handler of moving milk for regulatory

purposes does not enhance economic

efficiency or milk quality and in fact

decreases economic efficiency and milk

quality to the detriment of the entire

market.

The proposed order provides that

producer milk be priced in the month in

which it is picked up at the farm and

at the location of the plant at which the

milk is physically unloaded into

processing facilities or a storage tank. In

the current Chicago Regional order milk

is priced where milk is pumped within

the confines of a plant. The proposed

order would eliminate the pricing of

milk where it is pumped from truck to

truck and price the milk where it is

eventually unloaded into processing

facilities or a storage tank.

Location Adjustments and

Transportation Credits

To help move milk to the fluid market

a transportation credit and a

procurement credit to be applied to

Class I milk are contained in the

proposed Upper Midwest order. The

transportation credit would be

computed by multiplying the

hundredweight of Class I milk

contained in transfers of bulk fluid milk

from pool plants to pool distributing

plants by the value obtained by

multiplying .0028 times the number of

miles between the shipping plant and

the receiving plant. The transportation

credit should be paid to the shipping

handler, since the milk would be priced

at the location at which it is first

received.

The proposed transportation credit is

similar to the transportation credit

currently contained in the Chicago

Regional order. Both the proposed

transportation credit and the current

credit, which use the same .0028 rate,

are applied to Class I milk only.

However, in the current Chicago

Regional order the credit is based on

110 percent of the Class I milk received
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4959

at the pool distributing plant, rather

than on the Class I milk delivered by the

shipping handler, as proposed. Since

the transportation credit is computed on

the basis of milk classified as Class I at

the shipping plant, the credit would be

paid to the shipping handler.

Unlike the transportation credit,

which is based on mileage and paid

only on transfers of bulk milk to pool

distributing plants, the procurement

credit would be paid at the rate of 8

cents per hundredweight of Class I milk

transferred or diverted by a pool plant

to a pool distributing plant. A

procurement credit also will be applied

to milk received from producers and

from cooperative associations acting as

handlers pursuant to § 1030.9(c) based

on the pro rata share of producer milk

delivered to a pool distributing plant

and allocated to Class I.

A transportation credit and

procurement credit would be

incorporated in the proposed order to

assist handlers in supplying the Class I

market. These transportation and

procurement credits, to be paid on Class

I milk only in combination with the

Class I price surface discussed

elsewhere in this proposed rule, will

help handlers move milk to the fluid

market by distributing the cost of

supplying the fluid market to all market

participants who share in the

marketwide pool. Handlers and

producers who supply the Class I

market on a regular basis should not be

expected to bear the entire cost of

supplying the Class I market while

handlers and producers who meet only

the minimum requirements derive the

benefits of marketwide pooling.

Incorporation of a transportation credit

and procurement credit on Class I milk

in the marketwide pool will assure that

at least some of the cost of supplying the

Class I market is shared among all

market participants.

Mideast Order

Many of the provisions of the

proposed Mideast order are explained in

the ‘‘Identical Provisions’’ portion of

this proposed rule, and need not be

addressed here. The provisions that

deviate somewhat from those proposed

for other order areas are the provisions

dealing with standards for determining

the pool status of producers and

handlers, and those describing the

pricing of milk under a component

pricing plan that differs slightly from

that common to the other orders with

proposed multiple component pricing

provisions. For the most part, pooling

provisions have less effect on the

current Michigan Upper Peninsula

market than on the 4 other markets

included in this consolidated order

because Michigan Upper Peninsula is

the only remaining individual handler

pool in the current Federal order

system. Therefore, pooling provisions

are discussed in relation to the 4

principal markets included in the

proposed Mideast order.

Pool Plant

The proposed Mideast pool

distributing plant definition would

differ from that contained in most of the

other proposed orders to make less

likely the full Federal regulation of three

State-regulated plants, two in

Pennsylvania and one in Virginia, that

currently are partially regulated under

one or more of these orders. These Stateregulated handlers must pay a minimum

Class I price for milk used in fluid

products, often a higher price than

would be applied under Federal order

regulation. At the same time, Federal

regulation of the Pennsylvania and

Virginia-regulated handlers under the

consolidated order would reduce

producer returns while having little

effect on handlers’ costs of Class I milk.

Specifically, the percentage of a

handler’s total route dispositions

distributed within the marketing area

that would result in the handler being

fully regulated under the Mideast order

should be 30 percent under this order

rather than the 15-percent standard

proposed for all but one of the other 10

orders. This level of sales in the

marketing area can be compared to the

current pooling standards for

distributing plants in the Eastern OhioWestern Pennsylvania and Indiana

orders. These orders currently have

variable (30–50 percent) pooling

standards for the percentage of a

distributing plant’s receipts distributed

on routes, combined with a 10–15

percent standard for receipts distributed

within the marketing area. Plants that

meet the total dispositions standard at

the lower end of the range (35 or 40

percent) and distribute only 10 or 15

percent of their receipts on routes in the

marketing area would actually distribute

approximately 30 percent of their route

dispositions on routes in the marketing

area. At the same time, it would be

difficult to justify establishing a pooling

standard so high that the significant role

played in a market by a handler having

more than 30 percent of its route

disposition in the marketing area would

fail to be recognized by inclusion in the

marketwide pool.

In addition to specifying the in-area

route disposition percentage at 30

percent of total routes, the total and inarea route disposition percentages

would be calculated on the basis of the

total receipts of bulk fluid milk products

physically received at the distributing

plant. Currently all four of the larger

orders to be included in the

consolidated Mideast order include

milk diverted from the distributing

plant in the total bulk receipts used to

compute the route disposition

percentages.

To assure continued pool

qualification for all of the handlers who

currently are associated with the

Mideast markets, the pool supply plant

definition of the consolidated Mideast

order would provide for all of the types

of supply plants that currently qualify

for pooling under the 4 principal orders.

The Eastern Ohio-Western Pennsylvania

pool plant provision includes a plant

operated by a cooperative if the

cooperative association delivers to

distributing plants at least 35 percent of

the milk for which it is the handler

during the current month or over the

preceding 12 months. The Southern

Michigan order includes as pool supply

plants: (a) a plant that has been a pool

plant for 12 consecutive months and has

a marketing agreement with a

cooperative association, and (b) a

system of supply plants operated by one

or more handlers. Order 40 also

includes some shipments to other

Federal order plants and partially

regulated distributing plants, in

addition to pool distributing plants, as

qualifying shipments by supply plants.

The percentage of receipts as

qualifying shipments to distributing

plants currently ranges from 30 to 40

percent for these orders, with direct

deliveries from farms rather than plant

transfers limited to half of the required

deliveries under three of the orders. All

four of the orders require performance

of pooling standards by supply plants

for the months of September through

February, followed by a ‘‘free ride’’

period during which shipping

percentages need not be met by supply

plants that met the shipping standards

during the required period. The Indiana

order contains a provision allowing the

continued pooling of a plant that fails to

meet pooling standards because of

circumstances beyond the handler’s

control.

The proposed shipping standards for

pool supply plants are 35 percent for all

months, with plants meeting the

standard for the months of September

through February being allowed to

retain their pool status for the

immediately following months of March

through August. For the purpose of

making the 35 percent level of shipping

standard less burdensome, up to 90

percent of required shipments should be

allowed to be made directly from farms
4960 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

to distributing plants. The cooperative

association plant provided for in the

Eastern Ohio-Western Pennsylvania

order would be retained, as would the

supply plant provisions peculiar to the

Southern Michigan order.

Producer Milk

The producer and producer milk

provisions of the orders to be

consolidated in the Mideast order are

quite similar and differ little from those

to be incorporated in the other

consolidated orders. The principal

difference between some of the

individual orders and the consolidated

order would be the limit on the

percentage of a handler’s pooled

producer milk that may be diverted to

nonpool plants. The Ohio Valley,

Indiana and Eastern Ohio-Western

Pennsylvania orders all contain 50

percent diversion limits for the months

of September through November,

January and February and a 60 percent

limit for the month of December, with

no diversion limit for the months of

March through August. The Southern

Michigan order contains a 60-percent

diversion limit for the months of

September through February, with no

limit for the months of March through

August. In order to assure that all of the

milk that has been pooled under these

orders continues to qualify for pooling,

the diversion limit proposed for the

Mideast order is 60 percent for the

months of September through February,

with no limit for the March through

August period. At the same time, the

market administrator would be

authorized to increase or reduce the

diversion limit as needed to maintain

orderly marketing and efficient handling

of milk in the marketing area.

Multiple Component Pricing

The reporting and payment provisions

of the proposed consolidated Mideast

order differ somewhat from those of the

other consolidated orders that provide

for multiple component pricing (MCP)

by retaining the current Southern

Michigan component pricing plan. The

Southern Michigan multiple component

pricing plan is very similar to that

proposed for the other MCP orders, but

prices ‘‘fluid carrier’’ instead of ‘‘other

solids.’’ The Mideast order language is

changed accordingly. This difference

appears to be favored by market

participants in the Mideast, and would

result in very little difference in total

payments, either by handlers or to

producers whose milk is pooled under

the differing provisions.

Central Order

Many of the provisions of the

proposed Central order are explained in

the ‘‘Identical Provisions’’ portion of

this proposed rule, and need not be

addressed here. The provisions that

deviate somewhat from those proposed

for other order areas are the provisions

dealing with standards for determining

the pool status of producers and

handlers. An effort is made to explain

significant differences between the

pooling provisions of the 8 individual

orders included in this consolidation

and those of the consolidated order.

Pool Plant

The proposed Central pool

distributing plant definition should

follow closely the provisions contained

in most of the other proposed orders.

The proposed provisions would make

no difference in the pool status of

distributing plants currently pooled

under the individual orders.

Specifically, the percentage of a

handler’s total route disposition

distributed within the marketing area

that would result in the handler being

fully regulated under the Central order

should be the 15-percent standard

proposed for most of the other 10

orders. The minimum percentage of a

pool distributing plant’s actual physical

receipts of bulk fluid milk products that

would have to be distributed on route is

proposed to be 25. Currently most of the

orders to be included in the

consolidated Central order include milk

diverted from the distributing plant in

the total bulk receipts used to compute

the route disposition percentages.

The proposed order would provide

that a single handler be allowed to form

a unit of distributing plants and Class II

manufacturing plants, all of which must

be located within the marketing area.

The unit would have to meet the

requirements for a pool distributing

plant, and at least one of the plants in

the unit would be required to meet the

pool distributing plant requirements as

a separate plant. Plants in the unit that

do not meet the pool distributing plant

definition would be required to have

disposition of packaged fluid milk

products, packaged fluid cream

products, or cottage cheese and other

Class II products of at least half of their

receipts of Grade A bulk fluid milk

products, including milk diverted by the

plant operator.

The proposed inclusion of Class II

manufacturing plants in units with

distributing plants is supported because

the manufacturing plants produce

products such as packaged fluid cream,

sour cream, and cottage cheese that are

marketed in conjunction with bottled

fluid milk products. In addition, some

of these plants produce a limited

quantity of fluid milk products.

Handlers have argued that the operator

of a free-standing manufacturing plant

that manufactures these complementary

products should be able to pool its milk

supply for both (or for several) plants as

if all of the products were made in the

bottling plant.

The pool supply plant definition of

the consolidated Central order would

contain provisions that assure

continued pool qualification for any

handlers or milk currently associated

with the markets consolidated into the

proposed Central market. The Iowa

order contains no limit on the amount

of direct-shipped milk that can be used

to qualify a supply plant, and several of

the other orders allow such deliveries to

make up a portion of qualifying

shipments. The proposed order allows

direct-shipped milk to be counted as

pool qualifying shipments without

limit.

The Greater Kansas City, NebraskaWestern Iowa, Southern Illinois-Eastern

Missouri, and Southwest Plains orders

contain cooperative balancing plant

provisions, allowing cooperativeoperated plants to be pooled if the

cooperative delivers a given percentage

of the milk for which it is the handler

to pool distributing plants. The

proposed Central order also contains

such a provision, including in the pool

plant definition a cooperative

association plant that supplies at least

35 percent of the milk for which it is the

handler to pool distributing plants,

either during the current month or for

the immediately preceding 12-month

period. The deliveries to pool

distributing plants may include

deliveries directly from the farms of

producers for whom the co-op is the

handler, as well as transfers from the

cooperative’s plant.

Cooperative association ‘‘balancing

plants’’ serve the market as the outlet of

last resort. When surplus milk has no

other place to go on weekends, holidays,

or during months of surplus production,

it moves to cooperative association

‘‘balancing plants’’ where it is

manufactured into storable products.

When production decreases, these

plants operate at minimal capacity or

may be shut down completely.

Cooperative members assume the

burden and cost of processing surplus

milk through such plants.

Most of the Central orders allow a

period during which supply plants do

not have to meet shipping percentages

if they have done so for the months

during which milk production levels are
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4961

low and demand for fluid milk is high.

The Iowa order has reduced shipping

standards for such months. The

proposed order should include a period

during which supply plants that have

served the needs of the market when

milk supplies are tight are not required

to meet shipping standards, but it is

reduced from the 5–7 month period

existing in the current orders to a 3-

month period from May through July.

The percentage of receipts as

qualifying shipments to distributing

plants currently ranges from 30 to 50

percent for these orders, the Iowa

percentage reduced to 20 for the months

of December through August.

The proposed shipping standards for

pool supply plants under the proposed

consolidated order are 35 percent for the

months of September through November

and January and 25 percent for all other

months, with plants meeting the

percentage standard for the months of

August through April being allowed to

retain their pool status for the

immediately following months of May

through July.

Groups of two or more supply plants

should be allowed to form systems of

supply plants for the purpose of meeting

the shipping requirements, by shipping

the same percentage as that required for

individual pool supply plants that are

not part of such a system. These pool

supply plant systems may consist of

plants of the same handler or more than

one handler, and may contain both

proprietary and cooperative handlers.

The only requirement affecting each

plant within the system is that the plant

must be physically located within the

marketing area. This restriction is

necessary to prevent distant plants from

receiving the benefits of participating in

the marketwide pool without having an

actual association with the market.

As in the other proposed consolidated

orders, the market administrator would

have the authority to increase or reduce

the order’s pooling provisions as

marketing conditions change for the

purpose of assuring that an adequate

supply of milk will be available for fluid

use, or to assure that the order does not

require handlers to undertake

uneconomic movements of milk to

maintain the pool status of their plants.

Producer Milk

The producer and producer milk

provisions of the orders to be

consolidated in the Central order are

quite similar to each other and differ

little from those to be incorporated in

the other consolidated orders. The

principal difference between some of

the individual orders and the

consolidated order would be the limit

on the percentage of a handler’s pooled

producer milk that may be diverted to

nonpool plants. The percentage of a

handler’s milk that may be diverted to

nonpool plants varies under the

individual orders from 20 percent of

milk received at pool plants during

some months under the Eastern

Colorado order to 70 percent for some

months under the Nebraska-Western

Iowa and Iowa orders. Most of the

orders require each producer’s milk to

be received at a pool plant at least once

each month.

In order to assure that all of the milk

that has been pooled under these orders

continues to qualify for pooling, the

diversion limit proposed for the Central

order is 65 percent for the months of

September through November and

January, and 75 percent for the months

of February through April and

December. Allowable diversions for the

months of May through July would be

unlimited. There would be no

requirement that each producer’s milk

be received at pool plants for a

minimum number of days per month. At

the same time, the market administrator

would be authorized to increase or

reduce the diversion limit as needed to

maintain orderly marketing and efficient

handling of milk in the marketing area.

Multiple Component Pricing

The reporting and payment provisions

of the proposed consolidated Central

order would include those common to

other orders with multiple component

pricing. These markets have a

significant amount of milk used in

manufactured products, and component

pricing will enable producers to be paid

according to the valuable components of

their milk.

6d. Western Region

Southwest Order

The proposed consolidated Southwest

marketing area is comprised principally

of the current Texas and New MexicoWest Texas marketing areas. With

regard to milk production and

population (consumption), these areas

are both in the process of change, but in

different ways. Texas has one of the

fastest-growing populations in the U.S.,

and until recently has been able to

maintain milk production on a per

capita basis. After a significant increase

in milk production during the 1988–

1994 period, Texas milk production has

been declining somewhat, accompanied

by the exit of approximately 29 percent

of the State’s Grade A dairy farmers. If

the current trend continues, the Texas

market could come to resemble more

closely those of the Southeast portion of

the U.S., relying significantly on more

distant milk supplies to meet the

market’s Class I and II needs. This

scenario currently is true for the

southern parts of Texas.

The State of New Mexico has

experienced relatively slow population

growth, but dramatic increases in milk

production—from 1.099 billion pounds

in 1988 to an estimated 4.020 billion

pounds in 1997. With the declining

production in Texas, the New Mexico

milkshed will be drawn upon more

often to supply Class I and II needs in

the Texas demand centers, 500–600

miles distant. Procurement costs would

be expected to increase dramatically. In

light of these circumstances, proposed

provisions in the proposed Southwest

order would provide flexibility to

handlers supplying the market to

prevent inefficient movements of milk

and unnecessary costs of operation

incurred for the purpose of participating

in the marketwide pool.

Prior to enactment of the 1996 Farm

Bill, cooperatives operating in the

Southwestern Markets had determined

that the two milk orders in the region

were being operated as one and should

be merged. Much discussion took place

and proposed order provisions were

developed by the principal cooperatives

involved. These comments, with

numerous others, were considered in

the development of this proposed rule

for the Southwest marketing area.

Pooling Standards

Most of the pooling standards in the

Texas and New Mexico-West Texas

orders have been suspended for some

time. The rapid expansion of milk

production in the region during the late

1980’s created a situation in which

handlers operating in the region could

no longer meet the provisions of the

orders while pooling all of their milk

supplies.

Pool Distributing Plant. The identical

provisions committee recommended

that a pool distributing plant distribute

as route disposition at least 25% of its

bulk fluid milk receipts at the plant, and

distribute at least 15% of its total route

disposition within the marketing area.

One partially regulated plant located in

the Texas marketing area would become

fully regulated under this provision.

The plant has been partially regulated

under the Texas order and, periodically,

fully regulated under the Chicago

Regional order. The proposed

percentages for pool distributing plants

will cause this plant to become fully

regulated under the Southwest order

and alleviate the disorderly conditions

caused by its shifts between orders.

There should be no change in the
4962 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

plant’s costs, since their supply of milk

comes from Southwest pool sources.

Pool Supply Plant. The Texas and

New Mexico-West Texas orders

currently contain a 50% pool supply

plant shipping percentage during the

Fall months, with a lower percentage or

an automatic pooling provision for the

remaining months. Currently there are

no pool supply plants regulated under

either of the Southwest orders, but

provision is made for such an operation

if it should meet the proposed order’s

definition. A provision defining

cooperative plants located in the

marketing area would base pool

qualification on total cooperative

performance in delivering at least 30

percent of the cooperative’s milk supply

pooled under this order to pool

distributing plants.

Although neither the Texas nor New

Mexico-West Texas orders currently

have provisions for split-plant

operations (plants that have both pool

and nonpool portions) or the authority

for the Market Administrator to adjust

shipping requirements, these provisions

are included in the proposed order, as

recommended by the identical

provisions committee.

Producer Milk

The current Texas and New MexicoWest Texas orders have provisions that

require a producer’s milk to be received

at a pool plant, or touch base, before

milk of the producer is eligible to be

diverted. Based on comments received,

the order would limit diversions of

producer milk on the basis of a portion

of a handler’s total milk supply. At least

fifty percent of the milk pooled by a

handler should be received at pool

plants for the handler’s entire milk

supply to be pooled. Milk produced by

producers located in the marketing area

should be eligible for pooling without a

particular percentage or number of days’

production being required to be

received at a pool plant. For producers

located outside the marketing area,

however, the currently-suspended

‘‘touch-base’’ provision of 15%

delivered to pool plants during the

month (rather than before diversions are

allowed), is continued in this proposed

rule.

Diversion limits are suggested to be

50% of a handler’s total milk supply.

The current Texas order allows an

amount equal to one-third of the milk

delivered to pool plants to be diverted

(this provision is currently suspended),

while the (currently suspended) New

Mexico-West Texas provision allows

50% of a handler’s total milk supply to

be diverted. The current Texas order

provisions base allowable diversions on

deliveries to individual pool plants,

greatly exacerbating the time and effort

required to keep track of milk

movements. The total performance

standard will allow handlers to meet

diversion limits more easily with more

efficient movements of milk. In

addition, the increased percentage of

allowable diversions will assure that all

of the producers whose milk would

qualify for pooling under either of the

two orders being consolidated would

continue to meet pooling qualifications.

Transportation Credits for Surplus Milk

The Texas order currently has a

market-wide service payment provision

that gives credits for hauling surplus

milk located in certain zones in Texas

to nonpool plants outside the State for

use in manufactured products. The

provision has not been included in the

proposed Southwest order language

because of declining production and

increasing balancing plant capacity in

the affected areas of Texas.

Payment Provision

The Texas order is one of only a few

marketing orders that require handlers

to submit the full classified value during

the month to the market Administration.

In turn, the Market Administrator acts

as a clearing house and forwards these

proceeds on to the respective

organizations. Interested persons have

expressed an interest in retaining these

provisions, not only for the proposed

Southwest order, but for all other

orders.

The current Texas payment provision

was found necessary because of

problems encountered in assuring

timely payments by pooled handlers.

The provision has been in the Texas

order since 1979, and the earlier

payment problems have been remedied.

Such a provision involves a rather large

degree of regulatory intervention

between milk processors and their

suppliers that should be shown to be

necessary to correct existing problems.

There is no indication that such

problems currently exist, or would exist

in the absence of the provision. Nearly

all of the milk that will be pooled under

the consolidated Southwest order is

produced by cooperative members and

pooled by the cooperatives. These large,

business-oriented organizations should

be able to assure that they receive full

payment for their members’ milk in a

timely manner.

Arizona-Las Vegas Order

Many of the provisions of the

proposed Arizona-Las Vegas order are

explained in the ‘‘Identical Provisions’’

portion of this proposed rule and need

not be addressed here. Those provisions

that deviate to some extent from the

‘‘Identical Provisions’’ are addressed in

this discussion.

Pool Plant

The proposed pool distributing plant

definition is similar to that contained in

most of the other proposed orders. The

minimum percentage of a pool

distributing plant’s physical receipts of

bulk fluid milk products that are

disposed of as route disposition is

proposed to be 25%. The percentage of

a handler’s total route disposition into

the marketing area that would result in

a distributing plant becoming fully

regulated under the Arizona-Las Vegas

order is proposed to be 15%. While this

definition differs slightly from the

current order language, it provides

uniformity with other proposed orders

and should result in no additional

distributing plants being pooled under

the proposed order or any change in the

pool status of distributing plants

currently pooled.

The proposed pool supply plant

definition would require a supply plant

to ship 50% of its physical receipts of

milk from dairy farmers to pool

distributing plants during the month in

order to be a pool supply plant. This

definition would provide for easy,

effective order administration and

would result in no additional handlers

being regulated under the order. There

are currently no pool supply plants in

the proposed marketing area.

The current Central Arizona order

permits a manufacturing plant located

in the marketing area that is operated by

a cooperative association to be a pool

plant, provided that the cooperative

ships at least 50% of its member milk

to pool plants of other handlers during

the current month or the previous 12-

month period ending with the current

month. This percentage requirement is

currently suspended. The proposed

order would reduce this percentage to

35%. In conjunction with the market

administrator being authorized to

increase or reduce the percentage in

response to market conditions, the

reduced performance standard should

enable the continued pooling of

producer milk that currently is pooled

without resulting in uneconomic

handling or disorderly marketing.

The proposed Arizona-Las Vegas

order should provide that a single

handler be allowed to form a unit of

distributing plants and Class II

manufacturing plants provided each

plant is located within the marketing

area. The unit in total would be required

to meet the requirements for a pool

distributing plant and at least one of the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4963

plants in the unit would be required to

meet the pool distributing plant

definition individually. This provision

would provide uniformity with other

federal orders and would not change the

status of any plants currently pooled.

Class II manufacturing plants are

included for unit pooling with

distributing plants operated by the same

handler because such plants produce

products that are marketed in

conjunction with fluid milk products.

A provision permitting the market

administrator to adjust the percentages

specified in the pool plant definition

will provide the flexibility to respond in

a timely manner to changing marketing

conditions without the need for a formal

hearing process.

Producer

The proposed order contains a dairy

farmer for other markets definition. A

producer could not be pooled under the

proposed Arizona-Las Vegas order

unless all of the milk from the same

farm was pooled under this or some

other federal order or unless such

nonpooled milk went to a plant with

only Class III or Class IV utilization.

This differs slightly from the current

definition in the Central Arizona Order.

Such a provision is needed in the

proposed order to prevent dairy farmers

whose milk is regularly used for fluid

disposition in other markets from

pooling the surplus portion of their

production under the proposed order.

Producer Milk

The percentage of a handler’s pooled

milk that may be diverted to nonpool

plants is proposed to be 20% in any

month. Currently, diversions under the

Central Arizona order are limited to

eight days’ production of a producer

during four months of the year, with

unlimited diversions the remainder of

the year. The 20% diversion limit

would result in the amount of milk

eligible for diversion being

approximately equivalent to eight days’

production and would be easier to

administer. The 20% limit year round

will assure that pooled milk will have

a close association with the market’s

fluid processing plants.

Component Pricing

The proposed Arizona-Las Vegas

order does not provide for multiple

component pricing. There are six plants

that are expected to be regulated under

the proposed order: five proprietary

distributing plants, and one

manufacturing plant operated by a

cooperative association. The Class I

utilization for the proposed order is

expected to be less than 50 percent, a

level that would, in some other orders,

be an indication that component pricing

would be appropriate. However, the

Class I utilization at the five distributing

plants is more than 80 percent. With the

exception of the one cooperative

balancing plant, the handlers to be

regulated constitute predominantly a

Class I market. They have expressed no

interest in component pricing, and the

fluid nature of much of the market

would not seem to warrant multiple

component pricing at this time.

Western Order

Many of the provisions of the

proposed Western order are explained

in the ‘‘Identical Provisions’’ portion of

this proposed rule and need not be

addressed here. Those provisions that

differ from those explained in the

‘‘Identical Provisions,’’ or those

currently contained in the orders to be

consolidated, are discussed below.

Pool Plant

The proposed pool distributing plant

definition is similar to that contained in

most of the other proposed orders. The

minimum percentage of a pool

distributing plant’s physical receipts of

bulk fluid milk products that are

disposed of as route disposition is

proposed to be 25%. The percentage of

a handler’s total route disposition

distributed into the marketing area that

would result in a distributing plant

becoming fully regulated under the

Western order is proposed to be 15%.

While this definition differs slightly

from the current language of the orders

involved in this proposed consolidation,

it provides uniformity with other

proposed orders and should result in no

additional distributing plants being

pooled under the proposed order or any

change in the pool status of distributing

plants currently pooled.

The proposed pool supply plant

definition would require a supply plant

operator to ship 35% of the milk pooled

at the supply plant, either by transfer or

diversion, to pool distributing plants

during the month in order to qualify for

pooling. This definition would provide

for more efficient order administration

and would result in no additional

handlers being regulated under the

order. The proposed percentage is

slightly higher than that contained in

the current Southwest Idaho-Eastern

Oregon order and slightly lower than

that contained in the current Great

Basin and Western Colorado orders.

This change should result in no milk

that is currently associated with any of

the three orders losing such association.

The proposed pool supply plant

definition includes provision for a

March through August period during

which a supply plant that has met the

order’s shipping percentages for the

preceding months of September through

February to be able to continue to be a

pool plant without meeting the shipping

standards. As with other proposed

orders, the market administrator would

have the authority to increase or

decrease the order’s supply plant

pooling standards as marketing

conditions change.

The proposed order contains a

provision that would permit a

manufacturing plant operated by a

cooperative association and located in

the marketing area to be a pool plant if

35% of the milk for which the

cooperative is the handler is received at

pool distributing plants during the

month or during the immediately

preceding 12-month period. This

provision is similar to one currently

contained in the Great Basin order and

in some of the other proposed orders.

The proposed order retains the ‘‘bulk

tank handler’’ provision that is currently

in the Southwestern Idaho-Eastern

Oregon order, permitting a handler

other than a cooperative association to

divert milk to nonpool plants for the

handler’s account based on shipments

of milk to pool plants of other handlers.

Although the three current orders

proposed to be consolidated do not

contain such a provision, the proposed

Western order would provide that a

single handler be allowed to form a unit

of distributing plants and Class II

manufacturing plants provided each

plant is located within the marketing

area, as suggested by the Identical

Provisions committee. The unit in total

would be required to meet the

requirements for a pool distributing

plant and at least one of the plants in

the unit would be required to meet the

pool distributing plant definition

individually. This provision would

provide uniformity with other federal

orders and would not change the status

of any plants currently pooled. Class II

manufacturing plants are proposed to be

included for unit pooling with

distributing plants operated by the same

handler because such plants produce

products that are marketed in

conjunction with fluid milk products.

Producer

The proposed order contains a dairy

farmer for other markets definition. A

producer would not qualify for pooling

under the proposed Western order

unless all of the milk from the same

farm was pooled under this or some

other federal order or unless such

nonpooled milk went to a plant with

only Class III or Class IV utilization.
4964 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

This differs slightly from the current

definition in the Great Basin order. Such

a provision is proposed for the

consolidated order to prevent dairy

farmers whose milk is regularly used for

fluid disposition in other markets from

pooling the surplus portion of their

production on the proposed order.

Producer Milk

The percentage of a handler’s pooled

milk that may be diverted to nonpool

plants is proposed to be 80% in any

month. This is identical to the

percentage currently included in the

Southwestern Idaho-Eastern Oregon

order and is only slightly higher than

that for the present Great Basin order,

which is 75% for cooperatives and 70%

for proprietary handlers. The 80% limit

on movements of pooled milk to

nonpool plants should permit all milk

associated with the market that is not

needed at pool plants during the month

to be pooled and priced under the order.

These percentages are higher than those

contained in the Western Colorado

order, but should not have the effect of

encouraging additional amounts of

unneeded milk to be pooled in that area.

Reports of Receipts and Utilization and

Payroll Reports

The proposed order requires pool

handlers to file a ‘‘report of receipts and

utilization’’ on or before the seventh day

after the end of the month. This is

identical to the current reporting date in

the Western Colorado and Great Basin

orders but two days earlier than the

same provision in the Southwestern

Idaho-Eastern Oregon order. Almost all

handlers currently file reports by FAX

or some other form of electronic data

transfer, which eliminates delays due to

mail handling. A seven-day reporting

period should allow adequate time for

handlers to prepare reports and will

allow the computation and release of

producer price information to occur on

or before the 12th day after the end of

the month.

The date on which the report of

payments to producers is proposed to be

due to the market administrator under

the Western order is on or before the

21st day after the end of the month. This

is the same date as that under the Great

Basin order, but one day earlier than

under the Southwestern Idaho-Eastern

Oregon order and two days earlier than

the Western Colorado order. The earlier

reporting date and announcement of

producer prices should assure that an

earlier payroll reporting date would not

be burdensome.

Multiple Component Pricing

Both the Great Basin order and the

Southwestern Idaho-Eastern Oregon

order currently have multiple

component pricing based on protein; the

Western Colorado order does not. The

multiple component pricing provisions

of the proposed Western order should

be the same as those for other proposed

orders that provide for multiple

component pricing based on protein.

The proposed Western order has a

significant amount of milk used in

manufactured products, especially

cheese, and component pricing will

enable producers to be paid according to

the value of the components of their

milk. However, the somatic cell

adjustment included in most of the rest

of the orders for which component

pricing is proposed is not warranted by

marketing conditions under the Western

order, and such an adjustment is not

included.

Payments to and From the Producer

Settlement Fund

Payments to the producer settlement

fund under the proposed order are due

on or before the 14th day after the end

of the month. This is two days after the

announcement of uniform producer

prices, which is an identical time period

to that which exists in the three current

orders proposed to be consolidated.

Payments from the producer

settlement fund under the proposed

order would be due on or before the

15th day after the end of the month.

This is the same date as under the

current Great Basin order, three days

earlier than under the Southwestern

Idaho-Eastern Oregon order, and one

day later than the Western Colorado

order. This payment date should be

practicable given the use of current

banking and transmission techniques.

Payments to Producers and Cooperative

Associations

Under the proposed order, partial

payments would be due from handlers

to producers who are not members of

cooperative associations on or before the

25th day of the month in an amount not

less than 1.2 times the lowest class price

for the preceding month multiplied by

the hundredweight of milk received

from such producers during the first 15

days of the month. Final payments

would be due on or before the 17th day

after the end of the month.

Partial payments to cooperative

associations would be due on or before

the 24th day of the month at the same

rate as above, with final payments due

on or before the 16th day after the end

of the month. These final payment dates

represent very little or no change from

the orders’ present payment dates. The

proposed partial payment dates are

earlier than those required under the

current orders, but are very close to

those suggested by the Identical

Provisions committee, and compliance

should present no hardship to handlers

who would already have had the use of

the producers’ milk for 9 to 23 days.

Pacific Northwest Order

Many of the provisions of the

proposed Pacific Northwest order are

explained in the ‘‘Identical Provisions’’

portion of this proposed rule, and need

not be addressed here. The provisions

that deviate somewhat from those

proposed for other order areas are the

provisions dealing with standards for

determining the pool status of producers

and handlers, the definition of

producer-handlers, the factors upon

which payments to producers are

calculated, and reporting and payment

dates. Because this order is not

proposed to be consolidated with any

other orders, there is little reason for

changing the substance of many of the

provisions that are not included in the

General Provisions.

Pool Distributing Plant

The pool distributing plant provisions

of the proposed Pacific Northwest Order

would be changed from the current

definition to one that more closely

resembles the definition suggested in

the identical provisions report. Rather

than basing the identification of a pool

distributing plant on only 10 percent of

the plant’s receipts as in-area route

dispositions, the order should specify

that such a plant have at least 25

percent of its physical receipts

distributed as route disposition, and at

least 15 percent of its route disposition

distributed within the marketing area.

It is not expected that the proposed

pooling standard will affect the pool

status of any plant that currently does

or does not meet the pooling standard

of the Pacific Northwest order. In

addition, it would remedy a provision

that could result in fully regulating a

plant that has minimal association with

the marketing area.

Pool Supply Plant

For the most part, the current pool

supply plant definition of the Pacific

Northwest order is appropriate to the

marketing conditions in the area.

However, the provision that currently

requires a handler to include producer

milk moved directly to pool distributing

plants in the shipments on which pool

plant performance is calculated would

be changed to allow the handler to
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4965

include such movements if the handler

wants to qualify its plant for pooling. A

plant operator who receives milk at a

plant only for manufacturing use also

would be able to supply producer milk

directly to distributing plants without a

requirement that the manufacturing

plant be a supply plant.

The Pacific Northwest order’s current

pool supply plant performance standard

of 20 percent of milk receipts shipped

to distributing plants should continue to

be appropriate for this market. The

current March through August period

during which supply plants do not have

to ship the minimum percentage to

distributing plants if they have done so

during the previous September through

February period would continue to be

included in the pool supply plant

definition.

As in the other proposed consolidated

orders, the market administrator is

proposed to have the authority to

increase or decrease the order’s pooling

provisions as marketing conditions

change for the purpose of assuring that

an adequate supply of milk will be

available for fluid use, or to assure that

the order does not require handlers to

undertake uneconomic movements of

milk to maintain: (1) the pool status of

their plants, or (2) the pooling of

producers who have historically been

associated with the market and who

help serve Class I needs.

Nonpool Plant

The current definition and exemption

for milk produced and processed by

state institutions, as contained in the

present order’s producer-handler

definition, would be expanded and

moved to be included in the ‘‘Nonpool

plant’’ definition contained in the

General Provisions. Such entities, along

with colleges and universities and

charitable organizations, would not be

subject to the orders’ pricing and

pooling provisions as long as they have

no sales in commercial channels.

The present Pacific Northwest order

provisions allow a state institution to

avoid any regulation on the portion of

its milk that is used only within the

institution, and apply some pricing

regulation to that portion that is

distributed in commercial channels. In

some respects, this arrangement is

similar to the situation of partially

regulated distributing plants. However,

partially regulated distributing plant

operators, to avoid obligations under

Federal orders, must show that they pay

the dairy farmers who ship milk to them

at a rate at least commensurate with that

paid to producers whose milk is pooled

under the order. In any case, they must

procure a milk supply in the

competitive market. State institutions

may have any number of cost

advantages over regulated handlers in

the production and processing of milk,

such as not having to pay a minimum

wage and not having to pay property

taxes. It would be unjust to allow such

institutions to compete with fully

regulated handlers in regular

commercial channels as if the playing

field were level. Therefore, state and

other institutions that compete with

regulated handlers in regular

commercial channels, such as bids for

school milk programs, would also be

fully regulated.

Producer-Handler

The current Pacific Northwest

producer-handler provisions should

remain essentially untouched. Some of

the ‘‘Identical Provisions’’ features of

the producer-handler definition, such as

the 150,000-pound thresholds for route

dispositions, own farm production, and

receipts from pool plants; and the

ability to request to operate as both a

pool plant and a producer, would be

adopted. The rest of the current

producer-handler provisions would

remain in effect for administrative

purposes.

Producer-handlers represent a much

larger portion of the Class I dispositions

in the Pacific Northwest marketing area

than in most other Federal order areas.

In many marketing areas, producerhandlers supply 1 percent or less of the

Class I sales. In the Pacific Northwest

area, however, they furnish almost 10

percent of the market’s Class I

dispositions. The larger average size of

the dairy farmers in the western United

States makes more likely the existence

of a producer-handler that is a

significant factor in the market.

The current order’s producer-handler

provisions are based on the history of

producer-handler operations in this

marketing area, reflecting difficulties

encountered in order administration,

attempts to circumvent order

provisions, and court challenges.

In addition to the current order

provisions, the producer-handler

definition would also contain language

clarifying that milk received by the

producer-handler at a location other

than the producer-handler’s processing

plant for distribution on routes will be

included as a receipt from another

handler.

Reserve Supply Unit

The Pacific Northwest order would

continue to provide for a cooperative

reserve supply unit. The existing

provision has many similarities to a

reserve supply plant, which is not

provided in this order but which is

included in several of the proposed

consolidated orders.

Under the terms of the present

provision, the cooperative members of

the reserve supply unit must be located

near a pool distributing plant, as a

reserve supply plant must be located in

the marketing area. Both the reserve

supply unit and the reserve supply

plant provisions require that the plant

or unit operator request prior approval

of the market administrator to initiate

and cancel their status, both require

long-term association with the market,

and both provide substantial penalties

for failing to meet all required

conditions. Although the cooperative

unit does not have monthly

qualification requirements, it is subject

to a call by the market administrator

after the market administrator’s

investigation of the need for

supplemental supplies of milk. Because

of the current existence of this

provision, based on the need shown at

a public hearing, and its similarities to

a pooling mechanism suggested for

other orders, provision for the

cooperative reserve supply unit would

continue to be included in the proposed

Pacific Northwest order.

Producer and Producer Milk

The proposed Pacific Northwest order

would contain a ‘‘dairy farmer for other

markets’’ provision for each month of

the year. The large volume of milk

production in California and

California’s quota system give dairy

farmers an incentive to pool production

in a volume equal to their quota pounds

on the California order, and then

attempt to share in the Pacific

Northwest Class I market with their

over-quota production, for which

returns under the California order are

much less. At the same time, none of the

California Class I returns would be

shared with Pacific Northwest

producers. Similarly, the reserve

supplies for the State-regulated markets

of Western Nevada and Montana should

not be allowed to share in returns from

the Pacific Northwest order’s higher

classes of utilization while enjoying the

benefits of the State orders’ Class I

returns.

The current provisions of the Pacific

Northwest order do not require that a

producer’s milk be received at pool

plants for the producer’s first pooled

delivery on the market or for any

specified period. If a handler meets its

overall performance requirements for

supplying milk to the market, it should

make no difference which individual

producer’s milk is actually delivered to

pool plants as long as the milk of each
4966 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

producer participating in the pool is

Grade A and available to the market if

and when needed. It is expensive,

inefficient, and unnecessary to move

milk from areas close to nonpool

manufacturing plants to bottling plants

in the city markets when that milk is not

needed for bottling. For the above

reasons and the physical fact that there

are often great distances and

mountainous terrain between plants and

farms in the more sparsely populated

West, no ‘‘touch base’’ requirements

should be included.

This order and other western orders

have allowed producers to pool milk on

more than one order during the same

month. Because of the locations of a

number of dairy farmers, their milk may

be used by pool plants regulated under

more than one order in a single month.

These producers also represent a reserve

supply for more than one market. Large,

multi-market handlers should be given

the flexibility to market and transport

their milk to fulfill the needs of their

customers in the most efficient way

possible.

The small degree of change from the

current provisions necessary in the

pooling provisions of the proposed

Pacific Northwest results in very little

change proposed for the order’s

diversion limits. The limit of 80% of the

handler’s supply of producer milk

should remain unchanged, with the

months during which the percentage is

effective changed from September

through April to September through

February. These months will correspond

to the months during which supply

plants must ship 20 percent of their

receipts to pool distributing plants.

There would be no limit on diversions

of producer milk for the months of

March through August. These delivery

standards have not been overly

restrictive nor associated unneeded

supplies with the market and should be

allowed to continue without change.

Payments to Producers and Cooperative

Associations

Although the current Pacific

Northwest order contains a multiple

component pricing plan very like that

proposed to be standard for the

consolidated orders, it does not now

and would not under this reform

process contain a somatic cell

adjustment provision. The level of

somatic cells in the western U.S. is

generally lower than in the east, with an

overall average of approximately

250,000 instead of 350,000. This lower

somatic cell count would seem to

reduce the need for such a provision.

Historically, the principal argument for

a somatic cell adjuster has been the

negative effect of somatic cells on the

cheese yields. Although cheese

manufacturing in the Northwest is

increasing, most cheese manufacturing

is done by cooperative associations who

have expressed the opinion that an

adjustment for somatic cells is a quality

issue best dealt with internally. The

somatic cell adjustments in the

proposed consolidated orders are not

incorporated in the proposed Pacific

Northwest order.

Announcement of Producer Prices

The dates on which handler reports,

market administrator’s announcement of

producer prices, and payment to

producers would remain unchanged

from those of the current order.

8. Miscellaneous and Administrative

(a) Consolidation of the Marketing

Service, Administrative Expense, and

Producer-Settlement Funds

To complete the proposed

consolidation of the present 31 Federal

orders effectively and equitably, the

reserve balances in the marketing

service, administrative expense, and

producer-settlement funds that have

resulted under the individual orders

would be combined.

The balances in these three funds

should be combined on the same basis

that the marketing areas are

consolidated into regional orders herein.

For instance, the Texas and New

Mexico-West Texas marketing areas are

merged into a new regional Southwest

order. Accordingly, the reserve balances

in the marketing service, administrative

expense and producer-settlement funds

of the two individual orders likewise

should be combined into three separate

funds established under the

consolidated Southwest order.

The marketing areas of the proposed

11 consolidated orders essentially

represent the territory covered by the 31

individual orders plus the territory

included in the former Tennessee Valley

marketing area. Because of this, the

handlers and producers servicing the

milk needs of the individual markets

will continue to furnish the milk needs

of the applicable regional market for the

most part.

In that regard, the reserve balances in

the funds that have resulted under the

31 individual orders should be

combined on a marketing area basis into

the appropriate separate fund

established for each of the 11 regional

orders. Any liabilities of such funds

under the individual orders would be

paid from the appropriate newly

established fund of the applicable

regional order. Similarly, obligations

that are due the separate funds under

the individual orders would be paid to

the appropriate combined fund of the

applicable consolidated order.

In most cases, the entire marketing

area of an order or orders is included in

the proposed consolidated marketing

area of one of the 11 regional orders.

Three present marketing areas would be

split between two consolidated orders.

One county of the present LouisvilleLexington-Evansville (Order 46)

marketing area would be included in the

Southeast order, and the rest of the

territory in the Order 46 marketing area

would be included under the

Appalachian order. Even though one

Order 46 county is included in the

proposed Southeast order, all of the

present Order 46 producers and

handlers are expected to be covered

under the proposed consolidated

Appalachian order. Accordingly, the

balances in the Order 46 marketing

service, administrative expense, and

producer settlement funds should be

consolidated into the three separate

funds established for the consolidated

Appalachian market.

Different regulatory situations,

however, will occur in the other two

instances where a current marketing

area is divided between two proposed

consolidated orders. One county of the

current Great Basin (Order 139)

marketing area would be included in the

consolidated Arizona-Las Vegas order

and the rest of the Order 139 marketing

area would be included in the

consolidated marketing area for the

West. Some of the present Order 139

producers and handlers would become

regulated under the Arizona-Las Vegas

consolidated order and others would

become regulated under the regional

order for the West. Similarly, two zones

of the Michigan Upper Peninsula (Order

44) marketing area would be included in

the consolidated Upper Midwest

marketing area and the other zone of the

Order 44 marketing area would be

included in the marketing area for the

Mideast regional order. Accordingly,

any reserve balances in the marketing

service, administrative expense and

producer-settlement funds of these two

individual orders should be divided

equitably among the applicable

consolidated orders.

The money accumulated in the

marketing service funds of the

individual orders is that which has been

paid by producers for whom the market

administrators are performing such

services. Since the marketing areas of

the proposed 11 regional orders

encompass the territory covered by the

individual orders, for the most part, the

producers who have contributed to the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4967

marketing service funds of the

individual orders are expected to

continue supplying milk for the

consolidated orders. Since marketing

service programs will be continued for

these producers under the regional

orders, it would be appropriate to

combine the reserve balances in the

marketing service funds of the order or

orders that are represented in the

consolidation of each of the proposed 11

regional orders.

When the proposed consolidated

marketing area includes the marketing

area of one or more individual orders,

any remaining balance in the marketing

service fund of the individual order or

orders should be combined in the

marketing service fund established for

the applicable consolidated order. If a

current marketing area is split between

two consolidated markets and the

regulatory status of producers and

handlers is divided between the two

regional orders, as is the case with the

Michigan Upper Peninsula and Great

Basin orders, any balance in the

marketing service fund of the individual

order should be prorated between the

two consolidated orders on the basis of

the amount of milk subject to the

marketing service deduction that will be

covered by each respective regional

order (using producer deliveries in the

last month the individual orders are in

effect but assuming that the marketing

areas had been consolidated).

The money paid to the administrative

expense fund is each handler’s

proportionate share of the cost of

administering the order. For the most

part, handlers currently regulated under

the individual orders will continue to be

regulated under the proposed

consolidated orders. In view of this, it

would be an unnecessary administrative

and financial burden to allocate the

reserve funds of the individual orders

back to handlers and then accumulate

an adequate reserve for each of the

consolidated orders. It would be as

equitable and more efficient to combine

the remaining administrative monies

accumulated under the individual

orders in the same manner as the

marketing areas are proposed to be

combined.

For the orders where the proposed

consolidated marketing area includes

the regulated territory of one or more of

the individual orders, any remaining

balance in the administrative expense

fund of the individual order or orders

would be combined into the

administrative expense fund established

for the applicable consolidated order. In

the situations where the current

individual marketing area is split and

the regulatory status of producers and

handlers is divided (as in the case of the

Michigan Upper Peninsula and Great

Basin orders) between two consolidated

marketing areas, the remaining balance

in the administrative expense fund

should be prorated between the two

regional orders on the basis of the

amount of milk that would be pooled

and priced under each respective

consolidated order (using producer milk

deliveries during the last month the

individual orders are in effect but

assuming that the orders had been

consolidated).

Likewise, the producer-settlement

fund balances of the individual orders

should be combined. They should be

combined on the same basis as the

marketing areas are consolidated herein.

This will enable the producersettlement funds of the consolidated

orders to continue without interruption.

The producers currently supplying

the individual markets are expected to

supply milk for the proposed

consolidated markets. Thus, monetary

balances in the producer-settlement

funds of the individual orders now

would be reflected in the pay prices of

the producers who will benefit from the

applicable consolidated orders. The

combined fund for each proposed

consolidated order also would serve as

a contingency fund from which money

would be available to meet obligations

(resulting from audit adjustments and

otherwise) occurring under the

individual orders.

The same procedure used in

combining the remaining balances in

the marketing service and

administrative expense funds of the

individual orders should be followed in

combining the producer-settlement fund

balances when the individual orders are

consolidated. For orders where the

consolidated marketing area includes

the marketing area of one or more

orders, any remaining balance in the

producer-settlement fund of the

individual order or orders would be

combined into the producer-settlement

fund established for the applicable

consolidated order. In the two situations

(Michigan Upper Peninsula and Great

Basin) where the marketing area of a

current order is split between two

proposed consolidated orders and some

of the individual market’s producers

and handlers would be regulated under

one consolidated order and others

would be regulated under another

consolidated order, the balance in the

producer-settlement fund should be

divided equitably between the two

consolidated orders. Since the Michigan

Upper Peninsula order is an individualhandler pool market, no producersettlement fund is provided. The

remaining balance in the producersettlement fund of the Great Basin order

should be prorated between the

consolidated Arizona-Las Vegas order

and the regional order for the West on

the basis of the amount of milk that will

be pooled and priced under each

respective proposed consolidated order

(using producer milk deliveries during

the last month the individual orders are

in effect but assuming that the orders

had been consolidated).

(b) Consolidation of the Transportation

Credit Balancing Funds

To complete the consolidation

process, the reserve balances in the

transportation credit balancing funds

that are in effect now under three

Southeast orders (Carolina, Order 5;

Southeast, Order 7; and LouisvilleLexington-Evansville, Order 46) should

be consolidated also. These funds

should be combined on a marketing area

basis. In that regard, the reserve

balances in the transportation credit

balancing funds of the Carolina and

Louisville-Lexington-Evansville orders

should be consolidated into a newly

established transportation credit

balancing fund for the Appalachian

order, which also includes the current

marketing areas of these two orders with

the exception of one county. Similarly,

the reserve balance in the transportation

credit balancing fund of the present

Southeast order should be transferred to

the consolidated Southeast order, which

includes all of the marketing area of the

present Southeast order. These

procedures will enable the

transportation credits to continue

without interruption under these two

proposed consolidated orders.

(c) Proposed General Findings

The proposed findings and

determinations hereinafter set forth

supplement those that were made when

the aforesaid orders were first issued

and when they were amended. The

previous findings and determinations

are hereby ratified and confirmed,

except where they may conflict with

those set forth herein.

(1) 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;

(2) The parity prices of milk as

determined pursuant to section 2 of the

Act are not reasonable in view of the

price of feeds, available supplies of

feeds, and other economic conditions

which affect market supply and demand

for milk in each of the aforesaid

marketing areas, and the minimum
4968 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

prices specified in the tentative

marketing agreements and the orders, as

hereby proposed to be amended, are

such prices as will reflect the aforesaid

factors, insure a sufficient quantity of

pure and wholesome milk, and be in the

public interest;

(3) The tentative marketing

agreements and the orders, as hereby

proposed to be amended, will regulate

the handling of milk in the same

manner as, and will be applicable only

to persons in the respective classes of

industrial and commercial activity

specified in the marketing agreements;

(4) All milk and milk products

handled by handlers, as defined in the

tentative marketing agreements and the

orders as hereby proposed to be

amended, are in the current of interstate

commerce or directly burden, obstruct,

or affect interstate commerce in milk or

its products; and

(5) It is hereby found that the

necessary expense of the market

administrator for the maintenance and

functioning of such agency will require

the payment by each handler, as his pro

rata share of such expense, 5 cents per

hundredweight or such lesser amount as

the Secretary may prescribe, with

respect to milk specified in § 1000.85 of

the General Provisions.

Proposed Marketing Agreements and

Order Amending the Orders

The proposed marketing agreements

are not included in this proposed rule

because the regulatory provisions

thereof would be the same as those

contained in the orders, as hereby

proposed to be amended. The following

order amending the orders regulating

the handling of milk in the respective

marketing areas of these orders is

proposed as the detailed and

appropriate means by which the

foregoing conclusions may be carried

out.

List of Subjects in 7 CFR Chapter X

Milk marketing orders.

For the reasons set forth in the

preamble and under the authority of 7

U.S.C. 601–674, Title 7, chapter X, CFR

parts 1002, 1004, 1012, 1013, 1036,

1040, 1044, 1046, 1049, 1050, 1064,

1065, 1068, 1076, 1079, 1106, 1135,

1137, 1138, and 1139 are proposed to be

removed, and Parts 1000, 1001, 1005,

1006, 1007, 1030, 1032, 1033, 1124,

1126, 1131, and 1134 are proposed to be

revised as follows:

PART 1000—GENERAL PROVISIONS

OF FEDERAL MILK MARKETING

ORDERS

Subpart A—Scope and Purpose

Sec.

1000.1 Scope and purpose of Part 1000.

Subpart B—Definitions

1000.2 General definitions.

1000.3 Route disposition.

1000.4 Plant.

1000.5 Distributing plant.

1000.6 Supply plant.

1000.8 Nonpool plant.

1000.9 Handler.

1000.14 Other source milk.

1000.15 Fluid milk product.

1000.16 Fluid cream product.

1000.17 [Reserved]

1000.18 Cooperative association.

1000.19 Commercial food processing

establishment.

Subpart C—Rules of Practice and

Procedure Governing Market

Administrators

1000.25 Market administrator.

Subpart D—Rules Governing Order

Provisions

1000.26 Continuity and separability of

provisions.

Subpart E—Rules of Practice and

Procedure Governing Handlers

1000.27 Handler responsibility for records

and facilities.

1000.28 Termination of obligations.

Subpart F—Classification of Milk

1000.40 Classes of utilization.

1000.41 [Reserved]

1000.42 Classification of transfers and

diversions.

1000.43 General classification rules.

1000.44 Classification of producer milk.

1000.45 Market administrator’s reports and

announcements concerning

classification.

Subpart G—Class Prices

1000.50 Class prices and component prices.

1000.51 [Reserved]

1000.52 Adjusted Class I differentials.

1000.53 Announcement of class prices and

component prices.

1000.54 Equivalent price.

Subpart H—Payments for Milk

1000.70 Producer-settlement fund.

1000.71 Payments to the producersettlement fund.

1000.72 Payments from the producersettlement fund.

1000.76 Payments by a handler operating a

partially regulated distributing plant.

1000.77 Adjustment of accounts.

1000.78 Charges on overdue accounts.

Subpart I—Administrative Assessment and

Marketing Service Deduction

1000.85 Assessment for order

administration.

1000.86 Deduction for marketing services.

Subpart J—Miscellaneous Regulations

1000.90 Dates.

1000.91–1000.92 [Reserved]

1000.93 OMB control number assigned

pursuant to the Paperwork Reduction

Act.

Authority: 7 U.S.C. 601–674.

Subpart A—Scope and Purpose

§ 1000.1 Scope and purpose of Part 1000.

This part sets forth certain terms,

definitions, and provisions which shall

be common to and part of each Federal

milk marketing order in 7 CFR, chapter

X except as specifically defined

otherwise, or modified, or otherwise

provided, in an individual order in 7

CFR, chapter X.

Subpart B—Definitions

§ 1000.2 General definitions.

(a) Act means Public Act No. 10, 73d

Congress, as amended and as reenacted

and amended by the Agricultural

Marketing Agreement Act of 1937, as

amended (7 U.S.C. 601 et seq.).

(b) Order means the applicable part of

Title 7 of the Code of Federal

Regulations issued pursuant to Section

8c of the Act as a Federal milk

marketing order (as amended).

(c) Department means the U.S.

Department of Agriculture.

(d) Secretary means the Secretary of

Agriculture of the United States or any

officer or employee of the Department to

whom authority has heretofore been

delegated, or to whom authority may

hereafter be delegated, to act in his

stead.

(e) Person means any individual,

partnership, corporation, association, or

other business unit.

§ 1000.3 Route disposition.

Route disposition means a delivery to

a retail or wholesale outlet (except a

plant), either directly or through any

distribution facility (including

disposition from a plant store, vendor,

or vending machine) of a fluid milk

product in consumer-type packages or

dispenser units classified as Class I

milk.

§ 1000.4 Plant.

(a) Except as provided in paragraph

(b) of this section, plant means the land,

buildings, facilities, and equipment

constituting a single operating unit or

establishment at which milk or milk

products are received, processed, or

packaged, including a facility described

in paragraph (b)(2) of this section if the

facility receives the milk of more than

one dairy farmer.

(b) Plant shall not include:

(1) A separate building without

stationary storage tanks that is used only
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4969

as a reload point for transferring bulk

milk from one tank truck to another or

a separate building used only as a

distribution point for storing packaged

fluid milk products in transit for route

disposition; or

(2) An on-farm facility operated as

part of a single dairy farm entity for the

separation of cream and skim or the

removal of water from milk.

§ 1000.5 Distributing plant.

Distributing plant means a plant that

is approved by a duly constituted

regulatory agency for the handling of

Grade A milk and at which fluid milk

products are processed or packaged and

from which there is route disposition.

§ 1000.6 Supply plant.

Supply plant means a plant, other

than a distributing plant, that is

approved by a duly constituted

regulatory agency for the handling of

Grade A milk and at which fluid milk

products are received or from which

fluid milk products are transferred or

diverted.

§ 1000.8 Nonpool plant.

Nonpool plant means any milk

receiving, manufacturing, or processing

plant other than a pool plant. The

following categories of nonpool plants

are further defined as follows:

(a) A plant fully regulated under

another Federal order means a plant

that is fully subject to the pricing and

pooling provisions of another Federal

order.

(b) Producer-handler plant means a

plant operated by a producer-handler as

defined under any Federal order.

(c) Partially regulated distributing

plant means a nonpool plant that is not

a plant fully regulated under another

Federal order, a producer-handler plant,

or an exempt plant, from which there is

route disposition in the marketing area

during the month.

(d) Unregulated supply plant means a

supply plant that does not qualify as a

pool supply plant and is not a plant

fully regulated under another Federal

order, a producer-handler plant, or an

exempt plant.

(e) An exempt plant means a plant

described in this paragraph that is

exempt from the pricing and pooling

provisions of any order provided that

the operator of the plant files reports as

prescribed by the market administrator

to enable determination of the handler’s

exempt status:

(1) A plant that is operated by a

governmental agency that has no route

disposition in commercial channels;

(2) A plant that is operated by a duly

accredited college or university

disposing of fluid milk products only

through the operation of its own campus

with no route disposition in commercial

channels;

(3) A plant from which the total route

disposition is for individuals or

institutions for charitable purposes

without remuneration; or

(4) A plant that has route disposition

of 150,000 pounds or less during the

month.

§ 1000.9 Handler.

Handler means:

(a) Any person who operates a pool

plant or a nonpool plant.

(b) Any person who receives packaged

fluid milk products from a plant for

resale and distribution to retail or

wholesale outlets, any person who as a

broker negotiates a purchase or sale of

fluid milk products or fluid cream

products from or to any pool or nonpool

plant, and any person who by purchase

or direction causes milk of producers to

be picked up at the farm and/or moved

to a plant. Persons who qualify as

handlers only under this paragraph

under any Federal milk order in 7 CFR,

chapter X are not subject to the payment

provisions of §§ll.70, ll.71,

ll.72, ll.73, ll.76, and ll.85 of

that order.

(c) Any cooperative association with

respect to milk that it receives for its

account from the farm of a producer and

delivers to pool plants or diverts to

nonpool plants pursuant to §l.13 of

the order. The operator of a pool plant

receiving milk from a cooperative

association may be the handler for such

milk if both parties notify the market

administrator of this agreement prior to

the time that the milk is delivered to the

pool plant and the plant operator

purchases the milk on the basis of

weights determined from its

measurement at the farm and butterfat

tests determined from farm bulk tank

samples.

§ 1000.14 Other source milk.

Other source milk means all skim

milk and butterfat contained in or

represented by:

(a) Receipts of fluid milk products

and bulk fluid cream products from any

source other than producers, handlers

described in § 1000.9(c), or pool plants;

(b) Products (other than fluid milk

products, fluid cream products, and

products produced at the plant during

the same month) from any source which

are reprocessed, converted into, or

combined with another product in the

plant during the month; and

(c) Receipts of any milk product

(other than a fluid milk product or a

fluid cream product) for which the

handler fails to establish a disposition.

§ 1000.15 Fluid milk product.

(a) Except as provided in paragraph

(b) of this section, fluid milk product

means any milk products in fluid or

frozen form containing less than 9

percent butterfat that are intended to be

used as beverages. Such products

include, but are not limited to: Milk, fatfree milk, lowfat milk, light milk,

reduced fat milk, milk drinks, eggnog

and cultured buttermilk, including any

such beverage products that are

flavored, cultured, modified with added

nonfat milk solids, sterilized,

concentrated (to not more than 50

percent total milk solids), or

reconstituted.

(b) The term fluid milk product shall

not include:

(1) Plain or sweetened evaporated

milk/skim milk, sweetened condensed

milk/skim milk, formulas especially

prepared for infant feeding or meal

replacement, any product that contains

by weight less than 6.5 percent nonfat

milk solids, and whey; and

(2) The quantity of skim milk

equivalent in any modified product

specified in paragraph (a) of this section

that is greater than an equal volume of

an unmodified product of the same

nature and butterfat content.

§ 1000.16 Fluid cream product.

Fluid cream product means cream

(other than plastic cream or frozen

cream), including sterilized cream, or a

mixture of cream and milk or skim milk

containing 9 percent or more butterfat,

with or without the addition of other

ingredients.

§ 1000.17 [Reserved]

§ 1000.18 Cooperative association.

Cooperative association means any

cooperative marketing association of

producers which the Secretary

determines is qualified under the

provisions of the Capper-Volstead Act,

has full authority in the sale of milk of

its members, and is engaged in

marketing milk or milk products for its

members. A federation of two or more

cooperatives incorporated under the

laws of any state will be considered a

cooperative association under any

Federal milk order if all member

cooperatives meet the requirements of

this section.

§ 1000.19 Commercial food processing

establishment.

Commercial food processing

establishment means any facility, other

than a milk plant, to which fluid milk

products and fluid cream products are
4970 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

disposed of, or producer milk is

diverted, that uses such receipts as

ingredients in food products and has no

other disposition of fluid milk products

other than those received in consumertype packages (1 gallon or less).

Producer milk diverted to commercial

food processing establishments shall be

subject to the same provisions relating

to diversions to plants, including, but

not limited to, §§ll.13 and ll.52 of

each Federal milk order in 7 CFR,

chapter X.

Subpart C—Rules of Practice and

Procedure Governing Market

Administrators

§ 1000.25 Market administrator.

(a) Designation. The agency for the

administration of the order shall be a

market administrator selected by the

Secretary and subject to removal at the

Secretary’s discretion. The market

administrator shall be entitled to

compensation determined by the

Secretary.

(b) Powers. The market administrator

shall have the following powers with

respect to each order under his/her

administration:

(1) Administer the order in

accordance with its terms and

provisions;

(2) Maintain funds outside of the

United States Department of the

Treasury for the purpose of

administering the order;

(3) Make rules and regulations to

effectuate the terms and provisions of

the order;

(4) Receive, investigate, and report

complaints of violations to the

Secretary; and

(5) Recommend amendments to the

Secretary.

(c) Duties. The market administrator

shall perform all the duties necessary to

administer the terms and provisions of

each order under his/her

administration, including, but not

limited to, the following:

(1) Employ and fix the compensation

of persons necessary to enable him/her

to exercise the powers and perform the

duties of the office;

(2) Pay out of funds provided by the

administrative assessment, except

expenses associated with functions for

which the order provides a separate

charge, all expenses necessarily

incurred in the maintenance and

functioning of the office and in the

performance of the duties of the office,

including the market administrator’s

compensation;

(3) Keep records which will clearly

reflect the transactions provided for in

the order, and upon request by the

Secretary, surrender the records to a

successor or such other person as the

Secretary may designate;

(4) Furnish information and reports

requested by the Secretary and submit

office records for examination by the

Secretary;

(5) Announce publicly at his/her

discretion, unless otherwise directed by

the Secretary, by such means as he/she

deems appropriate, the name of any

handler who, after the date upon which

the handler is required to perform such

act, has not:

(i) Made reports required by the order;

(ii) Made payments required by the

order; or

(iii) Made available records and

facilities as required pursuant to

§ 1000.27;

(6) Prescribe reports required of each

handler under the order. Verify such

reports and the payments required by

the order by examining records

(including such papers as copies of

income tax reports, fiscal and product

accounts, correspondence, contracts,

documents or memoranda of the

handler, and the records of any other

persons that are relevant to the

handler’s obligation under the order), by

examining such handler’s milk handling

facilities, and by such other

investigation as the market

administrator deems necessary for the

purpose of ascertaining the correctness

of any report or any obligation under the

order. Reclassify skim milk and butterfat

received by any handler if such

examination and investigation discloses

that the original classification was

incorrect;

(7) Furnish each regulated handler a

written statement of such handler’s

accounts with the market administrator

promptly each month. Furnish a

corrected statement to such handler if

verification discloses that the original

statement was incorrect; and

(8) Prepare and disseminate publicly

for the benefit of producers, handlers,

and consumers such statistics and other

information concerning operation of the

order and facts relevant to the

provisions thereof (or proposed

provisions) as do not reveal confidential

information.

Subpart D—Rules Governing Order

Provisions

§ 1000.26 Continuity and separability of

provisions.

(a) Effective time. The provisions of

the order or any amendment to the order

shall become effective at such time as

the Secretary may declare and shall

continue in force until suspended or

terminated.

(b) Suspension or termination. The

Secretary shall suspend or terminate

any or all of the provisions of the order

whenever he/she finds that such

provision(s) obstructs or does not tend

to effectuate the declared policy of the

Act. The order shall terminate whenever

the provisions of the Act authorizing it

cease to be in effect.

(c) Continuing obligations. If upon the

suspension or termination of any or all

of the provisions of the order there are

any obligations arising under the order,

the final accrual or ascertainment of

which requires acts by any handler, by

the market administrator or by any other

person, the power and duty to perform

such further acts shall continue

notwithstanding such suspension or

termination.

(d) Liquidation. (1) Upon the

suspension or termination of any or all

provisions of the order, the market

administrator, or such other liquidating

agent designated by the Secretary, shall,

if so directed by the Secretary, liquidate

the business of the market

administrator’s office, dispose of all

property in his/her possession or

control, including accounts receivable,

and execute and deliver all assignments

or other instruments necessary or

appropriate to effectuate any such

disposition; and

(2) If a liquidating agent is so

designated, all assets and records of the

market administrator shall be

transferred promptly to such liquidating

agent. If, upon such liquidation, the

funds on hand exceed the amounts

required to pay outstanding obligations

of the office of the market administrator

and to pay necessary expenses of

liquidation and distribution, such

excess shall be distributed to

contributing handlers and producers in

an equitable manner.

(e) Separability of provisions. If any

provision of the order or its application

to any person or circumstances is held

invalid, the application of such

provision and of the remaining

provisions of the order to other persons

or circumstances shall not be affected

thereby.

Subpart E—Rules of Practice and

Procedure Governing Handlers

§ 1000.27 Handler responsibility for

records and facilities.

Each handler shall maintain and

retain records of its operations and

make such records and its facilities

available to the market administrator. If

adequate records of a handler, or of any

other persons, that are relevant to the

obligation of such handler are not

maintained and made available, any
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4971

skim milk and butterfat required to be

reported by such handler for which

adequate records are not available shall

be considered as used in the highestpriced class.

(a) Records to be maintained. (1) Each

handler shall maintain records of its

operations (including, but not limited

to, records of purchases, sales,

processing, packaging, and disposition)

as are necessary to verify whether such

handler has any obligation under the

order, and if so, the amount of such

obligation. Such records shall be such as

to establish for each plant or other

receiving point for each month:

(i) The quantities of skim milk and

butterfat contained in, or represented

by, products received in any form,

including inventories on hand at the

beginning of the month, according to

form, time, and source of each receipt;

(ii) The utilization of all skim milk

and butterfat showing the respective

quantities of such skim milk and

butterfat in each form disposed of or on

hand at the end of the month; and

(iii) Payments to producers, dairy

farmers and cooperative associations,

including the amount and nature of any

deductions and the disbursement of

money so deducted.

(2) Each handler shall keep such other

specific records as the market

administrator deems necessary to verify

or establish such handler’s obligation

under the order.

(b) Availability of records and

facilities. Each handler shall make

available all records pertaining to such

handler’s operations and all facilities

the market administrator finds are

necessary to verify the information

required to be reported by the order

and/or to ascertain such handler’s

reporting, monetary or other obligation

under the order. Each handler shall

permit the market administrator to

weigh, sample, and test milk and milk

products and observe plant operations

and equipment and make available to

the market administrator such facilities

as are necessary to carry out his/her

duties.

(c) Retention of records. All records

required under the order to be made

available to the market administrator

shall be retained by the handler for a

period of 3 years to begin at the end of

the month to which such records

pertain. If, within such 3-year period,

the market administrator notifies the

handler in writing that the retention of

such records, or of specified records, is

necessary in connection with a

proceeding under section 8c(15)(A) of

the Act or a court action specified in

such notice, the handler shall retain

such records, or specified records, until

further written notification from the

market administrator. The market

administrator shall give further written

notification to the handler promptly

upon the termination of the litigation or

when the records are no longer

necessary in connection therewith.

§ 1000.28 Termination of obligations.

The provisions of this section shall

apply to any obligation under the order

for the payment of money:

(a) Except as provided in paragraphs

(b) and (c) of this section, the obligation

of any handler to pay money required to

be paid under the terms of the order

shall terminate 2 years after the last day

of the month during which the market

administrator receives the handler’s

report of receipts and utilization on

which such obligation is based, unless

within such 2-year period, the market

administrator notifies the handler in

writing that such money is due and

payable. Service of such written notice

shall be complete upon mailing to the

handler’s last known address and it

shall contain, but need not be limited to,

the following information:

(1) The amount of the obligation;

(2) The month(s) on which such

obligation is based; and

(3) If the obligation is payable to one

or more producers or to a cooperative

association, the name of such

producer(s) or such cooperative

association, or if the obligation is

payable to the market administrator, the

account for which it is to be paid.

(b) If a handler fails or refuses, with

respect to any obligation under the

order, to make available to the market

administrator all records required by the

order to be made available, the market

administrator may notify the handler in

writing, within the 2-year period

provided for in paragraph (a) of this

section, of such failure or refusal. If the

market administrator so notifies a

handler, the said 2-year period with

respect to such obligation shall not

begin to run until the first day of the

month following the month during

which all such records pertaining to

such obligation are made available to

the market administrator.

(c) Notwithstanding the provisions of

paragraphs (a) and (b) of this section, a

handler’s obligation under the order to

pay money shall not be terminated with

respect to any transaction involving

fraud or willful concealment of a fact,

material to the obligation, on the part of

the handler against whom the obligation

is sought to be imposed.

(d) Unless the handler files a petition

pursuant to section 8c(15)(A) of the Act

and the applicable rules and regulations

(7 CFR 900.50 et seq.) within the

applicable 2-year period indicated

below, the obligation of the market

administrator:

(1) To pay a handler any money

which such handler claims is due under

the terms of the order shall terminate 2

years after the end of the month during

which the skim milk and butterfat

involved in the claim were received; or

(2) To refund any payment made by

a handler (including a deduction or

offset by the market administrator) shall

terminate 2 years after the end of the

month during which payment was made

by the handler.

Subpart F—Classification of Milk

§ 1000.40 Classes of utilization.

Except as provided in § 1000.42, all

skim milk and butterfat required to be

reported pursuant to §ll.30 of each

Federal milk order in 7 CFR, chapter X

shall be classified as follows:

(a) Class I milk shall be all skim milk

and butterfat:

(1) Disposed of in the form of fluid

milk products, except as otherwise

provided in this section;

(2) Used to produce fluid milk

products modifed in volume by the

addition of nonmilk ingredients and/or

previously processed and priced skim

milk and butterfat, including milkshake

and milkshake drinks sold in containers

less than one half-gallon;

(3) In packaged fluid milk products in

inventory at the end of the month,

exclusive of skim milk and butterfat

accounted for in paragraph (a)(2) of this

section; and

(4) In shrinkage assigned pursuant to

§ 1000.43(b).

(b) Class II milk shall be all skim milk

and butterfat:

(1) In fluid milk products in

containers larger than 1 gallon and fluid

cream products disposed of or diverted

to a commercial food processing

establishment if the market

administrator is permitted to audit the

records of the commercial food

processing establishment for the

purpose of verification. Otherwise, such

uses shall be Class I;

(2) Used to produce:

(i) Cottage cheese, lowfat cottage

cheese, dry curd cottage cheese, ricotta

cheese, pot cheese, Creole cheese, cream

cheese and any similar soft, highmoisture cheese resembling cottage

cheese in form or use;

(ii) Milkshake and ice milk mixes (or

bases), frozen desserts, and frozen

dessert mixes distributed in half-gallon

containers or larger and intended to be

used in soft or semi-solid form;

(iii) Aerated cream, frozen cream, sour

cream, sour half-and-half, sour cream
4972 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

mixtures containing nonmilk items,

yogurt, and any other semi-solid

product resembling a Class II product;

(iv) Custards, puddings, pancake

mixes, coatings, batter, and similar

products;

(v) Buttermilk biscuit mixes and other

buttermilk for baking that contain food

starch in excess of 2% of the total

solids, provided that the product is

labeled to indicate the food starch

content;

(vi) Formulas especially prepared for

infant feeding or meal replacement;

(vii) Candy, soup, bakery products

and other prepared foods which are

processed for general distribution to the

public, and intermediate products,

including sweetened condensed milk, to

be used in processing such prepared

food products;

(viii) A fluid cream product or any

product containing artificial fat or fat

substitutes that resembles a fluid cream

product, except as otherwise provided

in paragraph (c) of this section;

(ix) Any product not otherwise

specified in this section; and

(3) In shrinkage assigned pursuant to

§ 1000.43(b).

(c) Class III milk shall be all skim milk

and butterfat:

(1) Used to produce:

(i) Spreadable cheeses (other than

cream cheese) and hard cheese of types

that may be shredded, grated, or

crumbled and that are not included in

paragraph (b)(2)(i) of this section;

(ii) Plastic cream, anhydrous milkfat,

and butteroil; and

(iii) Evaporated or sweetened

condensed milk/skim milk in a

consumer-type package;

(2) In inventory at the end of the

month of fluid milk products and fluid

cream products in bulk form;

(3) In any products classified

pursuant to paragraphs (a) or (b) of this

section that are destroyed or lost by a

handler in a vehicular accident, flood,

fire, or in a similar occurrence beyond

the handler’s control, to the extent that

the quantities destroyed or lost can be

verified from records satisfactory to the

market administrator;

(4) In the skim milk equivalent of

nonfat milk solids used to modify a

fluid milk product that has not been

accounted for in Class I; and

(5) In shrinkage assigned pursuant to

§ 1000.43(b).

(d) Class IV milk shall be all skim

milk and butterfat:

(1) Used to produce:

(i) Butter; and

(ii) Any milk product in dried form;

and

(2) In shrinkage assigned pursuant to

§ 1000.43(b).

§ 1000.41 [Reserved]

§ 1000.42 Classification of transfers and

diversions.

(a) Transfers and diversions to pool

plants. Skim milk or butterfat

transferred or diverted in the form of a

fluid milk product or transferred in the

form of a bulk fluid cream product from

a pool plant to another pool plant shall

be classified as Class I milk unless the

operators of both plants request the

same classification in another class. In

either case, the classification shall be

subject to the following conditions:

(1) The skim milk and butterfat

classified in each class shall be limited

to the amount of skim milk and

butterfat, respectively, remaining in

such class at the receiving plant after

the computations pursuant to

§ 1000.44(a)(9) and the corresponding

step of § 1000.44(b);

(2) If the transferring plant received

during the month other source milk to

be allocated pursuant to § 1000.44(a)(3)

or the corresponding step of

§ 1000.44(b), the skim milk or butterfat

so transferred shall be classified so as to

allocate the least possible Class I

utilization to such other source milk;

and

(3) If the transferring handler received

during the month other source milk to

be allocated pursuant to § 1000.44(a)(8)

or (9) or the corresponding steps of

§ 1000.44(b), the skim milk or butterfat

so transferred, up to the total of the skim

milk and butterfat, respectively, in such

receipts of other source milk, shall not

be classified as Class I milk to a greater

extent than would be the case if the

other source milk had been received at

the receiving plant.

(b) Transfers and diversions to a plant

regulated under another Federal order.

Skim milk or butterfat transferred or

diverted in the form of a fluid milk

product or transferred in the form of a

bulk fluid cream product from a pool

plant to a plant regulated under another

Federal order shall be classified in the

following manner. Such classification

shall apply only to the skim milk or

butterfat that is in excess of any receipts

at the pool plant from a plant regulated

under another Federal order of skim

milk and butterfat, respectively, in fluid

milk products and bulk fluid cream

products, respectively, that are in the

same category as described in paragraph

(b)(1) or (2) of this section:

(1) As Class I milk, if transferred as

packaged fluid milk products;

(2) If transferred or diverted in bulk

form, classification shall be in the

classes to which allocated under the

other order:

(i) If the operators of both plants so

request in their reports of receipts and

utilization filed with their respective

market administrators, transfers in bulk

form shall be classified as other than

Class I to the extent that such utilization

is available for such classification

pursuant to the allocation provisions of

the other order;

(ii) If diverted, the diverting handler

must request a classification other than

Class I. If the plant receiving the

diverted milk does not have sufficient

utilization available for the requested

classification and some of the diverted

milk is consequently assigned to Class

I use, the diverting handler shall be

given the option of designating the

entire load of diverted milk as producer

milk at the plant physically receiving

the milk. Alternatively, if the diverting

handler so chooses, it may designate

which dairy farmers whose milk was

diverted during the month will be

designated as producers under the order

physically receiving the milk. If the

diverting handler declines to accept

either of these options, the market

administrator will prorate the portion of

diverted milk in excess of Class II, III,

and IV use among all the dairy farmers

whose milk was received from the

diverting handler on the last day of the

month, then the second-to-last day, and

continuing in that fashion until the

excess diverted milk has been assigned

as producer milk under the receiving

order; and

(iii) If information concerning the

classes to which such transfers or

diversions were allocated under the

other order is not available to the market

administrator for the purpose of

establishing classification under this

paragraph, classification shall be Class I,

subject to adjustment when such

information is available.

(c) Transfers and diversions to

producer-handlers and to exempt

plants. Skim milk or butterfat that is

transferred or diverted from a pool plant

to a producer-handler under any Federal

order in 7 CFR, chapter X or to an

exempt plant shall be classified:

(1) As Class I milk if transferred or

diverted to a producer-handler;

(2) As Class I milk if transferred to an

exempt plant in the form of a packaged

fluid milk product; and

(3) In accordance with the utilization

assigned to it by the market

administrator if transferred or diverted

in the form of a bulk fluid milk product

or transferred in the form of a bulk fluid

cream product to an exempt plant. For

this purpose, the receiving handler’s

utilization of skim milk and butterfat in

each class, in series beginning with

Class IV, shall be assigned to the extent
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4973

possible to its receipts of skim milk and

butterfat, in bulk fluid cream products,

and bulk fluid milk products,

respectively, pro rata to each source.

(d) Transfers and diversions to other

nonpool plants. Skim milk or butterfat

transferred or diverted in the following

forms from a pool plant to a nonpool

plant that is not a plant regulated under

another order in 7 CFR, chapter X, an

exempt plant, or a producer-handler

plant shall be classified:

(1) As Class I milk, if transferred in

the form of a packaged fluid milk

product; and

(2) As Class I milk, if transferred or

diverted in the form of a bulk fluid milk

product or transferred in the form of a

bulk fluid cream product, unless the

following conditions apply:

(i) If the conditions described in

paragraphs (d)(2)(i)(A) and (B) of this

section are met, transfers or diversions

in bulk form shall be classified on the

basis of the assignment of the nonpool

plant’s utilization, excluding the milk

equivalent of both nonfat milk solids

and concentrated milk used in the plant

during the month, to its receipts as set

forth in paragraphs (d)(2)(ii) through

(viii) of this section:

(A) The transferring handler or

diverting handler claims such

classification in such handler’s report of

receipts and utilization filed pursuant to

§ ll.30 of each Federal milk order in

7 CFR, chapter X for the month within

which such transaction occurred; and

(B) The nonpool plant operator

maintains books and records showing

the utilization of all skim milk and

butterfat received at such plant which

are made available for verification

purposes if requested by the market

administrator;

(ii) Route disposition in the marketing

area of each Federal milk order in 7

CFR, chapter X from the nonpool plant

and transfers of packaged fluid milk

products from such nonpool plant to

plants fully regulated thereunder shall

be assigned to the extent possible in the

following sequence:

(A) Pro rata to receipts of packaged

fluid milk products at such nonpool

plant from pool plants;

(B) Pro rata to any remaining

unassigned receipts of packaged fluid

milk products at such nonpool plant

from plants regulated under other

Federal orders in 7 CFR, chapter X;

(C) Pro rata to receipts of bulk fluid

milk products at such nonpool plant

from pool plants; and

(D) Pro rata to any remaining

unassigned receipts of bulk fluid milk

products at such nonpool plant from

plants regulated under other Federal

orders in 7 CFR, chapter X;

(iii) Any remaining Class I disposition

of packaged fluid milk products from

the nonpool plant shall be assigned to

the extent possible pro rata to any

remaining unassigned receipts of

packaged fluid milk products at such

nonpool plant from pool plants and

plants regulated under other Federal

orders in 7 CFR, chapter X;

(iv) Transfers of bulk fluid milk

products from the nonpool plant to a

plant regulated under any Federal order

in 7 CFR, chapter X, to the extent that

such transfers to the regulated plant

exceed receipts of fluid milk products

from such plant and are allocated to

Class I at the receiving plant, shall be

assigned to the extent possible in the

following sequence:

(A) Pro rata to receipts of fluid milk

products at such nonpool plant from

pool plants; and

(B) Pro rata to any remaining

unassigned receipts of fluid milk

products at such nonpool plant from

plants regulated under other Federal

orders in 7 CFR, chapter X;

(v) Any remaining unassigned Class I

disposition from the nonpool plant shall

be assigned to the extent possible in the

following sequence:

(A) To such nonpool plant’s receipts

from dairy farmers who the market

administrator determines constitute

regular sources of Grade A milk for such

nonpool plant; and

(B) To such nonpool plant’s receipts

of Grade A milk from plants not fully

regulated under any Federal order in 7

CFR, chapter X which the market

administrator determines constitute

regular sources of Grade A milk for such

nonpool plant;

(vi) Any remaining unassigned

receipts of bulk fluid milk products at

the nonpool plant from pool plants and

plants regulated under other Federal

orders in 7 CFR, chapter X shall be

assigned, pro rata among such plants, to

the extent possible first to any

remaining Class I utilization and then to

all other utilization, in sequence

beginning with Class IV at such nonpool

plant;

(vii) Receipts of bulk fluid cream

products at the nonpool plant from pool

plants and plants regulated under other

Federal orders in 7 CFR, chapter X shall

be assigned, pro rata among such plants,

to the extent possible to any remaining

utilization, in sequence beginning with

Class IV at such nonpool plant; and

(viii) In determining the nonpool

plant’s utilization for purposes of this

paragraph, any fluid milk products and

bulk fluid cream products transferred

from such nonpool plant to a plant not

fully regulated under any Federal order

in 7 CFR, chapter X shall be classified

on the basis of the second plant’s

utilization using the same assignment

priorities at the second plant that are set

forth in this paragraph.

§ 1000.43 General classification rules.

In determining the classification of

producer milk pursuant to § 1000.44,

the following rules shall apply:

(a) Each month the market

administrator shall correct for

mathematical and other obvious errors

all reports filed pursuant to §ll.30 of

each Federal milk order in 7 CFR,

chapter X and shall compute separately

for each pool plant, and for each

cooperative association with respect to

milk for which it is the handler

pursuant to § 1000.9(c) the pounds of

skim milk and butterfat, respectively, in

each class in accordance with

§§ 1000.40 and 1000.42, and paragraph

(b) of this section.

(b) For purposes of classifying all milk

reported by a handler pursuant to

§ ll.30 of each Federal milk order in

7 CFR, chapter X, the market

administrator shall:

(1) Determine the shrinkage or

overage of skim milk and butterfat for

each pool plant and for each handler

described in § 1000.9(c) by subtracting

total utilization from total receipts. Any

positive difference would be shrinkage,

and any negative difference would be

overage;

(2) Prorate the shrinkage or overage

computed in paragraph (b)(1) of this

section to the respective quantities of

skim milk and butterfat reported in each

class. In the case of a handler described

in § 1000.9(c), the proration of shrinkage

shall be based upon the utilization of

the plants to which the milk was

delivered; and

(3) Add the prorated shrinkage to, or

subtract the prorated overage from, the

handler’s reported utilization. The

results shall be known as the gross

utilization in each class.

(c) If any of the water contained in the

milk from which a product is made is

removed before the product is utilized

or disposed of by the handler, the

pounds of skim milk in such product

that are to be considered under this part

as used or disposed of by the handler

shall be an amount equivalent to the

nonfat milk solids contained in such

product plus all of the water originally

associated with such solids.

(d) Skim milk and butterfat contained

in receipts of bulk concentrated fluid

milk and nonfluid milk products that

are reconstituted for fluid use shall be

assigned to Class I use, up to the

reconstituted portion of labeled

reconstituted fluid milk products, on a

pro rata basis (except for any Class I use
4974 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

of specific concentrated receipts that is

established by the handler) prior to any

assignments under § 1000.44. Any

remaining skim milk and butterfat in

concentrated receipts shall be assigned

to uses under § 1000.44 on a pro rata

basis, unless a specific use of such

receipts is established by the handler.

§ 1000.44 Classification of producer milk.

For each month the market

administrator shall determine for each

handler described in § 1000.9(a) for each

pool plant of the handler separately and

for each handler described in § 1000.9(c)

the classification of producer milk by

allocating the handler’s receipts of skim

milk and butterfat to the gross

utilization of such receipts pursuant to

§ 1000.43(b)(3) by such handler as

follows:

(a) Skim milk shall be allocated in the

following manner:

(1) Subtract from the pounds of skim

milk in Class I the pounds of skim milk

in:

(i) Receipts of packaged fluid milk

products from an unregulated supply

plant to the extent that an equivalent

amount of skim milk disposed of to

such plant by handlers fully regulated

under any Federal order in 7 CFR,

chapter X is classified and priced as

Class I milk and is not used as an offset

for any other payment obligation under

any order in 7 CFR, chapter X;

(ii) Packaged fluid milk products in

inventory at the beginning of the month.

This paragraph shall apply only if the

pool plant was subject to the provisions

of this paragraph or comparable

provisions of another Federal order in 7

CFR, chapter X in the immediately

preceding month;

(iii) Fluid milk products received in

packaged form from plants regulated

under other Federal orders in 7 CFR,

chapter X;

(iv) Any remaining receipts of skim

milk shall be allocated pursuant to

paragraph (a)(3)(iv) of this section.

(2) Subtract from the pounds of skim

milk in Class II the pounds of skim milk

in the receipts of skim milk in bulk

concentrated fluid milk products and in

other source milk (except other source

milk received in the form of an

unconcentrated fluid milk product or a

fluid cream product) that is used to

produce, or added to, any product in

Class II (excluding the quantity of such

skim milk that was classified as Class III

milk pursuant to § 1000.40(c)(4)). Any

remaining receipts of skim milk shall be

allocated pursuant to paragraph

(a)(3)(iv) of this section.

(3) Subtract from the pounds of skim

milk remaining in each class, in series

beginning with Class IV, the pounds of

skim milk in:

(i) Receipts of bulk concentrated fluid

milk products and other source milk

(except other source milk received in

the form of an unconcentrated fluid

milk product);

(ii) Receipts of fluid milk products

and bulk fluid cream products for which

appropriate health approval is not

established and from unidentified

sources;

(iii) Receipts of fluid milk products

and bulk fluid cream products from an

exempt plant;

(iv) Fluid milk products and bulk

fluid cream products received, or

acquired for distribution, from a

producer-handler as defined under this

order or any other Federal order in 7

CFR, chapter X; and

(v) Any receipts not subtracted

pursuant to paragraphs (a)(1) and (a)(2)

of this section.

(4) Subtract from the pounds of skim

milk remaining in all classes other than

Class I, in sequence beginning with

Class IV, the receipts of fluid milk

products from an unregulated supply

plant that were not previously

subtracted in this section for which the

handler requests classification other

than Class I, but not in excess of the

pounds of skim milk remaining in these

other classes combined.

(5) Subtract from the pounds of skim

milk remaining in all classes other than

Class I, in sequence beginning with

Class IV, receipts of fluid milk products

from an unregulated supply plant that

were not subtracted in previous

paragraphs, and which are in excess of

the pounds of skim milk determined

pursuant to paragraphs (a)(5)(i) through

(iii) of this section;

(i) Multiply by 1.25 the pounds of

skim milk remaining in Class I at this

allocation step;

(ii) Subtract from the above result the

pounds of skim milk in receipts of

producer milk and fluid milk products

from pool plants of other handlers; and

(iii) Multiply any plus quantity

resulting above by the percentage that

the receipts of skim milk in fluid milk

products from unregulated supply

plants remaining at this pool plant is of

all such receipts remaining pursuant to

this allocation step.

(6) Subtract from the pounds of skim

milk remaining in all classes other than

Class I, in sequence beginning with

Class IV, the pounds of skim milk in

receipts of bulk fluid milk products

from a handler regulated under another

Federal order in 7 CFR, chapter X that

are in excess of bulk fluid milk products

transferred or diverted to such handler,

if other than Class I classification is

requested, but not in excess of the

pounds of skim milk remaining in these

classes combined.

(7) Subtract from the pounds of skim

milk remaining in each class, in series

beginning with Class III (or Class IV if

the plant had only Class IV utilization),

the pounds of skim milk in fluid milk

products and bulk fluid cream products

in inventory at the beginning of the

month that were not previously

subtracted in this section.

(8) Subtract from the pounds of skim

milk remaining in each class at the

plant, pro rata to the total pounds of

skim milk remaining in Class I and in

all other classes combined, and in

sequence beginning with Class IV, the

pounds of skim milk in receipts of fluid

milk products from an unregulated

supply plant that were not previously

subtracted in this section and that were

not offset by transfers or diversions of

fluid milk products to the unregulated

supply plant from which fluid milk

products to be allocated at this step

were received.

(9) Subtract in the manner specified

below from the pounds of skim milk

remaining in each class the pounds of

skim milk in receipts of bulk fluid milk

products from a handler regulated under

another Federal order in 7 CFR, chapter

X that are in excess of bulk fluid milk

products transferred or diverted to such

handler that were not subtracted in

paragraph (a)(6) of this section;

(i) Such subtraction shall be pro rata

to the pounds of skim milk in Class I

and in all other classes combined, with

the quantity prorated to all classes

combined being subtracted in sequence

beginning with Class IV, with respect to

whichever of the following quantities

represents the lower proportion of Class

I milk:

(A) The estimated utilization of skim

milk of all handlers in each class as

announced for the month pursuant to

§ 1000.45(a); or

(B) The total pounds of skim milk

remaining in each class at this

allocation step.

(ii) [Reserved]

(10) Subtract from the pounds of skim

milk remaining in each class the pounds

of skim milk in receipts of fluid milk

products and bulk fluid cream products

from another pool plant according to the

classification of such products pursuant

to § 1000.42(a).

(b) Butterfat shall be allocated in

accordance with the procedure outlined

for skim milk in paragraph (a) of this

section; and

(c) The quantity of producer milk in

each class shall be the combined

pounds of skim milk and butterfat

remaining in each class after the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4975

computations pursuant to paragraphs (a)

and (b) of this section.

§ 1000.45 Market administrator’s reports

and announcements concerning

classification.

(a) Whenever required for the purpose

of allocating receipts from other Federal

order plants pursuant to § 1000.44(a)(9)

and the corresponding step of

§ 1000.44(b), the market administrator

shall estimate and publicly announce

the utilization (to the nearest whole

percentage) in Class I during the month

of skim milk and butterfat, respectively,

in producer milk of all handlers. The

estimate shall be based upon the most

current available data and shall be final

for such purpose.

(b) The market administrator shall

report to the other Federal order market

administrators, as soon as possible after

the handlers’ reports of receipts and

utilization are received, the class to

which receipts from other Federal order

plants are allocated pursuant to

§§ 1000.43(d) and 1000.44 (including

any reclassification of inventories of

bulk concentrated fluid milk products),

and thereafter any change in allocation

required to correct errors disclosed on

the verification of such report.

(c) The market administrator shall

furnish each handler operating a pool

plant who has shipped fluid milk

products or bulk fluid cream products to

a plant fully regulated under another

Federal order in 7 CFR, chapter X the

class to which the shipments were

allocated by the market administrator of

the other Federal order in 7 CFR,

chapter X on the basis of the report by

the receiving handler and, as necessary,

any changes in the allocation arising

from the verification of such report.

(d) The market administrator shall

report to each cooperative association

which so requests, the percentage of

producer milk delivered by members of

the association that was used in each

class by each handler receiving the

milk. For the purpose of this report, the

milk so received shall be prorated to

each class in accordance with the total

utilization of producer milk by the

handler.

Subpart G—Class Prices

§ 1000.50 Class prices and component

prices.

Subject to the provisions of § 1000.52,

the class prices per hundredweight of

milk containing 3.5 percent butterfat

and the component prices for the month

shall be as follows:

(a) Class I price. The Class I price

shall be .965 times the Class I skim milk

price plus 3.5 times the Class I butterfat

price.

(b) Class II price. The Class II price

shall be .965 times the Class II skim

milk price plus 3.5 times the month’s

butterfat price.

(c) Class III price. The Class III price

shall be .965 times the Class III skim

milk price plus 3.5 times the month’s

butterfat price.

(d) Class IV price. The Class IV price

shall be .965 times the Class IV skim

milk price plus 3.5 times the month’s

butterfat price.

(e) Class I differential price. The Class

I differential price shall be the

difference between the current month’s

Class I and Class III prices (this price

may be negative).

(f) Class II differential price. The Class

II differential price shall be the

difference between the current month’s

Class II and Class IV prices.

(g) Class I skim milk price. The Class

I skim milk price per hundredweight,

rounded to the nearest cent, shall be the

adjusted Class I differential effective at

the location of the plant as specified in

§ 1000.52(a) plus a six month declining

average computed by totaling the value

of the higher of Class III or Class IV skim

milk price for each month, starting with

the second preceding month, multiplied

by a factor of six and reducing the factor

by one for each preceding month and

dividing the sum by 21.

(h) Class II skim milk price. The Class

II skim milk price per hundredweight

shall be the Class IV skim milk price for

the month plus 70 cents.

(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 3.3

pounds of protein plus the other solids

price per pound times 5.7 pounds of

other solids;

(j) 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

pounds of nonfat solids.

(k) Class I butterfat price. The Class I

butterfat price per pound, rounded to

the nearest one-hundredth cent, shall be

the adjusted Class I differential effective

at the location of the plant as specified

in § 1000.52(a) divided by 100, plus a

six month declining average computed

by totaling the value of the butterfat

price for each month, starting with the

second preceding month, multiplied by

a factor of six and reducing the factor by

one for each preceding month and

dividing the sum by 21.

(l) Butterfat price. The butterfat price

per pound, rounded to the nearest onehundredth cent, shall be the National

Agricultural Statistical Service (NASS)

AA Butter survey price as reported by

the Department less .079 (make

allowance), with the result divided by

0.82.

(m) Nonfat solids price. The nonfat

solids price per pound, rounded to the

nearest one-hundredth cent, shall be the

NASS nonfat dry milk survey price as

reported by the Department less $0.125

(make allowance), with the result

divided by 0.96.

(n) Protein price. The protein price

per pound, rounded to the nearest onehundredth cent shall be the total of:

(1) The NASS 40-lb block cheese

survey price as reported by the

Department less 12.7 cents, with the

result multiplied by 1.32; and

(2) Multiply by 1.20 an amount

computed as follows: The NASS 40-lb

block cheese survey price as reported by

the Department less 12.7 cents, with the

result multiplied by 1.582 then reduced

by the butterfat price.

(o) Other solids price. The other solids

price per pound, rounded to the nearest

one-hundredth cent, shall be the NASS

dry whey survey price as reported by

the Department minus 10 cents, with

the result divided by 0.968.

(p) Somatic cell adjustment. (1) The

somatic cell adjustment rate, per 1,000

somatic cells, rounded to five decimal

places, shall be computed by

multiplying .0005 times the monthly

NASS 40-pound block cheese survey

price;

(2) The somatic cell adjustment, per

hundredweight, shall be determined by

subtracting from 350 the somatic cell

count (in thousands) of the milk,

multiplying the difference by the

somatic cell adjustment rate, and

rounding to the nearest full cent.

§ 1000.51 [Reserved]

§ 1000.52 Adjusted Class I differentials.

The Class I differential adjusted for

location to be used in § 1000.50(g) and

(k) shall be as follows, except that:

(1) Under the Option 1B RevenueEnhancement Phase-In, the differential

shall be increased by $1.10 in 1999, $.70

in 2000, $.40 in 2001, and $.20 in 2002;

and

(2) Under the Option 1B Revenue

Neutral Phase-In, the differential shall

be increased by $.55 in 1999, $.35 in

2000, $.20 in 2001, and $.10 in 2002:
4976 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

AUTAUGA ................................................... AL 3.30 3.12 2.96 2.79 2.63 2.47

BALDWIN .................................................... AL 3.50 3.43 3.29 3.14 3.00 2.85

BARBOUR ................................................... AL 3.45 3.27 3.14 3.00 2.87 2.74

BIBB ............................................................ AL 3.10 2.93 2.78 2.63 2.48 2.33

BLOUNT ...................................................... AL 3.10 2.80 2.62 2.45 2.27 2.09

BULLOCK .................................................... AL 3.30 3.16 3.04 2.91 2.79 2.67

BUTLER ...................................................... AL 3.45 3.26 3.11 2.97 2.82 2.68

CALHOUN ................................................... AL 3.10 2.92 2.75 2.59 2.42 2.26

CHAMBERS ................................................ AL 3.10 3.05 2.92 2.79 2.66 2.53

CHEROKEE ................................................ AL 3.10 2.82 2.66 2.51 2.35 2.19

CHILTON ..................................................... AL 3.10 3.02 2.86 2.71 2.55 2.39

CHOCTAW .................................................. AL 3.30 3.23 3.06 2.90 2.73 2.56

CLARKE ...................................................... AL 3.45 3.25 3.10 2.94 2.79 2.64

CLAY ........................................................... AL 3.10 2.94 2.80 2.65 2.51 2.37

CLEBURNE ................................................. AL 3.10 2.93 2.78 2.63 2.48 2.33

COFFEE ...................................................... AL 3.45 3.28 3.16 3.05 2.93 2.81

COLBERT ................................................... AL 2.90 2.67 2.50 2.34 2.17 2.01

CONECUH .................................................. AL 3.45 3.27 3.13 3.00 2.86 2.73

COOSA ....................................................... AL 3.10 3.02 2.86 2.71 2.55 2.39

COVINGTON ............................................... AL 3.45 3.28 3.15 3.03 2.90 2.78

CRENSHAW ............................................... AL 3.45 3.26 3.12 2.97 2.83 2.69

CULLMAN ................................................... AL 3.10 2.79 2.60 2.41 2.22 2.03

DALE ........................................................... AL 3.45 3.28 3.16 3.05 2.93 2.81

DALLAS ....................................................... AL 3.30 3.13 2.98 2.82 2.67 2.52

DE KALB ..................................................... AL 2.90 2.68 2.53 2.38 2.23 2.08

ELMORE ..................................................... AL 3.30 3.12 2.96 2.81 2.65 2.49

ESCAMBIA .................................................. AL 3.45 3.28 3.16 3.04 2.92 2.80

ETOWAH ..................................................... AL 3.10 2.81 2.65 2.48 2.32 2.15

FAYETTE .................................................... AL 3.10 2.83 2.68 2.54 2.39 2.24

FRANKLIN ................................................... AL 2.90 2.68 2.53 2.39 2.24 2.09

GENEVA ..................................................... AL 3.45 3.29 3.19 3.08 2.98 2.87

GREENE ..................................................... AL 3.10 3.03 2.88 2.72 2.57 2.42

HALE ........................................................... AL 3.10 3.03 2.88 2.73 2.58 2.43

HENRY ........................................................ AL 3.45 3.28 3.17 3.05 2.94 2.82

HOUSTON .................................................. AL 3.45 3.29 3.19 3.08 2.98 2.87

JACKSON ................................................... AL 2.90 2.66 2.50 2.33 2.17 2.00

JEFFERSON ............................................... AL 3.10 2.90 2.72 2.55 2.37 2.19

LAMAR ........................................................ AL 3.10 2.84 2.70 2.55 2.41 2.27

LAUDERDALE ............................................ AL 2.90 2.65 2.48 2.30 2.13 1.95

LAWRENCE ................................................ AL 2.90 2.66 2.49 2.31 2.14 1.97

LEE .............................................................. AL 3.30 3.06 2.95 2.83 2.72 2.60

LIMESTONE ................................................ AL 2.90 2.64 2.44 2.25 2.05 1.86

LOWNDES .................................................. AL 3.30 3.14 2.99 2.85 2.70 2.56

MACON ....................................................... AL 3.30 3.14 3.01 2.87 2.74 2.60

MADISON .................................................... AL 2.90 2.64 2.44 2.25 2.05 1.86

MARENGO .................................................. AL 3.30 3.13 2.98 2.83 2.68 2.53

MARION ...................................................... AL 3.10 2.81 2.65 2.48 2.32 2.15

MARSHALL ................................................. AL 2.90 2.66 2.49 2.33 2.16 1.99

MOBILE ....................................................... AL 3.50 3.43 3.27 3.12 2.96 2.81

MONROE .................................................... AL 3.45 3.26 3.12 2.97 2.83 2.69

MONTGOMERY .......................................... AL 3.30 3.13 2.99 2.84 2.70 2.55

MORGAN .................................................... AL 2.90 2.65 2.47 2.30 2.12 1.94

PERRY ........................................................ AL 3.10 3.03 2.89 2.74 2.60 2.45

PICKENS ..................................................... AL 3.10 2.93 2.78 2.64 2.49 2.34

PIKE ............................................................ AL 3.45 3.26 3.12 2.98 2.84 2.70

RANDOLPH ................................................ AL 3.10 2.95 2.82 2.69 2.56 2.43

RUSSELL .................................................... AL 3.30 3.16 3.05 2.93 2.82 2.70

SHELBY ...................................................... AL 3.10 2.91 2.75 2.58 2.42 2.25

ST. CLAIR ................................................... AL 3.10 2.90 2.72 2.54 2.36 2.18

SUMTER ..................................................... AL 3.10 3.04 2.90 2.75 2.61 2.47

TALLADEGA ............................................... AL 3.10 2.92 2.76 2.61 2.45 2.29

TALLAPOOSA ............................................. AL 3.10 3.04 2.90 2.76 2.62 2.48

TUSCALOOSA ............................................ AL 3.10 2.92 2.76 2.61 2.45 2.29

WALKER ..................................................... AL 3.10 2.81 2.65 2.48 2.32 2.15

WASHINGTON ............................................ AL 3.45 3.25 3.11 2.96 2.82 2.67

WILCOX ...................................................... AL 3.30 3.14 3.00 2.86 2.72 2.58

WINSTON ................................................... AL 3.10 2.80 2.61 2.43 2.24 2.06

ARKANSAS ................................................. AR 2.90 2.71 2.59 2.46 2.34 2.22

ASHLEY ...................................................... AR 3.10 2.92 2.76 2.60 2.44 2.28

BAXTER ...................................................... AR 2.60 2.36 2.17 1.97 1.78 1.59
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4977

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

BENTON ..................................................... AR 2.60 2.30 2.04 1.79 1.53 1.28

BOONE ....................................................... AR 2.60 2.33 2.11 1.88 1.66 1.44

BRADLEY .................................................... AR 2.90 2.82 2.66 2.50 2.34 2.18

CALHOUN ................................................... AR 2.90 2.80 2.62 2.45 2.27 2.09

CARROLL ................................................... AR 2.60 2.31 2.07 1.82 1.58 1.34

CHICOT ....................................................... AR 3.10 2.93 2.78 2.64 2.49 2.34

CLARK ........................................................ AR 2.90 2.64 2.45 2.27 2.08 1.89

CLAY ........................................................... AR 2.60 2.42 2.30 2.17 2.05 1.92

CLEBURNE ................................................. AR 2.80 2.53 2.36 2.18 2.01 1.84

CLEVELAND ............................................... AR 2.90 2.81 2.63 2.46 2.28 2.11

COLUMBIA .................................................. AR 3.10 2.86 2.64 2.42 2.20 1.98

CONWAY .................................................... AR 2.80 2.56 2.36 2.15 1.95 1.74

CRAIGHEAD ............................................... AR 2.60 2.58 2.46 2.33 2.21 2.09

CRAWFORD ............................................... AR 2.80 2.51 2.26 2.00 1.75 1.49

CRITTENDEN ............................................. AR 2.80 2.69 2.61 2.53 2.45 2.37

CROSS ........................................................ AR 2.80 2.67 2.57 2.46 2.36 2.26

DALLAS ....................................................... AR 2.90 2.78 2.58 2.39 2.19 1.99

DESHA ........................................................ AR 2.90 2.84 2.70 2.56 2.42 2.28

DREW ......................................................... AR 2.90 2.83 2.68 2.53 2.38 2.23

FAULKNER ................................................. AR 2.80 2.59 2.41 2.22 2.04 1.86

FRANKLIN ................................................... AR 2.80 2.52 2.27 2.01 1.76 1.51

FULTON ...................................................... AR 2.60 2.38 2.20 2.03 1.85 1.68

GARLAND ................................................... AR 2.80 2.58 2.39 2.19 2.00 1.81

GRANT ........................................................ AR 2.90 2.66 2.50 2.33 2.17 2.00

GREENE ..................................................... AR 2.60 2.44 2.33 2.23 2.12 2.01

HEMPSTEAD .............................................. AR 2.90 2.75 2.51 2.28 2.04 1.81

HOT SPRING .............................................. AR 2.90 2.64 2.45 2.27 2.08 1.89

HOWARD .................................................... AR 2.90 2.60 2.38 2.15 1.93 1.70

INDEPENDENCE ........................................ AR 2.60 2.54 2.38 2.22 2.06 1.90

IZARD .......................................................... AR 2.60 2.39 2.23 2.07 1.91 1.75

JACKSON ................................................... AR 2.60 2.57 2.44 2.30 2.17 2.04

JEFFERSON ............................................... AR 2.90 2.69 2.55 2.41 2.27 2.13

JOHNSON ................................................... AR 2.80 2.47 2.24 2.02 1.79 1.56

LAFAYETTE ................................................ AR 3.10 2.84 2.60 2.35 2.11 1.87

LAWRENCE ................................................ AR 2.60 2.43 2.30 2.18 2.05 1.93

LEE .............................................................. AR 2.80 2.68 2.58 2.49 2.39 2.30

LINCOLN ..................................................... AR 2.90 2.82 2.66 2.51 2.35 2.19

LITTLE RIVER ............................................ AR 2.90 2.72 2.46 2.20 1.94 1.68

LOGAN ........................................................ AR 2.80 2.53 2.30 2.06 1.83 1.59

LONOKE ..................................................... AR 2.80 2.62 2.46 2.31 2.15 2.00

MADISON .................................................... AR 2.60 2.32 2.08 1.85 1.61 1.38

MARION ...................................................... AR 2.60 2.34 2.13 1.93 1.72 1.51

MILLER ....................................................... AR 3.10 2.82 2.57 2.31 2.06 1.80

MISSISSIPPI ............................................... AR 2.60 2.59 2.48 2.37 2.26 2.15

MONROE .................................................... AR 2.80 2.66 2.55 2.45 2.34 2.23

MONTGOMERY .......................................... AR 2.80 2.57 2.37 2.16 1.96 1.76

NEVADA ...................................................... AR 2.90 2.77 2.55 2.34 2.12 1.91

NEWTON .................................................... AR 2.60 2.38 2.15 1.93 1.70 1.48

OUACHITA .................................................. AR 2.90 2.79 2.59 2.40 2.20 2.01

PERRY ........................................................ AR 2.80 2.57 2.38 2.18 1.99 1.79

PHILLIPS ..................................................... AR 2.90 2.73 2.63 2.52 2.42 2.32

PIKE ............................................................ AR 2.90 2.62 2.40 2.19 1.97 1.76

POINSETT .................................................. AR 2.60 2.59 2.49 2.38 2.28 2.17

POLK ........................................................... AR 2.80 2.54 2.31 2.07 1.84 1.61

POPE .......................................................... AR 2.80 2.49 2.28 2.06 1.85 1.64

PRAIRIE ...................................................... AR 2.80 2.64 2.52 2.39 2.27 2.14

PULASKI ..................................................... AR 2.80 2.61 2.45 2.28 2.12 1.96

RANDOLPH ................................................ AR 2.60 2.41 2.27 2.12 1.98 1.84

SALINE ........................................................ AR 2.80 2.60 2.43 2.26 2.09 1.92

SCOTT ........................................................ AR 2.80 2.54 2.31 2.07 1.84 1.61

SEARCY ...................................................... AR 2.60 2.40 2.19 1.99 1.78 1.58

SEBASTIAN ................................................ AR 2.80 2.53 2.28 2.04 1.79 1.55

SEVIER ....................................................... AR 2.90 2.59 2.35 2.11 1.87 1.63

SHARP ........................................................ AR 2.60 2.41 2.26 2.12 1.97 1.83

ST. FRANCIS .............................................. AR 2.80 2.68 2.58 2.49 2.39 2.30

STONE ........................................................ AR 2.60 2.43 2.26 2.08 1.91 1.74

UNION ......................................................... AR 3.10 2.89 2.70 2.51 2.32 2.13

VAN BUREN ............................................... AR 2.80 2.50 2.31 2.11 1.92 1.72

WASHINGTON ............................................ AR 2.60 2.31 2.07 1.82 1.58 1.34

WHITE ......................................................... AR 2.80 2.61 2.46 2.30 2.15 1.99
4978 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

WOODRUFF ............................................... AR 2.80 2.64 2.51 2.39 2.26 2.13

YELL ............................................................ AR 2.80 2.55 2.33 2.12 1.90 1.68

APACHE ...................................................... AZ 1.90 2.25 2.11 1.96 1.82 1.67

COCHISE .................................................... AZ 2.10 2.20 1.98 1.75 1.53 1.31

COCONINO ................................................. AZ 1.90 2.24 2.07 1.90 1.73 1.56

GILA ............................................................ AZ 2.10 2.18 1.95 1.73 1.50 1.28

GRAHAM ..................................................... AZ 2.10 2.28 2.03 1.79 1.54 1.30

GREENLEE ................................................. AZ 2.10 2.21 2.00 1.80 1.59 1.38

LA PAZ ........................................................ AZ 2.10 2.23 2.06 1.88 1.71 1.54

MARICOPA ................................................. AZ 2.35 2.24 1.97 1.69 1.42 1.14

MOHAVE ..................................................... AZ 1.90 2.10 2.00 1.90 1.80 1.70

NAVAJO ...................................................... AZ 1.90 2.18 2.02 1.87 1.71 1.56

PIMA ............................................................ AZ 2.35 2.37 2.10 1.82 1.55 1.28

PINAL .......................................................... AZ 2.35 2.26 2.00 1.73 1.47 1.21

SANTA CRUZ ............................................. AZ 2.10 2.28 2.04 1.79 1.55 1.31

YAVAPAI ..................................................... AZ 1.90 2.20 2.00 1.81 1.61 1.41

YUMA .......................................................... AZ 2.10 2.25 2.08 1.92 1.75 1.58

ALAMEDA ................................................... CA 1.80 1.69 1.59 1.48 1.38 1.27

ALPINE ........................................................ CA 1.70 1.53 1.36 1.20 1.03 0.86

AMADOR ..................................................... CA 1.70 1.54 1.39 1.23 1.08 0.92

BUTTE ......................................................... CA 1.70 1.72 1.60 1.47 1.35 1.23

CALAVERAS ............................................... CA 1.70 1.54 1.37 1.21 1.04 0.88

COLUSA ...................................................... CA 1.70 1.62 1.54 1.46 1.38 1.30

CONTRA COSTA ........................................ CA 1.80 1.68 1.57 1.45 1.34 1.22

DEL NORTE ................................................ CA 1.80 1.73 1.65 1.58 1.50 1.43

EL DORADO ............................................... CA 1.70 1.55 1.39 1.24 1.08 0.93

FRESNO ..................................................... CA 1.60 1.59 1.41 1.24 1.06 0.89

GLENN ........................................................ CA 1.70 1.63 1.55 1.48 1.40 1.33

HUMBOLDT ................................................ CA 1.80 1.73 1.66 1.58 1.51 1.44

IMPERIAL .................................................... CA 2.00 1.92 1.84 1.77 1.69 1.61

INYO ............................................................ CA 1.60 1.51 1.43 1.34 1.26 1.17

KERN .......................................................... CA 1.80 1.68 1.57 1.45 1.34 1.22

KINGS ......................................................... CA 1.60 1.50 1.39 1.29 1.18 1.08

LAKE ........................................................... CA 1.80 1.71 1.63 1.54 1.46 1.37

LASSEN ...................................................... CA 1.70 1.57 1.44 1.32 1.19 1.06

LOS ANGELES ........................................... CA 2.10 2.03 1.82 1.61 1.40 1.19

MADERA ..................................................... CA 1.60 1.45 1.30 1.15 1.00 0.85

MARIN ......................................................... CA 1.80 1.71 1.62 1.53 1.44 1.35

MARIPOSA ................................................. CA 1.70 1.52 1.34 1.16 0.98 0.80

MENDOCINO .............................................. CA 1.80 1.72 1.65 1.57 1.50 1.42

MERCED ..................................................... CA 1.70 1.54 1.39 1.23 1.08 0.92

MODOC ....................................................... CA 1.70 1.59 1.48 1.38 1.27 1.16

MONO ......................................................... CA 1.60 1.45 1.30 1.14 0.99 0.84

MONTEREY ................................................ CA 1.80 1.77 1.74 1.72 1.69 1.66

NAPA ........................................................... CA 1.80 1.69 1.59 1.48 1.38 1.27

NEVADA ...................................................... CA 1.70 1.57 1.44 1.30 1.17 1.04

ORANGE ..................................................... CA 2.10 1.93 1.76 1.60 1.43 1.26

PLACER ...................................................... CA 1.70 1.56 1.41 1.27 1.12 0.98

PLUMAS ...................................................... CA 1.70 1.58 1.45 1.33 1.20 1.08

RIVERSIDE ................................................. CA 2.00 1.88 1.76 1.65 1.53 1.41

SACRAMENTO ........................................... CA 1.70 1.58 1.46 1.34 1.22 1.10

SAN BENITO .............................................. CA 1.80 1.74 1.69 1.63 1.58 1.52

SAN BERNARDINO .................................... CA 1.80 1.72 1.64 1.57 1.49 1.41

SAN DIEGO ................................................ CA 2.10 2.07 1.91 1.74 1.58 1.41

SAN FRANCISCO ....................................... CA 1.80 1.74 1.64 1.53 1.43 1.33

SAN JOAQUIN ............................................ CA 1.70 1.56 1.42 1.29 1.15 1.01

SAN LUIS OBISPO ..................................... CA 1.80 1.73 1.66 1.60 1.53 1.46

SAN MATEO ............................................... CA 1.80 1.72 1.64 1.56 1.48 1.40

SANTA BARBARA ...................................... CA 1.80 1.74 1.67 1.61 1.54 1.48

SANTA CLARA ........................................... CA 1.80 1.73 1.65 1.58 1.50 1.43

SANTA CRUZ ............................................. CA 1.80 1.75 1.70 1.65 1.60 1.55

SHASTA ...................................................... CA 1.70 1.74 1.64 1.53 1.43 1.33

SIERRA ....................................................... CA 1.70 1.57 1.44 1.31 1.18 1.05

SISKIYOU ................................................... CA 1.80 1.71 1.63 1.54 1.46 1.37

SOLANO ..................................................... CA 1.80 1.68 1.56 1.45 1.33 1.21

SONOMA .................................................... CA 1.80 1.71 1.63 1.54 1.46 1.37

STANISLAUS .............................................. CA 1.70 1.53 1.36 1.20 1.03 0.86

SUTTER ...................................................... CA 1.70 1.61 1.52 1.42 1.33 1.24

TEHAMA ..................................................... CA 1.70 1.63 1.55 1.48 1.40 1.33

TRINITY ...................................................... CA 1.80 1.72 1.65 1.57 1.50 1.42
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4979

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

TULARE ...................................................... CA 1.60 1.48 1.37 1.25 1.14 1.02

TUOLUMNE ................................................ CA 1.70 1.52 1.35 1.17 1.00 0.82

VENTURA ................................................... CA 1.80 1.71 1.61 1.52 1.42 1.33

YOLO .......................................................... CA 1.70 1.60 1.50 1.39 1.29 1.19

YUBA ........................................................... CA 1.70 1.60 1.50 1.39 1.29 1.19

ADAMS ........................................................ CO 2.55 2.40 2.07 1.75 1.42 1.09

ALAMOSA ................................................... CO 1.90 2.35 2.20 2.05 1.90 1.75

ARAPAHOE ................................................ CO 2.55 2.42 2.11 1.79 1.48 1.17

ARCHULETA ............................................... CO 1.90 1.73 1.76 1.80 1.83 1.86

BACA ........................................................... CO 2.35 2.29 2.08 1.86 1.65 1.44

BENT ........................................................... CO 2.35 2.35 2.11 1.86 1.62 1.37

BOULDER ................................................... CO 2.45 2.31 2.01 1.72 1.42 1.13

CHAFFEE .................................................... CO 1.90 2.31 2.12 1.92 1.73 1.54

CHEYENNE ................................................ CO 2.35 2.25 2.00 1.74 1.49 1.24

CLEAR CREEK ........................................... CO 2.45 2.33 2.06 1.78 1.51 1.24

CONEJOS ................................................... CO 1.90 2.29 2.18 2.06 1.95 1.84

COSTILLA ................................................... CO 1.90 2.35 2.20 2.04 1.89 1.74

CROWLEY .................................................. CO 2.45 2.47 2.20 1.94 1.67 1.41

CUSTER ...................................................... CO 2.45 2.39 2.18 1.98 1.77 1.56

DELTA ......................................................... CO 2.00 1.95 1.89 1.84 1.78 1.73

DENVER ..................................................... CO 2.55 2.41 2.09 1.78 1.46 1.14

DOLORES ................................................... CO 1.90 1.80 1.80 1.80 1.80 1.80

DOUGLAS ................................................... CO 2.55 2.43 2.13 1.83 1.53 1.23

EAGLE ........................................................ CO 1.90 1.72 1.64 1.56 1.48 1.40

EL PASO ..................................................... CO 2.45 2.43 2.13 1.83 1.53 1.23

ELBERT ...................................................... CO 2.55 2.45 2.18 1.90 1.63 1.35

FREMONT ................................................... CO 2.45 2.38 2.16 1.94 1.72 1.50

GARFIELD .................................................. CO 2.00 1.92 1.83 1.75 1.66 1.58

GILPIN ......................................................... CO 2.45 2.32 2.04 1.76 1.48 1.20

GRAND ....................................................... CO 1.90 2.25 2.00 1.74 1.49 1.24

GUNNISON ................................................. CO 1.90 1.77 1.74 1.70 1.67 1.64

HINSDALE .................................................. CO 1.90 1.79 1.78 1.78 1.77 1.76

HUERFANO ................................................ CO 2.45 2.40 2.21 2.01 1.82 1.62

JACKSON ................................................... CO 1.90 2.24 1.98 1.72 1.46 1.20

JEFFERSON ............................................... CO 2.55 2.43 2.13 1.82 1.52 1.22

KIOWA ........................................................ CO 2.35 2.34 2.08 1.83 1.57 1.31

KIT CARSON .............................................. CO 2.35 2.24 1.97 1.71 1.44 1.18

LA PLATA ................................................... CO 1.90 2.29 2.08 1.87 1.66 1.45

LAKE ........................................................... CO 1.90 1.73 1.76 1.78 1.81 1.84

LARIMER .................................................... CO 2.45 2.30 2.00 1.69 1.39 1.09

LAS ANIMAS ............................................... CO 2.35 2.41 2.22 2.04 1.85 1.66

LINCOLN ..................................................... CO 2.45 2.33 2.06 1.78 1.51 1.24

LOGAN ........................................................ CO 2.35 2.21 1.91 1.62 1.32 1.03

MESA .......................................................... CO 2.00 1.95 1.89 1.84 1.78 1.73

MINERAL .................................................... CO 1.90 1.71 1.73 1.74 1.76 1.77

MOFFAT ...................................................... CO 1.90 1.71 1.62 1.53 1.44 1.35

MONTEZUMA ............................................. CO 1.90 1.72 1.74 1.77 1.79 1.81

MONTROSE ................................................ CO 2.00 1.96 1.91 1.87 1.82 1.78

MORGAN .................................................... CO 2.35 2.29 1.98 1.66 1.35 1.04

OTERO ........................................................ CO 2.45 2.47 2.21 1.95 1.69 1.43

OURAY ........................................................ CO 1.90 1.80 1.80 1.79 1.79 1.79

PARK ........................................................... CO 2.45 2.35 2.10 1.85 1.60 1.35

PHILLIPS ..................................................... CO 2.35 2.13 1.87 1.60 1.34 1.07

PITKIN ......................................................... CO 1.90 1.74 1.68 1.63 1.57 1.51

PROWERS .................................................. CO 2.35 2.27 2.04 1.80 1.57 1.34

PUEBLO ...................................................... CO 2.45 2.48 2.23 1.99 1.74 1.49

RIO BLANCO .............................................. CO 1.90 1.73 1.66 1.60 1.53 1.46

RIO GRANDE ............................................. CO 1.90 2.27 2.15 2.02 1.90 1.77

ROUTT ........................................................ CO 1.90 1.70 1.60 1.50 1.40 1.30

SAGUACHE ................................................ CO 1.90 1.69 1.67 1.66 1.64 1.63

SAN JUAN .................................................. CO 1.90 1.80 1.80 1.80 1.80 1.80

SAN MIGUEL .............................................. CO 1.90 1.80 1.80 1.80 1.80 1.80

SEDGWICK ................................................. CO 2.35 2.13 1.85 1.58 1.30 1.03

SUMMIT ...................................................... CO 1.90 2.27 2.04 1.80 1.57 1.34

TELLER ....................................................... CO 2.45 2.46 2.20 1.93 1.67 1.40

WASHINGTON ............................................ CO 2.35 2.30 1.99 1.69 1.38 1.08

WELD .......................................................... CO 2.45 2.28 1.96 1.63 1.31 0.99

YUMA .......................................................... CO 2.35 2.22 1.95 1.67 1.40 1.12

FAIRFIELD .................................................. CT 3.10 2.91 2.72 2.54 2.35 2.17

HARTFORD ................................................ CT 3.10 2.92 2.70 2.47 2.25 2.03
4980 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

LITCHFIELD ................................................ CT 3.00 2.91 2.68 2.44 2.21 1.98

MIDDLESEX ................................................ CT 3.10 2.97 2.77 2.58 2.38 2.18

NEW HAVEN .............................................. CT 3.10 2.95 2.75 2.56 2.36 2.17

NEW LONDON ........................................... CT 3.10 2.99 2.80 2.62 2.43 2.25

TOLLAND .................................................... CT 3.10 2.97 2.76 2.54 2.33 2.11

WINDHAM ................................................... CT 3.10 3.00 2.80 2.61 2.41 2.22

DISTRICT OF COLUMBIA .......................... DC 3.00 2.74 2.45 2.17 1.88 1.59

KENT ........................................................... DE 3.00 2.69 2.47 2.25 2.03 1.81

NEW CASTLE ............................................. DE 3.00 2.81 2.53 2.24 1.96 1.68

SUSSEX ...................................................... DE 3.00 2.68 2.49 2.29 2.10 1.91

ALACHUA ................................................... FL 3.70 3.55 3.52 3.50 3.47 3.44

BAKER ........................................................ FL 3.70 3.52 3.47 3.41 3.36 3.30

BAY ............................................................. FL 3.70 3.47 3.37 3.26 3.16 3.05

BRADFORD ................................................ FL 3.70 3.54 3.51 3.47 3.44 3.40

BREVARD ................................................... FL 4.00 3.86 3.84 3.83 3.81 3.79

BROWARD .................................................. FL 4.30 4.19 4.20 4.20 4.21 4.22

CALHOUN ................................................... FL 3.70 3.47 3.36 3.26 3.15 3.04

CHARLOTTE ............................................... FL 4.30 3.91 3.95 3.98 4.02 4.05

CITRUS ....................................................... FL 4.00 3.82 3.77 3.71 3.66 3.60

CLAY ........................................................... FL 3.70 3.55 3.51 3.48 3.44 3.41

COLLIER ..................................................... FL 4.30 3.94 4.00 4.07 4.13 4.19

COLUMBIA .................................................. FL 3.70 3.52 3.47 3.41 3.36 3.30

DADE .......................................................... FL 4.30 4.20 4.22 4.25 4.27 4.29

DE SOTO .................................................... FL 4.30 3.91 3.93 3.96 3.98 4.01

DIXIE ........................................................... FL 3.70 3.54 3.50 3.45 3.41 3.37

DUVAL ........................................................ FL 3.70 3.54 3.49 3.45 3.40 3.36

ESCAMBIA .................................................. FL 3.45 3.44 3.30 3.16 3.02 2.88

FLAGLER .................................................... FL 4.00 3.81 3.74 3.68 3.61 3.54

FRANKLIN ................................................... FL 3.70 3.50 3.42 3.35 3.27 3.19

GADSDEN ................................................... FL 3.70 3.48 3.37 3.27 3.16 3.06

GILCHRIST ................................................. FL 3.70 3.54 3.50 3.47 3.43 3.39

GLADES ...................................................... FL 4.30 4.16 4.14 4.11 4.09 4.07

GULF ........................................................... FL 3.70 3.49 3.40 3.30 3.21 3.12

HAMILTON .................................................. FL 3.70 3.50 3.42 3.35 3.27 3.19

HARDEE ..................................................... FL 4.30 3.89 3.91 3.92 3.94 3.95

HENDRY ..................................................... FL 4.30 4.17 4.15 4.14 4.12 4.11

HERNANDO ................................................ FL 4.00 3.84 3.80 3.77 3.73 3.69

HIGHLANDS ............................................... FL 4.30 3.90 3.92 3.94 3.96 3.98

HILLSBOROUGH ........................................ FL 4.00 3.87 3.85 3.84 3.82 3.81

HOLMES ..................................................... FL 3.70 3.45 3.31 3.18 3.04 2.91

INDIAN RIVER ............................................ FL 4.00 4.13 4.07 4.02 3.96 3.91

JACKSON ................................................... FL 3.70 3.46 3.33 3.21 3.08 2.96

JEFFERSON ............................................... FL 3.70 3.49 3.40 3.32 3.23 3.14

LAFAYETTE ................................................ FL 3.70 3.55 3.52 3.48 3.45 3.42

LAKE ........................................................... FL 4.00 3.84 3.80 3.75 3.71 3.67

LEE .............................................................. FL 4.30 3.92 3.97 4.01 4.06 4.10

LEON ........................................................... FL 3.70 3.49 3.39 3.30 3.20 3.11

LEVY ........................................................... FL 4.00 3.80 3.72 3.64 3.56 3.48

LIBERTY ..................................................... FL 3.70 3.48 3.39 3.29 3.20 3.10

MADISON .................................................... FL 3.70 3.49 3.40 3.30 3.21 3.12

MANATEE ................................................... FL 4.30 3.89 3.91 3.92 3.94 3.95

MARION ...................................................... FL 4.00 3.81 3.75 3.68 3.62 3.55

MARTIN ....................................................... FL 4.30 4.15 4.12 4.09 4.06 4.03

MONROE .................................................... FL 4.30 4.21 4.23 4.26 4.28 4.31

NASSAU ...................................................... FL 3.70 3.51 3.45 3.38 3.32 3.25

OKALOOSA ................................................ FL 3.45 3.44 3.30 3.17 3.03 2.89

OKEECHOBEE ........................................... FL 4.30 4.14 4.11 4.07 4.04 4.00

ORANGE ..................................................... FL 4.00 3.85 3.82 3.78 3.75 3.72

OSCEOLA ................................................... FL 4.00 3.87 3.86 3.84 3.83 3.82

PALM BEACH ............................................. FL 4.30 4.17 4.16 4.14 4.13 4.12

PASCO ........................................................ FL 4.00 3.85 3.82 3.78 3.75 3.72

PINELLAS ................................................... FL 4.00 3.87 3.85 3.84 3.82 3.81

POLK ........................................................... FL 4.00 3.87 3.86 3.85 3.84 3.83

PUTNAM ..................................................... FL 3.70 3.57 3.55 3.54 3.52 3.51

SANTA ROSA ............................................. FL 3.45 3.44 3.30 3.16 3.02 2.88

SARASOTA ................................................. FL 4.30 3.90 3.93 3.95 3.98 4.00

SEMINOLE .................................................. FL 4.00 3.84 3.80 3.77 3.73 3.69

ST. JOHNS ................................................. FL 3.70 3.55 3.53 3.50 3.48 3.45

ST. LUCIE ................................................... FL 4.30 4.14 4.10 4.05 4.01 3.97

SUMTER ..................................................... FL 4.00 3.83 3.79 3.74 3.70 3.65
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4981

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

SUWANNEE ................................................ FL 3.70 3.51 3.45 3.38 3.32 3.25

TAYLOR ...................................................... FL 3.70 3.51 3.44 3.37 3.30 3.23

UNION ......................................................... FL 3.70 3.53 3.49 3.44 3.40 3.35

VOLUSIA ..................................................... FL 4.00 3.83 3.78 3.72 3.67 3.62

WAKULLA ................................................... FL 3.70 3.50 3.41 3.33 3.24 3.16

WALTON ..................................................... FL 3.45 3.45 3.32 3.20 3.07 2.94

WASHINGTON ............................................ FL 3.70 3.46 3.33 3.21 3.08 2.96

APPLING ..................................................... GA 3.45 3.28 3.17 3.05 2.94 2.82

ATKINSON .................................................. GA 3.45 3.31 3.22 3.12 3.03 2.94

BACON ........................................................ GA 3.45 3.30 3.20 3.11 3.01 2.91

BAKER ........................................................ GA 3.45 3.30 3.19 3.09 2.98 2.88

BALDWIN .................................................... GA 3.10 3.03 2.88 2.72 2.57 2.42

BANKS ........................................................ GA 3.10 2.93 2.77 2.62 2.46 2.31

BARROW .................................................... GA 3.10 2.94 2.81 2.67 2.54 2.40

BARTOW ..................................................... GA 3.10 2.85 2.72 2.58 2.45 2.32

BEN HILL .................................................... GA 3.45 3.28 3.16 3.03 2.91 2.79

BERRIEN .................................................... GA 3.45 3.31 3.22 3.12 3.03 2.94

BIBB ............................................................ GA 3.30 3.02 2.86 2.70 2.54 2.38

BLECKLEY .................................................. GA 3.30 3.13 2.98 2.84 2.69 2.54

BRANTLEY ................................................. GA 3.45 3.33 3.26 3.20 3.13 3.06

BROOKS ..................................................... GA 3.45 3.33 3.26 3.18 3.11 3.04

BRYAN ........................................................ GA 3.45 3.29 3.18 3.07 2.96 2.85

BULLOCH ................................................... GA 3.30 3.16 3.04 2.93 2.81 2.69

BURKE ........................................................ GA 3.30 3.05 2.91 2.78 2.64 2.51

BUTTS ......................................................... GA 3.10 2.95 2.82 2.70 2.57 2.44

CALHOUN ................................................... GA 3.45 3.29 3.18 3.06 2.95 2.84

CAMDEN ..................................................... GA 3.45 3.36 3.31 3.27 3.22 3.18

CANDLER ................................................... GA 3.30 3.16 3.04 2.93 2.81 2.69

CARROLL ................................................... GA 3.10 2.95 2.82 2.68 2.55 2.42

CATOOSA ................................................... GA 2.80 2.64 2.51 2.38 2.25 2.12

CHARLTON ................................................. GA 3.45 3.36 3.32 3.27 3.23 3.19

CHATHAM ................................................... GA 3.45 3.30 3.20 3.09 2.99 2.89

CHATTAHOOCHEE .................................... GA 3.30 3.16 3.05 2.93 2.82 2.70

CHATTOOGA .............................................. GA 2.80 2.65 2.53 2.42 2.30 2.18

CHEROKEE ................................................ GA 3.10 2.86 2.73 2.61 2.48 2.36

CLARKE ...................................................... GA 3.10 2.94 2.80 2.67 2.53 2.39

CLAY ........................................................... GA 3.45 3.28 3.16 3.04 2.92 2.80

CLAYTON ................................................... GA 3.10 2.96 2.84 2.72 2.60 2.48

CLINCH ....................................................... GA 3.45 3.34 3.27 3.21 3.14 3.08

COBB .......................................................... GA 3.10 2.95 2.82 2.69 2.56 2.43

COFFEE ...................................................... GA 3.45 3.30 3.19 3.09 2.98 2.88

COLQUITT .................................................. GA 3.45 3.31 3.21 3.12 3.02 2.93

COLUMBIA .................................................. GA 3.10 3.02 2.86 2.71 2.55 2.39

COOK .......................................................... GA 3.45 3.31 3.22 3.13 3.04 2.95

COWETA ..................................................... GA 3.10 2.96 2.84 2.71 2.59 2.47

CRAWFORD ............................................... GA 3.30 3.04 2.90 2.77 2.63 2.49

CRISP ......................................................... GA 3.45 3.17 3.06 2.95 2.84 2.73

DADE .......................................................... GA 2.80 2.64 2.50 2.37 2.23 2.10

DAWSON .................................................... GA 3.10 2.85 2.71 2.58 2.44 2.31

DE KALB ..................................................... GA 3.45 3.32 3.24 3.15 3.07 2.99

DECATUR ................................................... GA 3.10 2.96 2.83 2.71 2.58 2.46

DODGE ....................................................... GA 3.45 3.15 3.02 2.89 2.76 2.63

DOOLY ........................................................ GA 3.45 3.15 3.02 2.89 2.76 2.63

DOUGHERTY ............................................. GA 3.45 3.29 3.17 3.06 2.94 2.83

DOUGLAS ................................................... GA 3.10 2.95 2.82 2.70 2.57 2.44

EARLY ......................................................... GA 3.45 3.30 3.19 3.09 2.98 2.88

ECHOLS ...................................................... GA 3.45 3.34 3.29 3.23 3.18 3.12

EFFINGHAM ............................................... GA 3.30 3.17 3.06 2.95 2.84 2.73

ELBERT ...................................................... GA 3.10 2.92 2.77 2.61 2.46 2.30

EMANUEL ................................................... GA 3.30 3.14 3.01 2.87 2.74 2.60

EVANS ........................................................ GA 3.45 3.18 3.08 2.97 2.87 2.77

FANNIN ....................................................... GA 2.80 2.65 2.53 2.42 2.30 2.18

FAYETTE .................................................... GA 3.10 2.96 2.84 2.72 2.60 2.48

FLOYD ........................................................ GA 3.10 2.84 2.69 2.55 2.40 2.26

FORSYTH ................................................... GA 3.10 2.94 2.79 2.65 2.50 2.36

FRANKLIN ................................................... GA 3.10 2.92 2.76 2.59 2.43 2.27

FULTON ...................................................... GA 3.10 2.96 2.83 2.71 2.58 2.46

GILMER ....................................................... GA 3.10 2.71 2.59 2.46 2.34 2.22

GLASCOCK ................................................ GA 3.10 3.03 2.88 2.74 2.59 2.44

GLYNN ........................................................ GA 3.45 3.34 3.28 3.22 3.16 3.10
4982 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

GORDON .................................................... GA 3.10 2.83 2.68 2.54 2.39 2.24

GRADY ........................................................ GA 3.45 3.32 3.24 3.15 3.07 2.99

GREENE ..................................................... GA 3.10 2.94 2.81 2.67 2.54 2.40

GWINNETT ................................................. GA 3.10 2.95 2.82 2.69 2.56 2.43

HABERSHAM .............................................. GA 3.10 2.83 2.68 2.54 2.39 2.24

HALL ........................................................... GA 3.10 2.93 2.78 2.64 2.49 2.34

HANCOCK .................................................. GA 3.10 3.03 2.88 2.72 2.57 2.42

HARALSON ................................................. GA 3.10 2.93 2.79 2.64 2.50 2.35

HARRIS ....................................................... GA 3.30 3.06 2.95 2.83 2.72 2.60

HART ........................................................... GA 3.10 2.92 2.75 2.59 2.42 2.26

HEARD ........................................................ GA 3.10 2.96 2.83 2.71 2.58 2.46

HENRY ........................................................ GA 3.10 2.96 2.84 2.71 2.59 2.47

HOUSTON .................................................. GA 3.30 3.12 2.96 2.81 2.65 2.49

IRWIN .......................................................... GA 3.45 3.28 3.17 3.05 2.94 2.82

JACKSON ................................................... GA 3.10 2.94 2.79 2.65 2.50 2.36

JASPER ...................................................... GA 3.10 2.95 2.82 2.68 2.55 2.42

JEFF DAVIS ................................................ GA 3.45 3.28 3.16 3.05 2.93 2.81

JEFFERSON ............................................... GA 3.30 3.04 2.90 2.76 2.62 2.48

JENKINS ..................................................... GA 3.30 3.14 3.00 2.87 2.73 2.59

JOHNSON ................................................... GA 3.30 3.13 2.99 2.84 2.70 2.55

JONES ........................................................ GA 3.10 3.02 2.86 2.71 2.55 2.39

LAMAR ........................................................ GA 3.10 3.04 2.90 2.75 2.61 2.47

LANIER ....................................................... GA 3.45 3.33 3.26 3.18 3.11 3.04

LAURENS ................................................... GA 3.30 3.14 3.00 2.85 2.71 2.57

LEE .............................................................. GA 3.45 3.28 3.15 3.03 2.90 2.78

LIBERTY ..................................................... GA 3.45 3.30 3.20 3.09 2.99 2.89

LINCOLN ..................................................... GA 3.10 2.93 2.79 2.64 2.50 2.35

LONG .......................................................... GA 3.45 3.30 3.20 3.09 2.99 2.89

LOWNDES .................................................. GA 3.45 3.33 3.26 3.18 3.11 3.04

LUMPKIN .................................................... GA 3.10 2.84 2.70 2.55 2.41 2.27

MACON ....................................................... GA 3.10 3.02 2.87 2.71 2.56 2.40

MADISON .................................................... GA 3.45 3.32 3.24 3.15 3.07 2.99

MARION ...................................................... GA 3.30 3.15 3.01 2.88 2.74 2.61

MCDUFFIE .................................................. GA 3.10 2.93 2.79 2.64 2.50 2.35

MCINTOSH ................................................. GA 3.30 3.16 3.03 2.91 2.78 2.66

MERIWETHER ............................................ GA 3.10 3.05 2.92 2.79 2.66 2.53

MILLER ....................................................... GA 3.45 3.30 3.20 3.11 3.01 2.91

MITCHELL ................................................... GA 3.45 3.30 3.20 3.11 3.01 2.91

MONROE .................................................... GA 3.10 3.03 2.88 2.73 2.58 2.43

MONTGOMERY .......................................... GA 3.45 3.17 3.05 2.94 2.82 2.71

MORGAN .................................................... GA 3.10 2.95 2.82 2.68 2.55 2.42

MURRAY ..................................................... GA 2.80 2.66 2.54 2.43 2.31 2.20

MUSCOGEE ............................................... GA 3.30 3.08 2.98 2.87 2.77 2.67

NEWTON .................................................... GA 3.10 2.95 2.82 2.70 2.57 2.44

OCONEE ..................................................... GA 3.10 2.94 2.81 2.67 2.54 2.40

OGLETHORPE ........................................... GA 3.10 2.94 2.79 2.65 2.50 2.36

PAULDING .................................................. GA 3.10 2.94 2.81 2.67 2.54 2.40

PEACH ........................................................ GA 3.30 3.12 2.97 2.81 2.66 2.50

PICKENS ..................................................... GA 3.10 2.84 2.70 2.57 2.43 2.29

PIERCE ....................................................... GA 3.45 3.32 3.24 3.15 3.07 2.99

PIKE ............................................................ GA 3.10 3.04 2.91 2.77 2.64 2.50

POLK ........................................................... GA 3.10 2.92 2.77 2.61 2.46 2.30

PULASKI ..................................................... GA 3.45 3.14 3.01 2.87 2.74 2.60

PUTNAM ..................................................... GA 3.10 2.95 2.81 2.68 2.54 2.41

QUITMAN .................................................... GA 3.45 3.27 3.14 3.02 2.89 2.76

RABUN ........................................................ GA 3.10 2.81 2.65 2.48 2.32 2.15

RANDOLPH ................................................ GA 3.45 3.28 3.16 3.03 2.91 2.79

RICHMOND ................................................. GA 3.30 3.03 2.88 2.72 2.57 2.42

ROCKDALE ................................................. GA 3.10 2.95 2.83 2.70 2.58 2.45

SCHLEY ...................................................... GA 3.30 3.16 3.03 2.91 2.78 2.66

SCREVEN ................................................... GA 3.30 3.15 3.02 2.88 2.75 2.62

SEMINOLE .................................................. GA 3.45 3.31 3.22 3.12 3.03 2.94

SPALDING .................................................. GA 3.10 2.96 2.84 2.72 2.60 2.48

STEPHENS ................................................. GA 3.10 2.91 2.75 2.58 2.42 2.25

STEWART ................................................... GA 3.45 3.17 3.06 2.95 2.84 2.73

SUMTER ..................................................... GA 3.45 3.16 3.05 2.93 2.82 2.70

TALBOT ...................................................... GA 3.30 3.06 2.94 2.81 2.69 2.57

TALIAFERRO .............................................. GA 3.10 2.94 2.81 2.67 2.54 2.40

TATTNALL .................................................. GA 3.45 3.18 3.09 2.99 2.90 2.80

TAYLOR ...................................................... GA 3.30 3.06 2.94 2.82 2.70 2.58
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4983

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

TELFAIR ...................................................... GA 3.45 3.17 3.07 2.96 2.86 2.75

TERRELL .................................................... GA 3.45 3.28 3.15 3.03 2.90 2.78

THOMAS ..................................................... GA 3.45 3.32 3.25 3.17 3.10 3.02

TIFT ............................................................. GA 3.45 3.29 3.18 3.08 2.97 2.86

TOOMBS ..................................................... GA 3.45 3.17 3.06 2.94 2.83 2.72

TOWNS ....................................................... GA 3.10 2.70 2.56 2.43 2.29 2.16

TREUTLEN ................................................. GA 3.30 3.15 3.02 2.88 2.75 2.62

TROUP ........................................................ GA 3.10 3.05 2.91 2.78 2.64 2.51

TURNER ..................................................... GA 3.45 3.28 3.16 3.03 2.91 2.79

TWIGGS ...................................................... GA 3.30 3.04 2.90 2.75 2.61 2.47

UNION ......................................................... GA 3.10 2.70 2.57 2.45 2.32 2.19

UPSON ........................................................ GA 3.10 3.05 2.91 2.78 2.64 2.51

WALKER ..................................................... GA 2.80 2.64 2.51 2.39 2.26 2.13

WALTON ..................................................... GA 3.10 2.95 2.82 2.68 2.55 2.42

WARE .......................................................... GA 3.45 3.32 3.25 3.17 3.10 3.02

WARREN .................................................... GA 3.10 3.03 2.87 2.72 2.56 2.41

WASHINGTON ............................................ GA 3.30 3.04 2.90 2.75 2.61 2.47

WAYNE ....................................................... GA 3.45 3.31 3.21 3.12 3.02 2.93

WEBSTER ................................................... GA 3.45 3.17 3.06 2.96 2.85 2.74

WHEELER ................................................... GA 3.45 3.16 3.05 2.93 2.82 2.70

WHITE ......................................................... GA 3.10 2.84 2.70 2.55 2.41 2.27

WHITFIELD ................................................. GA 2.80 2.65 2.53 2.42 2.30 2.18

WILCOX ...................................................... GA 3.45 3.17 3.05 2.94 2.82 2.71

WILKES ....................................................... GA 3.10 2.94 2.79 2.65 2.50 2.36

WILKINSON ................................................ GA 3.30 3.03 2.89 2.74 2.60 2.45

WORTH ....................................................... GA 3.45 3.29 3.18 3.06 2.95 2.84

ADAIR ......................................................... IA 1.80 1.55 1.54 1.54 1.53 1.53

ADAMS ........................................................ IA 1.80 1.55 1.55 1.54 1.54 1.54

ALLAMAKEE ............................................... IA 1.75 1.23 1.21 1.18 1.16 1.13

APPANOOSE .............................................. IA 1.80 1.54 1.53 1.51 1.50 1.49

AUDUBON .................................................. IA 1.80 1.54 1.53 1.53 1.52 1.51

BENTON ..................................................... IA 1.80 1.48 1.48 1.47 1.47 1.47

BLACK HAWK ............................................. IA 1.75 1.37 1.36 1.36 1.35 1.34

BOONE ....................................................... IA 1.80 1.53 1.51 1.49 1.47 1.45

BREMER ..................................................... IA 1.75 1.33 1.31 1.29 1.28 1.26

BUCHANAN ................................................ IA 1.75 1.38 1.37 1.35 1.34 1.32

BUENA VISTA ............................................ IA 1.75 1.50 1.46 1.41 1.37 1.32

BUTLER ...................................................... IA 1.75 1.38 1.37 1.35 1.34 1.32

CALHOUN ................................................... IA 1.75 1.52 1.49 1.46 1.43 1.40

CARROLL ................................................... IA 1.80 1.53 1.51 1.49 1.47 1.45

CASS ........................................................... IA 1.80 1.71 1.67 1.62 1.58 1.54

CEDAR ........................................................ IA 1.80 1.48 1.49 1.49 1.50 1.50

CERRO GORDO ......................................... IA 1.75 1.30 1.28 1.27 1.25 1.24

CHEROKEE ................................................ IA 1.75 1.66 1.57 1.48 1.39 1.30

CHICKASAW ............................................... IA 1.75 1.29 1.27 1.24 1.22 1.20

CLARKE ...................................................... IA 1.80 1.54 1.54 1.53 1.53 1.52

CLAY ........................................................... IA 1.75 1.22 1.24 1.26 1.27 1.29

CLAYTON ................................................... IA 1.75 1.29 1.24 1.20 1.16 1.12

CLINTON ..................................................... IA 1.80 1.47 1.46 1.46 1.45 1.44

CRAWFORD ............................................... IA 1.80 1.69 1.63 1.56 1.50 1.44

DALLAS ....................................................... IA 1.80 1.54 1.53 1.52 1.51 1.50

DAVIS .......................................................... IA 1.80 1.54 1.52 1.51 1.49 1.48

DECATUR ................................................... IA 1.80 1.54 1.54 1.53 1.53 1.52

DELAWARE ................................................ IA 1.75 1.34 1.31 1.29 1.26 1.24

DES MOINES .............................................. IA 1.80 1.55 1.54 1.54 1.53 1.53

DICKINSON ................................................ IA 1.75 1.20 1.21 1.23 1.24 1.25

DUBUQUE .................................................. IA 1.75 1.34 1.31 1.29 1.26 1.24

EMMET ....................................................... IA 1.75 1.22 1.22 1.23 1.24 1.25

FAYETTE .................................................... IA 1.75 1.33 1.29 1.25 1.20 1.16

FLOYD ........................................................ IA 1.75 1.31 1.29 1.27 1.25 1.23

FRANKLIN ................................................... IA 1.75 1.35 1.35 1.34 1.34 1.33

FREMONT ................................................... IA 1.85 1.71 1.67 1.62 1.58 1.54

GREENE ..................................................... IA 1.80 1.53 1.51 1.49 1.47 1.45

GRUNDY ..................................................... IA 1.75 1.40 1.40 1.39 1.38 1.37

GUTHRIE .................................................... IA 1.80 1.54 1.53 1.52 1.51 1.50

HAMILTON .................................................. IA 1.75 1.42 1.41 1.41 1.40 1.39

HANCOCK .................................................. IA 1.75 1.33 1.32 1.31 1.29 1.28

HARDIN ....................................................... IA 1.75 1.41 1.40 1.39 1.39 1.38

HARRISON ................................................. IA 1.80 1.70 1.65 1.60 1.55 1.50

HENRY ........................................................ IA 1.80 1.54 1.53 1.52 1.51 1.50
4984 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

HOWARD .................................................... IA 1.75 1.19 1.18 1.17 1.16 1.15

HUMBOLDT ................................................ IA 1.75 1.34 1.34 1.34 1.34 1.34

IDA .............................................................. IA 1.75 1.67 1.60 1.52 1.45 1.37

IOWA ........................................................... IA 1.80 1.49 1.49 1.50 1.50 1.51

JACKSON ................................................... IA 1.80 1.38 1.38 1.38 1.38 1.38

JASPER ...................................................... IA 1.80 1.54 1.52 1.51 1.49 1.48

JEFFERSON ............................................... IA 1.80 1.54 1.53 1.51 1.50 1.49

JOHNSON ................................................... IA 1.80 1.49 1.49 1.50 1.50 1.51

JONES ........................................................ IA 1.80 1.47 1.45 1.44 1.42 1.41

KEOKUK ..................................................... IA 1.80 1.48 1.49 1.49 1.50 1.50

KOSSUTH ................................................... IA 1.75 1.22 1.23 1.25 1.26 1.28

LEE .............................................................. IA 1.80 1.53 1.52 1.50 1.49 1.47

LINN ............................................................ IA 1.80 1.48 1.49 1.49 1.50 1.50

LOUISA ....................................................... IA 1.80 1.49 1.50 1.50 1.51 1.52

LUCAS ........................................................ IA 1.80 1.54 1.53 1.53 1.52 1.51

LYON ........................................................... IA 1.75 1.44 1.39 1.33 1.28 1.22

MADISON .................................................... IA 1.80 1.54 1.54 1.53 1.53 1.52

MAHASKA ................................................... IA 1.80 1.54 1.53 1.52 1.51 1.50

MARION ...................................................... IA 1.80 1.54 1.53 1.52 1.51 1.50

MARSHALL ................................................. IA 1.80 1.47 1.47 1.46 1.46 1.45

MILLS .......................................................... IA 1.85 1.71 1.67 1.64 1.60 1.56

MITCHELL ................................................... IA 1.75 1.20 1.19 1.19 1.18 1.18

MONONA .................................................... IA 1.80 1.68 1.61 1.54 1.47 1.40

MONROE .................................................... IA 1.80 1.54 1.53 1.51 1.50 1.49

MONTGOMERY .......................................... IA 1.80 1.71 1.67 1.64 1.60 1.56

MUSCATINE ............................................... IA 1.80 1.49 1.50 1.51 1.52 1.53

O’BRIEN ...................................................... IA 1.75 1.45 1.41 1.36 1.32 1.27

OSCEOLA ................................................... IA 1.75 1.43 1.38 1.34 1.29 1.24

PAGE .......................................................... IA 1.80 1.71 1.67 1.63 1.59 1.55

PALO ALTO ................................................ IA 1.75 1.27 1.27 1.28 1.28 1.29

PLYMOUTH ................................................ IA 1.75 1.50 1.44 1.38 1.32 1.26

POCAHONTAS ........................................... IA 1.75 1.30 1.31 1.32 1.33 1.34

POLK ........................................................... IA 1.80 1.54 1.53 1.52 1.51 1.50

POTTAWATTAMIE ..................................... IA 1.85 1.71 1.67 1.64 1.60 1.56

POWESHIEK ............................................... IA 1.80 1.48 1.48 1.49 1.49 1.49

RINGGOLD ................................................. IA 1.80 1.55 1.54 1.54 1.53 1.53

SAC ............................................................. IA 1.75 1.68 1.61 1.54 1.47 1.40

SCOTT ........................................................ IA 1.80 1.49 1.50 1.52 1.53 1.54

SHELBY ...................................................... IA 1.80 1.70 1.65 1.61 1.56 1.51

SIOUX ......................................................... IA 1.75 1.65 1.55 1.44 1.34 1.24

STORY ........................................................ IA 1.80 1.53 1.51 1.49 1.47 1.45

TAMA .......................................................... IA 1.80 1.47 1.46 1.46 1.45 1.44

TAYLOR ...................................................... IA 1.80 1.55 1.55 1.54 1.54 1.54

UNION ......................................................... IA 1.80 1.55 1.54 1.54 1.53 1.53

VAN BUREN ............................................... IA 1.80 1.53 1.51 1.50 1.48 1.46

WAPELLO ................................................... IA 1.80 1.54 1.53 1.51 1.50 1.49

WARREN .................................................... IA 1.80 1.54 1.53 1.53 1.52 1.51

WASHINGTON ............................................ IA 1.80 1.49 1.49 1.50 1.50 1.51

WAYNE ....................................................... IA 1.80 1.54 1.53 1.52 1.51 1.50

WEBSTER ................................................... IA 1.75 1.48 1.46 1.44 1.42 1.40

WINNEBAGO .............................................. IA 1.75 1.20 1.21 1.21 1.22 1.22

WINNESHIEK .............................................. IA 1.75 1.19 1.18 1.16 1.15 1.14

WOODBURY ............................................... IA 1.75 1.55 1.49 1.44 1.38 1.32

WORTH ....................................................... IA 1.75 1.20 1.20 1.20 1.20 1.20

WRIGHT ...................................................... IA 1.75 1.37 1.36 1.35 1.34 1.33

ADA ............................................................. ID 1.60 1.31 1.21 1.12 1.02 0.93

ADAMS ........................................................ ID 1.60 1.16 1.12 1.07 1.03 0.99

BANNOCK ................................................... ID 1.60 1.52 1.39 1.25 1.12 0.99

BEAR LAKE ................................................ ID 1.60 1.52 1.39 1.27 1.14 1.01

BENEWAH .................................................. ID 1.90 1.72 1.54 1.35 1.17 0.99

BINGHAM .................................................... ID 1.60 1.47 1.34 1.20 1.07 0.94

BLAINE ........................................................ ID 1.60 1.39 1.28 1.17 1.06 0.95

BOISE ......................................................... ID 1.60 1.39 1.28 1.16 1.05 0.94

BONNER ..................................................... ID 1.90 1.72 1.53 1.35 1.16 0.98

BONNEVILLE .............................................. ID 1.60 1.46 1.32 1.19 1.05 0.91

BOUNDARY ................................................ ID 1.90 1.72 1.55 1.37 1.20 1.02

BUTTE ......................................................... ID 1.60 1.39 1.27 1.16 1.04 0.93

CAMAS ........................................................ ID 1.60 1.39 1.28 1.16 1.05 0.94

CANYON ..................................................... ID 1.60 1.27 1.19 1.10 1.02 0.94

CARIBOU .................................................... ID 1.60 1.51 1.38 1.24 1.11 0.97
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4985

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

CASSIA ....................................................... ID 1.60 1.52 1.38 1.25 1.11 0.98

CLARK ........................................................ ID 1.60 1.42 1.29 1.15 1.02 0.89

CLEARWATER ........................................... ID 1.60 1.73 1.57 1.40 1.24 1.07

CUSTER ...................................................... ID 1.60 1.39 1.28 1.18 1.07 0.96

ELMORE ..................................................... ID 1.60 1.35 1.24 1.14 1.03 0.93

FRANKLIN ................................................... ID 1.60 1.52 1.40 1.27 1.15 1.02

FREMONT ................................................... ID 1.60 1.46 1.31 1.17 1.02 0.88

GEM ............................................................ ID 1.60 1.27 1.19 1.10 1.02 0.94

GOODING ................................................... ID 1.60 1.39 1.28 1.17 1.06 0.95

IDAHO ......................................................... ID 1.60 1.61 1.47 1.34 1.20 1.06

JEFFERSON ............................................... ID 1.60 1.46 1.32 1.18 1.04 0.90

JEROME ..................................................... ID 1.60 1.39 1.28 1.18 1.07 0.96

KOOTENAI .................................................. ID 1.90 1.71 1.53 1.34 1.16 0.97

LATAH ......................................................... ID 1.90 1.72 1.54 1.35 1.17 0.99

LEMHI ......................................................... ID 1.60 1.40 1.30 1.20 1.10 1.00

LEWIS ......................................................... ID 1.60 1.61 1.46 1.32 1.17 1.03

LINCOLN ..................................................... ID 1.60 1.47 1.34 1.21 1.08 0.95

MADISON .................................................... ID 1.60 1.46 1.32 1.17 1.03 0.89

MINIDOKA ................................................... ID 1.60 1.47 1.35 1.22 1.10 0.97

NEZ PERCE ................................................ ID 1.60 1.60 1.45 1.31 1.16 1.01

ONEIDA ....................................................... ID 1.60 1.52 1.39 1.27 1.14 1.01

OWYHEE .................................................... ID 1.60 1.29 1.21 1.12 1.04 0.95

PAYETTE .................................................... ID 1.60 1.23 1.16 1.09 1.02 0.95

POWER ....................................................... ID 1.60 1.52 1.38 1.25 1.11 0.98

SHOSHONE ................................................ ID 1.90 1.73 1.56 1.39 1.22 1.05

TETON ........................................................ ID 1.60 1.36 1.25 1.13 1.02 0.90

TWIN FALLS ............................................... ID 1.60 1.45 1.33 1.20 1.08 0.96

VALLEY ....................................................... ID 1.60 1.40 1.30 1.19 1.09 0.99

WASHINGTON ............................................ ID 1.60 1.22 1.16 1.09 1.03 0.96

ADAMS ........................................................ IL 1.80 1.68 1.61 1.54 1.47 1.40

ALEXANDER ............................................... IL 2.20 2.03 1.97 1.90 1.84 1.77

BOND .......................................................... IL 2.00 1.85 1.78 1.70 1.63 1.56

BOONE ....................................................... IL 1.75 1.32 1.33 1.35 1.36 1.37

BROWN ....................................................... IL 1.80 1.70 1.66 1.61 1.57 1.52

BUREAU ..................................................... IL 1.80 1.61 1.62 1.62 1.63 1.63

CALHOUN ................................................... IL 2.00 1.86 1.79 1.73 1.66 1.60

CARROLL ................................................... IL 1.80 1.78 1.68 1.58 1.48 1.38

CASS ........................................................... IL 1.80 1.61 1.61 1.62 1.62 1.62

CHAMPAIGN ............................................... IL 1.80 1.72 1.69 1.67 1.64 1.61

CHRISTIAN ................................................. IL 2.00 1.86 1.80 1.75 1.69 1.63

CLARK ........................................................ IL 2.00 1.84 1.76 1.68 1.60 1.52

CLAY ........................................................... IL 2.00 1.84 1.75 1.67 1.58 1.50

CLINTON ..................................................... IL 2.00 1.84 1.77 1.69 1.62 1.54

COLES ........................................................ IL 2.00 1.85 1.77 1.70 1.62 1.55

COOK .......................................................... IL 1.80 1.45 1.50 1.55 1.60 1.65

CRAWFORD ............................................... IL 2.00 1.84 1.76 1.67 1.59 1.51

CUMBERLAND ........................................... IL 2.00 1.84 1.76 1.69 1.61 1.53

DE KALB ..................................................... IL 1.80 1.35 1.39 1.42 1.46 1.50

DE WITT ..................................................... IL 1.80 1.74 1.74 1.73 1.73 1.72

DOUGLAS ................................................... IL 2.00 1.72 1.68 1.65 1.61 1.58

DU PAGE .................................................... IL 1.80 1.44 1.49 1.53 1.58 1.62

EDGAR ........................................................ IL 2.00 1.71 1.67 1.63 1.59 1.55

EDWARDS .................................................. IL 2.20 1.85 1.77 1.70 1.62 1.55

EFFINGHAM ............................................... IL 2.00 1.84 1.76 1.69 1.61 1.53

FAYETTE .................................................... IL 2.00 1.84 1.77 1.69 1.62 1.54

FORD .......................................................... IL 1.80 1.62 1.63 1.65 1.66 1.67

FRANKLIN ................................................... IL 2.20 1.93 1.85 1.77 1.69 1.61

FULTON ...................................................... IL 1.80 1.63 1.65 1.66 1.68 1.70

GALLATIN ................................................... IL 2.20 2.01 1.93 1.84 1.76 1.67

GREENE ..................................................... IL 2.00 1.85 1.79 1.72 1.66 1.59

GRUNDY ..................................................... IL 1.80 1.62 1.63 1.64 1.65 1.66

HAMILTON .................................................. IL 2.20 1.93 1.85 1.76 1.68 1.60

HANCOCK .................................................. IL 1.80 1.69 1.64 1.58 1.53 1.47

HARDIN ....................................................... IL 2.20 2.02 1.94 1.87 1.79 1.71

HENDERSON ............................................. IL 1.80 1.55 1.55 1.56 1.56 1.56

HENRY ........................................................ IL 1.80 1.51 1.53 1.56 1.58 1.61

IROQUOIS .................................................. IL 1.80 1.61 1.61 1.60 1.60 1.60

JACKSON ................................................... IL 2.20 1.94 1.86 1.79 1.71 1.64

JASPER ...................................................... IL 2.00 1.84 1.75 1.67 1.58 1.50

JEFFERSON ............................................... IL 2.00 1.85 1.78 1.70 1.63 1.56
4986 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

JERSEY ...................................................... IL 2.00 1.86 1.80 1.73 1.67 1.61

JO DAVIESS ............................................... IL 1.75 1.50 1.44 1.39 1.33 1.28

JOHNSON ................................................... IL 2.20 2.02 1.95 1.87 1.80 1.72

KANE ........................................................... IL 1.80 1.43 1.46 1.50 1.53 1.56

KANKAKEE ................................................. IL 1.80 1.61 1.61 1.62 1.62 1.62

KENDALL .................................................... IL 1.80 1.44 1.48 1.53 1.57 1.61

KNOX .......................................................... IL 1.80 1.62 1.64 1.65 1.67 1.68

LA SALLE .................................................... IL 1.80 1.43 1.46 1.49 1.52 1.55

LAKE ........................................................... IL 1.80 1.62 1.63 1.65 1.66 1.67

LAWRENCE ................................................ IL 2.00 1.84 1.76 1.67 1.59 1.51

LEE .............................................................. IL 1.80 1.31 1.35 1.40 1.45 1.50

LIVINGSTON ............................................... IL 1.80 1.63 1.65 1.66 1.68 1.70

LOGAN ........................................................ IL 1.80 1.75 1.75 1.75 1.75 1.75

MACON ....................................................... IL 1.80 1.60 1.59 1.59 1.58 1.57

MACOUPIN ................................................. IL 1.80 1.37 1.40 1.42 1.45 1.48

MADISON .................................................... IL 1.80 1.75 1.75 1.74 1.74 1.74

MARION ...................................................... IL 1.80 1.73 1.71 1.70 1.68 1.66

MARSHALL ................................................. IL 2.00 1.86 1.80 1.73 1.67 1.61

MASON ....................................................... IL 2.00 1.93 1.85 1.78 1.70 1.62

MASSAC ..................................................... IL 2.00 1.84 1.76 1.68 1.60 1.52

MCDONOUGH ............................................ IL 1.80 1.64 1.67 1.70 1.73 1.76

MCHENRY .................................................. IL 1.80 1.63 1.65 1.68 1.70 1.72

MCLEAN ..................................................... IL 2.20 2.03 1.96 1.89 1.82 1.75

MENARD ..................................................... IL 1.80 1.74 1.73 1.71 1.70 1.69

MERCER ..................................................... IL 1.80 1.50 1.52 1.54 1.56 1.58

MONROE .................................................... IL 2.00 1.94 1.87 1.79 1.72 1.65

MONTGOMERY .......................................... IL 2.00 1.86 1.79 1.73 1.66 1.60

MORGAN .................................................... IL 1.80 1.72 1.69 1.67 1.64 1.61

MOULTRIE .................................................. IL 2.00 1.72 1.69 1.66 1.63 1.60

OGLE .......................................................... IL 1.80 1.28 1.31 1.34 1.36 1.39

PEORIA ....................................................... IL 1.80 1.65 1.69 1.74 1.78 1.82

PERRY ........................................................ IL 2.00 1.93 1.85 1.76 1.68 1.60

PIATT .......................................................... IL 1.80 1.73 1.71 1.69 1.67 1.65

PIKE ............................................................ IL 1.80 1.70 1.66 1.61 1.57 1.52

POPE .......................................................... IL 2.20 2.02 1.95 1.87 1.80 1.72

PULASKI ..................................................... IL 2.20 2.03 1.96 1.89 1.82 1.75

PUTNAM ..................................................... IL 1.80 1.63 1.65 1.66 1.68 1.70

RANDOLPH ................................................ IL 2.00 1.93 1.86 1.78 1.71 1.63

RICHLAND .................................................. IL 2.00 1.83 1.74 1.66 1.57 1.48

ROCK ISLAND ............................................ IL 1.80 1.50 1.52 1.53 1.55 1.57

SALINE ........................................................ IL 2.20 1.94 1.87 1.80 1.73 1.66

SANGAMON ............................................... IL 1.80 1.73 1.71 1.69 1.67 1.65

SCHUYLER ................................................. IL 1.80 1.71 1.68 1.64 1.61 1.57

SCOTT ........................................................ IL 1.80 1.71 1.68 1.64 1.61 1.57

SHELBY ...................................................... IL 2.00 1.85 1.78 1.71 1.64 1.57

ST. CLAIR ................................................... IL 2.00 1.94 1.87 1.79 1.72 1.65

STARK ........................................................ IL 1.80 1.63 1.66 1.68 1.71 1.73

STEPHENSON ............................................ IL 1.75 1.25 1.26 1.27 1.28 1.29

TAZEWELL ................................................. IL 1.80 1.66 1.70 1.75 1.79 1.84

UNION ......................................................... IL 2.20 2.02 1.94 1.87 1.79 1.71

VERMILION ................................................. IL 1.80 1.72 1.68 1.65 1.61 1.58

WABASH ..................................................... IL 2.20 1.85 1.78 1.70 1.63 1.56

WARREN .................................................... IL 1.80 1.61 1.61 1.60 1.60 1.60

WASHINGTON ............................................ IL 2.00 1.85 1.77 1.70 1.62 1.55

WAYNE ....................................................... IL 2.20 1.84 1.77 1.69 1.62 1.54

WHITE ......................................................... IL 2.20 1.93 1.85 1.78 1.70 1.62

WHITESIDE ................................................ IL 1.80 1.25 1.30 1.36 1.42 1.48

WILL ............................................................ IL 1.80 1.45 1.50 1.54 1.59 1.64

WILLIAMSON .............................................. IL 2.20 1.94 1.87 1.79 1.72 1.65

WINNEBAGO .............................................. IL 1.75 1.31 1.31 1.32 1.32 1.32

WOODFORD ............................................... IL 1.80 1.65 1.69 1.74 1.78 1.82

ADAMS ........................................................ IN 1.80 1.71 1.62 1.52 1.43 1.34

ALLEN ......................................................... IN 1.80 1.71 1.61 1.52 1.42 1.33

BARTHOLOMEW ........................................ IN 2.20 1.82 1.73 1.65 1.56 1.48

BENTON ..................................................... IN 1.80 1.75 1.71 1.66 1.62 1.57

BLACKFORD .............................................. IN 1.80 1.72 1.64 1.56 1.48 1.40

BOONE ....................................................... IN 2.00 1.83 1.75 1.68 1.60 1.53

BROWN ....................................................... IN 2.20 1.82 1.74 1.66 1.58 1.50

CARROLL ................................................... IN 1.80 1.74 1.68 1.61 1.55 1.49

CASS ........................................................... IN 1.80 1.73 1.66 1.58 1.51 1.44
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4987

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

CLARK ........................................................ IN 2.20 1.97 1.83 1.68 1.54 1.40

CLAY ........................................................... IN 2.00 1.82 1.75 1.67 1.60 1.52

CLINTON ..................................................... IN 1.80 1.82 1.74 1.67 1.59 1.51

CRAWFORD ............................................... IN 2.20 1.99 1.86 1.74 1.61 1.49

DAVIESS ..................................................... IN 2.20 1.99 1.87 1.76 1.64 1.52

DE KALB ..................................................... IN 2.20 1.98 1.85 1.71 1.58 1.45

DEARBORN ................................................ IN 2.20 1.81 1.73 1.64 1.56 1.47

DECATUR ................................................... IN 1.80 1.62 1.54 1.45 1.37 1.29

DELAWARE ................................................ IN 2.00 1.81 1.72 1.63 1.54 1.45

DUBOIS ....................................................... IN 2.20 1.99 1.87 1.76 1.64 1.52

ELKHART .................................................... IN 1.80 1.61 1.53 1.44 1.36 1.27

FAYETTE .................................................... IN 2.00 1.81 1.72 1.64 1.55 1.46

FLOYD ........................................................ IN 2.20 1.97 1.83 1.69 1.55 1.41

FOUNTAIN .................................................. IN 1.80 1.83 1.76 1.69 1.62 1.55

FRANKLIN ................................................... IN 2.00 1.81 1.72 1.64 1.55 1.46

FULTON ...................................................... IN 1.80 1.72 1.64 1.56 1.48 1.40

GIBSON ...................................................... IN 2.20 2.01 1.90 1.80 1.69 1.59

GRANT ........................................................ IN 1.80 1.80 1.70 1.61 1.51 1.41

GREENE ..................................................... IN 2.20 1.82 1.74 1.67 1.59 1.51

HAMILTON .................................................. IN 2.00 1.82 1.74 1.67 1.59 1.51

HANCOCK .................................................. IN 2.00 1.82 1.74 1.66 1.58 1.50

HARRISON ................................................. IN 2.20 1.98 1.84 1.71 1.57 1.44

HENDRICKS ............................................... IN 2.00 1.83 1.76 1.68 1.61 1.54

HENRY ........................................................ IN 2.00 1.81 1.73 1.64 1.56 1.47

HOWARD .................................................... IN 1.80 1.81 1.72 1.64 1.55 1.46

HUNTINGTON ............................................ IN 1.80 1.71 1.62 1.54 1.45 1.36

JACKSON ................................................... IN 2.20 1.89 1.78 1.68 1.57 1.46

JASPER ...................................................... IN 1.80 1.66 1.63 1.59 1.56 1.52

JAY .............................................................. IN 1.80 1.72 1.64 1.55 1.47 1.39

JEFFERSON ............................................... IN 2.20 1.89 1.77 1.66 1.54 1.43

JENNINGS .................................................. IN 2.20 1.89 1.78 1.67 1.56 1.45

JOHNSON ................................................... IN 2.00 1.82 1.75 1.67 1.60 1.52

KNOX .......................................................... IN 2.20 1.99 1.87 1.76 1.64 1.52

KOSCIUSKO ............................................... IN 1.80 1.61 1.52 1.42 1.33 1.24

LA PORTE .................................................. IN 1.80 1.61 1.52 1.44 1.35 1.26

LAGRANGE ................................................ IN 1.80 1.55 1.55 1.56 1.56 1.56

LAKE ........................................................... IN 1.80 1.65 1.60 1.54 1.49 1.44

LAWRENCE ................................................ IN 2.20 1.90 1.80 1.69 1.59 1.49

MADISON .................................................... IN 2.00 1.82 1.73 1.65 1.56 1.48

MARION ...................................................... IN 2.00 1.83 1.75 1.68 1.60 1.53

MARSHALL ................................................. IN 1.80 1.63 1.56 1.49 1.42 1.35

MARTIN ....................................................... IN 2.20 1.99 1.87 1.74 1.62 1.50

MIAMI .......................................................... IN 1.80 1.72 1.64 1.56 1.48 1.40

MONROE .................................................... IN 2.20 1.82 1.74 1.66 1.58 1.50

MONTGOMERY .......................................... IN 2.00 1.83 1.76 1.68 1.61 1.54

MORGAN .................................................... IN 2.00 1.83 1.75 1.68 1.60 1.53

NEWTON .................................................... IN 1.80 1.67 1.64 1.62 1.59 1.56

NOBLE ........................................................ IN 1.80 1.62 1.53 1.45 1.36 1.28

OHIO ........................................................... IN 2.20 1.98 1.84 1.71 1.57 1.44

ORANGE ..................................................... IN 2.20 1.99 1.86 1.74 1.61 1.49

OWEN ......................................................... IN 2.00 1.82 1.75 1.67 1.60 1.52

PARKE ........................................................ IN 2.00 1.83 1.76 1.68 1.61 1.54

PERRY ........................................................ IN 2.20 1.99 1.87 1.75 1.63 1.51

PIKE ............................................................ IN 2.20 2.00 1.89 1.78 1.67 1.56

PORTER ..................................................... IN 1.80 1.54 1.53 1.51 1.50 1.49

POSEY ........................................................ IN 2.20 2.02 1.92 1.83 1.73 1.64

PULASKI ..................................................... IN 1.80 1.65 1.60 1.56 1.51 1.46

PUTNAM ..................................................... IN 2.00 1.83 1.75 1.68 1.60 1.53

RANDOLPH ................................................ IN 2.00 1.80 1.71 1.61 1.52 1.42

RIPLEY ........................................................ IN 2.20 1.89 1.78 1.67 1.56 1.45

RUSH .......................................................... IN 2.00 1.82 1.73 1.65 1.56 1.48

SCOTT ........................................................ IN 1.80 1.63 1.55 1.48 1.40 1.33

SHELBY ...................................................... IN 2.20 1.89 1.77 1.66 1.54 1.43

SPENCER ................................................... IN 2.00 1.82 1.74 1.66 1.58 1.50

ST. JOSEPH ............................................... IN 2.20 2.00 1.90 1.79 1.69 1.58

STARKE ...................................................... IN 1.80 1.65 1.60 1.54 1.49 1.44

STEUBEN ................................................... IN 1.80 1.62 1.53 1.45 1.36 1.28

SULLIVAN ................................................... IN 2.20 1.82 1.74 1.67 1.59 1.51

SWITZERLAND ........................................... IN 2.20 1.89 1.78 1.66 1.55 1.44

TIPPECANOE ............................................. IN 1.80 1.83 1.75 1.68 1.60 1.53
4988 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

TIPTON ....................................................... IN 1.80 1.82 1.73 1.65 1.56 1.48

UNION ......................................................... IN 2.00 1.81 1.72 1.63 1.54 1.45

VANDERBURGH ........................................ IN 2.20 2.01 1.92 1.82 1.73 1.63

VERMILLION ............................................... IN 2.00 1.83 1.76 1.69 1.62 1.55

VIGO ........................................................... IN 2.00 1.83 1.75 1.68 1.60 1.53

WABASH ..................................................... IN 1.80 1.71 1.63 1.54 1.46 1.37

WARREN .................................................... IN 1.80 1.83 1.76 1.70 1.63 1.56

WARRICK ................................................... IN 2.20 2.01 1.91 1.82 1.72 1.62

WASHINGTON ............................................ IN 2.20 1.98 1.85 1.71 1.58 1.45

WAYNE ....................................................... IN 2.00 1.81 1.72 1.63 1.54 1.45

WELLS ........................................................ IN 1.80 1.71 1.63 1.54 1.46 1.37

WHITE ......................................................... IN 1.80 1.74 1.68 1.61 1.55 1.49

WHITLEY .................................................... IN 1.80 1.62 1.54 1.46 1.38 1.30

ALLEN ......................................................... KS 2.20 2.11 1.92 1.72 1.53 1.34

ANDERSON ................................................ KS 2.00 1.81 1.70 1.58 1.47 1.36

ATCHISON .................................................. KS 2.00 1.83 1.74 1.64 1.55 1.46

BARBER ...................................................... KS 2.20 2.11 1.92 1.72 1.53 1.34

BARTON ..................................................... KS 2.20 2.10 1.89 1.69 1.48 1.28

BOURBON .................................................. KS 2.20 2.11 1.92 1.72 1.53 1.34

BROWN ....................................................... KS 2.00 1.83 1.74 1.64 1.55 1.46

BUTLER ...................................................... KS 2.20 2.10 1.90 1.71 1.51 1.31

CHASE ........................................................ KS 2.20 1.80 1.69 1.57 1.46 1.34

CHAUTAUQUA ........................................... KS 2.20 2.11 1.92 1.74 1.55 1.36

CHEROKEE ................................................ KS 2.20 2.10 1.90 1.70 1.50 1.30

CHEYENNE ................................................ KS 2.20 2.15 1.91 1.66 1.42 1.17

CLARK ........................................................ KS 2.20 2.27 2.04 1.81 1.58 1.35

CLAY ........................................................... KS 2.00 1.80 1.69 1.57 1.46 1.34

CLOUD ........................................................ KS 2.00 1.80 1.68 1.57 1.45 1.33

COFFEY ...................................................... KS 2.00 1.81 1.69 1.58 1.46 1.35

COMANCHE ............................................... KS 2.20 2.11 1.92 1.73 1.54 1.35

COWLEY ..................................................... KS 2.20 2.11 1.92 1.72 1.53 1.34

CRAWFORD ............................................... KS 2.20 2.10 1.90 1.71 1.51 1.31

DECATUR ................................................... KS 2.00 1.91 1.73 1.54 1.36 1.17

DICKINSON ................................................ KS 2.00 1.80 1.68 1.56 1.44 1.32

DONIPHAN ................................................. KS 2.00 1.83 1.74 1.66 1.57 1.48

DOUGLAS ................................................... KS 2.00 1.82 1.72 1.62 1.52 1.42

EDWARDS .................................................. KS 2.20 2.10 1.90 1.70 1.50 1.30

ELK .............................................................. KS 2.20 2.11 1.92 1.72 1.53 1.34

ELLIS ........................................................... KS 2.00 2.09 1.88 1.68 1.47 1.26

ELLSWORTH .............................................. KS 2.00 2.10 1.89 1.69 1.48 1.28

FINNEY ....................................................... KS 2.20 2.26 2.02 1.79 1.55 1.31

FORD .......................................................... KS 2.20 2.27 2.03 1.80 1.56 1.33

FRANKLIN ................................................... KS 2.00 1.81 1.71 1.60 1.50 1.39

GEARY ........................................................ KS 2.00 1.80 1.69 1.57 1.46 1.34

GOVE .......................................................... KS 2.20 2.25 2.00 1.74 1.49 1.24

GRAHAM ..................................................... KS 2.00 1.92 1.75 1.57 1.40 1.22

GRANT ........................................................ KS 2.20 2.27 2.04 1.82 1.59 1.36

GRAY .......................................................... KS 2.20 2.27 2.03 1.80 1.56 1.33

GREELEY ................................................... KS 2.20 2.26 2.01 1.77 1.52 1.28

GREENWOOD ............................................ KS 2.20 2.11 1.91 1.72 1.52 1.33

HAMILTON .................................................. KS 2.20 2.27 2.03 1.80 1.56 1.33

HARPER ..................................................... KS 2.20 2.11 1.91 1.72 1.52 1.33

HARVEY ...................................................... KS 2.20 2.10 1.90 1.69 1.49 1.29

HASKELL .................................................... KS 2.20 2.27 2.03 1.80 1.56 1.33

HODGEMAN ............................................... KS 2.20 2.26 2.02 1.77 1.53 1.29

JACKSON ................................................... KS 2.00 1.82 1.72 1.63 1.53 1.43

JEFFERSON ............................................... KS 2.00 1.82 1.72 1.63 1.53 1.43

JEWELL ...................................................... KS 2.00 1.93 1.76 1.60 1.43 1.26

JOHNSON ................................................... KS 2.00 1.82 1.73 1.63 1.54 1.44

KEARNY ...................................................... KS 2.20 2.27 2.03 1.80 1.56 1.33

KINGMAN .................................................... KS 2.20 2.10 1.90 1.70 1.50 1.30

KIOWA ........................................................ KS 2.20 2.10 1.91 1.71 1.52 1.32

LABETTE .................................................... KS 2.20 2.10 1.91 1.71 1.52 1.32

LANE ........................................................... KS 2.20 2.25 2.01 1.76 1.52 1.27

LEAVENWORTH ......................................... KS 2.00 1.83 1.73 1.64 1.54 1.45

LINCOLN ..................................................... KS 2.00 2.10 1.90 1.69 1.49 1.29

LINN ............................................................ KS 2.00 1.81 1.71 1.60 1.50 1.39

LOGAN ........................................................ KS 2.20 2.13 1.91 1.68 1.46 1.24

LYON ........................................................... KS 2.00 1.81 1.69 1.58 1.46 1.35

MARION ...................................................... KS 2.20 2.10 1.90 1.69 1.49 1.29
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4989

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

MARSHALL ................................................. KS 2.20 2.10 1.90 1.71 1.51 1.31

MCPHERSON ............................................. KS 2.00 1.81 1.71 1.60 1.50 1.39

MEADE ........................................................ KS 2.20 2.27 2.04 1.82 1.59 1.36

MIAMI .......................................................... KS 2.00 1.82 1.72 1.61 1.51 1.41

MITCHELL ................................................... KS 2.00 1.94 1.78 1.61 1.45 1.29

MONTGOMERY .......................................... KS 2.20 2.11 1.92 1.73 1.54 1.35

MORRIS ...................................................... KS 2.00 1.80 1.69 1.57 1.46 1.34

MORTON .................................................... KS 2.20 2.28 2.06 1.84 1.62 1.40

NEMAHA ..................................................... KS 2.00 1.82 1.73 1.63 1.54 1.44

NEOSHO ..................................................... KS 2.20 2.11 1.91 1.72 1.52 1.33

NESS ........................................................... KS 2.20 2.25 2.01 1.76 1.52 1.27

NORTON ..................................................... KS 2.00 1.92 1.74 1.55 1.37 1.19

OSAGE ........................................................ KS 2.00 1.81 1.70 1.60 1.49 1.38

OSBORNE .................................................. KS 2.00 1.93 1.76 1.59 1.42 1.25

OTTAWA ..................................................... KS 2.00 1.80 1.68 1.55 1.43 1.31

PAWNEE ..................................................... KS 2.20 2.10 1.90 1.69 1.49 1.29

PHILLIPS ..................................................... KS 2.00 1.92 1.74 1.56 1.38 1.20

POTTAWATOMIE ....................................... KS 2.00 1.81 1.71 1.60 1.50 1.39

PRATT ......................................................... KS 2.20 2.10 1.90 1.71 1.51 1.31

RAWLINS .................................................... KS 2.00 1.91 1.72 1.53 1.34 1.15

RENO .......................................................... KS 2.20 2.10 1.90 1.69 1.49 1.29

REPUBLIC .................................................. KS 2.00 1.80 1.68 1.55 1.43 1.31

RICE ............................................................ KS 2.20 2.10 1.89 1.69 1.48 1.28

RILEY .......................................................... KS 2.00 1.81 1.70 1.59 1.48 1.37

ROOKS ....................................................... KS 2.00 1.93 1.75 1.58 1.40 1.23

RUSH .......................................................... KS 2.20 2.09 1.89 1.68 1.48 1.27

RUSSELL .................................................... KS 2.00 2.09 1.89 1.68 1.48 1.27

SALINE ........................................................ KS 2.00 1.80 1.67 1.55 1.42 1.30

SCOTT ........................................................ KS 2.20 2.26 2.01 1.77 1.52 1.28

SEDGWICK ................................................. KS 2.20 2.10 1.90 1.69 1.49 1.29

SEWARD ..................................................... KS 2.20 2.27 2.05 1.82 1.60 1.37

SHAWNEE .................................................. KS 2.00 1.82 1.71 1.61 1.50 1.40

SHERIDAN .................................................. KS 2.00 1.92 1.74 1.56 1.38 1.20

SHERMAN .................................................. KS 2.20 2.16 1.91 1.67 1.42 1.18

SMITH ......................................................... KS 2.00 1.93 1.75 1.58 1.40 1.23

STAFFORD ................................................. KS 2.20 2.10 1.90 1.69 1.49 1.29

STANTON ................................................... KS 2.20 2.27 2.05 1.82 1.60 1.37

STEVENS .................................................... KS 2.20 2.27 2.05 1.82 1.60 1.37

SUMNER ..................................................... KS 2.20 2.11 1.91 1.72 1.52 1.33

THOMAS ..................................................... KS 2.00 1.92 1.74 1.55 1.37 1.19

TREGO ........................................................ KS 2.20 2.25 2.00 1.75 1.50 1.25

WABAUNSEE ............................................. KS 2.00 2.20 1.99 1.79 1.58 1.38

WALLACE ................................................... KS 2.20 2.25 2.00 1.74 1.49 1.24

WASHINGTON ............................................ KS 2.00 1.81 1.70 1.58 1.47 1.36

WICHITA ..................................................... KS 2.20 2.26 2.01 1.77 1.52 1.28

WILSON ...................................................... KS 2.20 2.11 1.91 1.72 1.52 1.33

WOODSON ................................................. KS 2.20 2.11 1.92 1.72 1.53 1.34

WYANDOTTE ............................................. KS 2.00 1.83 1.73 1.64 1.54 1.45

ADAIR ......................................................... KY 2.40 1.98 1.85 1.72 1.59 1.46

ALLEN ......................................................... KY 2.40 2.12 1.98 1.85 1.71 1.57

ANDERSON ................................................ KY 2.20 1.97 1.83 1.69 1.55 1.41

BALLARD .................................................... KY 2.40 2.27 2.15 2.03 1.91 1.79

BARREN ..................................................... KY 2.40 2.11 1.97 1.82 1.68 1.53

BATH ........................................................... KY 2.20 2.00 1.89 1.78 1.67 1.56

BELL ............................................................ KY 2.40 2.30 2.15 1.99 1.84 1.69

BOONE ....................................................... KY 2.20 1.98 1.85 1.71 1.58 1.45

BOURBON .................................................. KY 2.20 1.99 1.86 1.74 1.61 1.49

BOYD .......................................................... KY 2.20 2.02 1.93 1.85 1.76 1.67

BOYLE ........................................................ KY 2.20 1.97 1.83 1.69 1.55 1.41

BRACKEN ................................................... KY 2.20 1.99 1.87 1.74 1.62 1.50

BREATHITT ................................................ KY 2.20 2.28 2.11 1.94 1.77 1.60

BRECKINRIDGE ......................................... KY 2.20 1.99 1.87 1.74 1.62 1.50

BULLITT ...................................................... KY 2.20 1.97 1.83 1.69 1.55 1.41

BUTLER ...................................................... KY 2.40 2.00 1.90 1.79 1.69 1.58

CALDWELL ................................................. KY 2.40 2.15 2.05 1.94 1.84 1.73

CALLOWAY ................................................ KY 2.40 2.28 2.18 2.07 1.97 1.86

CAMPBELL ................................................. KY 2.20 1.98 1.85 1.72 1.59 1.46

CARLISLE ................................................... KY 2.40 2.28 2.17 2.05 1.94 1.83

CARROLL ................................................... KY 2.20 1.97 1.84 1.70 1.57 1.43

CARTER ...................................................... KY 2.20 2.01 1.92 1.82 1.73 1.63
4990 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

CASEY ........................................................ KY 2.40 1.97 1.83 1.69 1.55 1.41

CHRISTIAN ................................................. KY 2.40 2.15 2.04 1.92 1.81 1.70

CLARK ........................................................ KY 2.20 1.99 1.87 1.74 1.62 1.50

CLAY ........................................................... KY 2.40 2.28 2.11 1.93 1.76 1.59

CLINTON ..................................................... KY 2.40 2.00 1.89 1.78 1.67 1.56

CRITTENDEN ............................................. KY 2.40 2.15 2.04 1.94 1.83 1.72

CUMBERLAND ........................................... KY 2.40 2.00 1.89 1.77 1.66 1.55

DAVIESS ..................................................... KY 2.20 2.01 1.91 1.81 1.71 1.61

EDMONSON ............................................... KY 2.40 1.99 1.87 1.76 1.64 1.52

ELLIOTT ...................................................... KY 2.20 2.01 1.92 1.82 1.73 1.63

ESTILL ........................................................ KY 2.20 1.99 1.87 1.76 1.64 1.52

FAYETTE .................................................... KY 2.20 1.98 1.85 1.72 1.59 1.46

FLEMING .................................................... KY 2.20 2.00 1.89 1.77 1.66 1.55

FLOYD ........................................................ KY 2.20 2.09 1.98 1.88 1.77 1.67

FRANKLIN ................................................... KY 2.20 1.97 1.84 1.70 1.57 1.43

FULTON ...................................................... KY 2.40 2.29 2.19 2.10 2.00 1.90

GALLATIN ................................................... KY 2.20 1.98 1.84 1.71 1.57 1.44

GARRARD .................................................. KY 2.20 1.97 1.84 1.70 1.57 1.43

GRANT ........................................................ KY 2.20 1.98 1.85 1.71 1.58 1.45

GRAVES ..................................................... KY 2.40 2.28 2.17 2.07 1.96 1.85

GRAYSON .................................................. KY 2.40 1.99 1.87 1.75 1.63 1.51

GREEN ........................................................ KY 2.40 1.98 1.85 1.71 1.58 1.45

GREENUP ................................................... KY 2.20 2.01 1.92 1.82 1.73 1.63

HANCOCK .................................................. KY 2.20 2.00 1.89 1.77 1.66 1.55

HARDIN ....................................................... KY 2.20 1.98 1.85 1.72 1.59 1.46

HARLAN ...................................................... KY 2.40 2.30 2.15 2.00 1.85 1.70

HARRISON ................................................. KY 2.20 1.98 1.86 1.73 1.61 1.48

HART ........................................................... KY 2.40 1.98 1.86 1.73 1.61 1.48

HENDERSON ............................................. KY 2.20 2.02 1.92 1.83 1.73 1.64

HENRY ........................................................ KY 2.20 1.97 1.83 1.70 1.56 1.42

HICKMAN .................................................... KY 2.40 2.28 2.18 2.07 1.97 1.86

HOPKINS .................................................... KY 2.40 2.15 2.03 1.92 1.80 1.69

JACKSON ................................................... KY 2.20 2.26 2.07 1.89 1.70 1.51

JEFFERSON ............................................... KY 2.20 1.97 1.82 1.68 1.53 1.39

JESSAMINE ................................................ KY 2.20 1.98 1.85 1.71 1.58 1.45

JOHNSON ................................................... KY 2.20 2.08 1.97 1.87 1.76 1.65

KENTON ..................................................... KY 2.20 1.98 1.85 1.72 1.59 1.46

KNOTT ........................................................ KY 2.40 2.29 2.14 1.98 1.83 1.67

KNOX .......................................................... KY 2.40 2.28 2.11 1.95 1.78 1.61

LARUE ........................................................ KY 2.20 1.98 1.84 1.71 1.57 1.44

LAUREL ...................................................... KY 2.40 2.27 2.08 1.90 1.71 1.53

LAWRENCE ................................................ KY 2.20 2.09 1.98 1.88 1.77 1.67

LEE .............................................................. KY 2.20 2.27 2.09 1.91 1.73 1.55

LESLIE ........................................................ KY 2.40 2.29 2.13 1.98 1.82 1.66

LETCHER .................................................... KY 2.40 2.30 2.15 1.99 1.84 1.69

LEWIS ......................................................... KY 2.20 2.00 1.90 1.79 1.69 1.58

LINCOLN ..................................................... KY 2.20 1.97 1.83 1.70 1.56 1.42

LIVINGSTON ............................................... KY 2.40 2.26 2.13 2.01 1.88 1.75

LOGAN ........................................................ KY 2.40 2.13 2.00 1.88 1.75 1.62

LYON ........................................................... KY 2.40 2.16 2.06 1.97 1.87 1.77

MADISON .................................................... KY 2.40 2.27 2.15 2.03 1.91 1.79

MAGOFFIN ................................................. KY 2.40 2.27 2.09 1.92 1.74 1.56

MARION ...................................................... KY 2.20 2.02 1.92 1.83 1.73 1.64

MARSHALL ................................................. KY 2.20 1.98 1.85 1.73 1.60 1.47

MARTIN ....................................................... KY 2.20 2.08 1.97 1.85 1.74 1.63

MASON ....................................................... KY 2.20 1.97 1.83 1.70 1.56 1.42

MCCRACKEN ............................................. KY 2.40 2.27 2.15 2.04 1.92 1.80

MCCREARY ................................................ KY 2.20 2.09 1.99 1.89 1.79 1.69

MCLEAN ..................................................... KY 2.20 1.99 1.88 1.76 1.65 1.53

MEADE ........................................................ KY 2.20 1.98 1.85 1.73 1.60 1.47

MENIFEE .................................................... KY 2.20 2.00 1.89 1.79 1.68 1.57

MERCER ..................................................... KY 2.20 1.97 1.83 1.69 1.55 1.41

METCALFE ................................................. KY 2.40 1.99 1.87 1.74 1.62 1.50

MONROE .................................................... KY 2.40 2.00 1.89 1.77 1.66 1.55

MONTGOMERY .......................................... KY 2.20 1.99 1.88 1.76 1.65 1.53

MORGAN .................................................... KY 2.20 2.07 1.96 1.84 1.73 1.61

MUHLENBERG ........................................... KY 2.40 2.14 2.01 1.89 1.76 1.64

NELSON ...................................................... KY 2.20 1.97 1.83 1.70 1.56 1.42

NICHOLAS .................................................. KY 2.20 1.99 1.87 1.76 1.64 1.52

OHIO ........................................................... KY 2.40 2.01 1.90 1.80 1.69 1.59
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4991

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

OLDHAM ..................................................... KY 2.20 1.97 1.83 1.68 1.54 1.40

OWEN ......................................................... KY 2.20 1.98 1.84 1.71 1.57 1.44

OWSLEY ..................................................... KY 2.20 2.27 2.10 1.92 1.75 1.57

PENDLETON .............................................. KY 2.20 1.98 1.86 1.73 1.61 1.48

PERRY ........................................................ KY 2.40 2.29 2.13 1.97 1.81 1.65

PIKE ............................................................ KY 2.40 2.09 1.99 1.89 1.79 1.69

POWELL ..................................................... KY 2.20 2.00 1.88 1.77 1.65 1.54

PULASKI ..................................................... KY 2.40 2.24 2.03 1.83 1.62 1.41

ROBERTSON .............................................. KY 2.20 1.99 1.87 1.74 1.62 1.50

ROCKCASTLE ............................................ KY 2.20 2.25 2.05 1.86 1.66 1.46

ROWAN ....................................................... KY 2.20 2.01 1.90 1.80 1.69 1.59

RUSSELL .................................................... KY 2.40 1.98 1.85 1.73 1.60 1.47

SCOTT ........................................................ KY 2.20 1.98 1.85 1.71 1.58 1.45

SHELBY ...................................................... KY 2.20 1.97 1.83 1.68 1.54 1.40

SIMPSON .................................................... KY 2.40 2.01 1.91 1.80 1.70 1.60

SPENCER ................................................... KY 2.20 1.97 1.83 1.68 1.54 1.40

TAYLOR ...................................................... KY 2.40 1.97 1.84 1.70 1.57 1.43

TODD .......................................................... KY 2.40 2.14 2.02 1.90 1.78 1.66

TRIGG ......................................................... KY 2.40 2.16 2.07 1.97 1.88 1.78

TRIMBLE ..................................................... KY 2.20 1.97 1.83 1.70 1.56 1.42

UNION ......................................................... KY 2.20 2.02 1.94 1.85 1.77 1.68

WARREN .................................................... KY 2.40 2.00 1.89 1.78 1.67 1.56

WASHINGTON ............................................ KY 2.20 1.97 1.83 1.69 1.55 1.41

WAYNE ....................................................... KY 2.40 1.99 1.88 1.76 1.65 1.53

WEBSTER ................................................... KY 2.40 2.02 1.94 1.85 1.77 1.68

WHITLEY .................................................... KY 2.40 2.28 2.11 1.94 1.77 1.60

WOLFE ........................................................ KY 2.20 2.07 1.95 1.83 1.71 1.59

WOODFORD ............................................... KY 2.20 1.97 1.84 1.70 1.57 1.43

ACADIA ....................................................... LA 3.50 3.43 3.21 3.00 2.78 2.56

ALLEN ......................................................... LA 3.50 3.36 3.13 2.91 2.68 2.46

ASCENSION ............................................... LA 3.60 3.40 3.16 2.91 2.67 2.42

ASSUMPTION ............................................. LA 3.60 3.41 3.18 2.94 2.71 2.47

AVOYELLES ............................................... LA 3.40 3.21 3.01 2.82 2.62 2.43

BEAUREGARD ........................................... LA 3.50 3.35 3.12 2.88 2.65 2.42

BIENVILLE .................................................. LA 3.30 2.97 2.76 2.56 2.35 2.14

BOSSIER .................................................... LA 3.10 2.94 2.69 2.45 2.20 1.96

CADDO ....................................................... LA 3.10 2.93 2.68 2.42 2.17 1.92

CALCASIEU ................................................ LA 3.50 3.42 3.19 2.97 2.74 2.51

CALDWELL ................................................. LA 3.30 3.10 2.91 2.73 2.54 2.36

CAMERON .................................................. LA 3.60 3.43 3.21 3.00 2.78 2.56

CATAHOULA .............................................. LA 3.40 3.20 3.00 2.80 2.60 2.40

CLAIBORNE ................................................ LA 3.10 2.96 2.75 2.53 2.32 2.10

CONCORDIA .............................................. LA 3.40 3.20 3.00 2.81 2.61 2.41

DE SOTO .................................................... LA 3.30 3.04 2.79 2.55 2.30 2.06

EAST BATON ROUGE ............................... LA 3.60 3.40 3.15 2.90 2.65 2.40

EAST CARROLL ......................................... LA 3.10 3.02 2.86 2.70 2.54 2.38

EAST FELICIANA ....................................... LA 3.50 3.34 3.11 2.87 2.64 2.40

EVANGELINE ............................................. LA 3.50 3.36 3.14 2.91 2.69 2.47

FRANKLIN ................................................... LA 3.30 3.10 2.92 2.75 2.57 2.39

GRANT ........................................................ LA 3.40 3.19 2.97 2.76 2.54 2.33

IBERIA ......................................................... LA 3.60 3.44 3.22 3.01 2.79 2.58

IBERVILLE .................................................. LA 3.60 3.41 3.16 2.92 2.67 2.43

JACKSON ................................................... LA 3.30 3.00 2.82 2.63 2.45 2.27

JEFFERSON ............................................... LA 3.60 3.41 3.16 2.92 2.67 2.43

JEFFERSON DAVIS ................................... LA 3.50 3.43 3.20 2.98 2.75 2.53

LA SALLE .................................................... LA 3.60 3.44 3.23 3.01 2.80 2.59

LAFAYETTE ................................................ LA 3.60 3.41 3.18 2.94 2.71 2.47

LAFOURCHE .............................................. LA 3.40 3.19 2.98 2.78 2.57 2.36

LINCOLN ..................................................... LA 3.10 2.99 2.79 2.60 2.40 2.21

LIVINGSTON ............................................... LA 3.60 3.40 3.15 2.90 2.65 2.40

MADISON .................................................... LA 3.30 3.10 2.93 2.75 2.58 2.40

MOREHOUSE ............................................. LA 3.10 3.01 2.84 2.67 2.50 2.33

NATCHITOCHES ........................................ LA 3.30 3.17 2.94 2.70 2.47 2.24

ORLEANS ................................................... LA 3.60 3.41 3.17 2.93 2.69 2.45

OUACHITA .................................................. LA 3.10 3.01 2.84 2.66 2.49 2.32

PLAQUEMINES .......................................... LA 3.60 3.43 3.21 2.99 2.77 2.55

POINTE COUPEE ....................................... LA 3.50 3.35 3.12 2.90 2.67 2.44

RAPIDES ..................................................... LA 3.40 3.20 2.99 2.79 2.58 2.38

RED RIVER ................................................. LA 3.30 3.05 2.82 2.58 2.35 2.12

RICHLAND .................................................. LA 3.10 3.02 2.86 2.70 2.54 2.38
4992 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

SABINE ....................................................... LA 3.30 3.16 2.92 2.68 2.44 2.20

ST. BERNARD ............................................ LA 3.60 3.41 3.18 2.94 2.71 2.47

ST. CHARLES ............................................. LA 3.60 3.41 3.16 2.92 2.67 2.43

ST. HELENA ............................................... LA 3.50 3.35 3.11 2.88 2.64 2.41

ST. JAMES .................................................. LA 3.60 3.41 3.17 2.92 2.68 2.44

ST. JOHN THE BAPTIST ........................... LA 3.60 3.41 3.16 2.92 2.67 2.43

ST. LANDRY ............................................... LA 3.50 3.36 3.14 2.93 2.71 2.49

ST. MARTIN ................................................ LA 3.60 3.43 3.21 3.00 2.78 2.56

ST. MARY ................................................... LA 3.60 3.43 3.21 3.00 2.78 2.56

ST. TAMMANY ............................................ LA 3.50 3.36 3.14 2.91 2.69 2.47

TANGIPAHOA ............................................. LA 3.60 3.40 3.16 2.91 2.67 2.42

TENSAS ...................................................... LA 3.30 3.10 2.93 2.75 2.58 2.40

TERREBONNE ........................................... LA 3.60 3.42 3.20 2.97 2.75 2.52

UNION ......................................................... LA 3.10 2.99 2.80 2.61 2.42 2.23

VERMILION ................................................. LA 3.60 3.44 3.23 3.03 2.82 2.61

VERNON ..................................................... LA 3.40 3.18 2.97 2.75 2.54 2.32

WASHINGTON ............................................ LA 3.50 3.36 3.13 2.91 2.68 2.46

WEBSTER ................................................... LA 3.10 2.94 2.70 2.46 2.22 1.98

WEST BATON ROUGE .............................. LA 3.60 3.40 3.16 2.91 2.67 2.42

WEST CARROLL ........................................ LA 3.10 3.02 2.85 2.69 2.52 2.36

WEST FELICIANA ...................................... LA 3.50 3.35 3.12 2.88 2.65 2.42

WINN ........................................................... LA 3.30 3.08 2.88 2.69 2.49 2.29

BARNSTABLE ............................................. MA 3.25 3.06 2.87 2.69 2.50 2.32

BERKSHIRE ................................................ MA 2.80 2.71 2.49 2.28 2.06 1.85

BRISTOL ..................................................... MA 3.25 3.07 2.89 2.72 2.54 2.37

DUKES ........................................................ MA 3.25 3.06 2.88 2.71 2.53 2.35

ESSEX ........................................................ MA 3.25 3.04 2.83 2.63 2.42 2.22

FRANKLIN ................................................... MA 3.00 2.80 2.58 2.36 2.14 1.92

HAMPDEN .................................................. MA 3.00 2.90 2.68 2.45 2.23 2.01

HAMPSHIRE ............................................... MA 3.00 2.91 2.67 2.44 2.20 1.97

MIDDLESEX ................................................ MA 3.25 3.04 2.84 2.64 2.44 2.24

NANTUCKET .............................................. MA 3.25 3.06 2.88 2.69 2.51 2.33

NORFOLK ................................................... MA 3.25 3.05 2.87 2.68 2.50 2.31

PLYMOUTH ................................................ MA 3.25 3.06 2.88 2.71 2.53 2.35

SUFFOLK .................................................... MA 3.25 3.06 2.87 2.69 2.50 2.32

WORCESTER ............................................. MA 3.10 2.99 2.78 2.58 2.37 2.17

ALLEGANY ................................................. MD 2.60 2.58 2.33 2.09 1.84 1.60

ANNE ARUNDEL ........................................ MD 3.00 2.75 2.47 2.18 1.90 1.62

BALTIMORE ................................................ MD 3.00 2.73 2.44 2.14 1.85 1.55

BALTIMORE CITY ...................................... MD 3.00 2.74 2.45 2.15 1.86 1.57

CALVERT .................................................... MD 3.00 2.77 2.50 2.24 1.97 1.71

CAROLINE .................................................. MD 3.00 2.78 2.53 2.28 2.03 1.78

CARROLL ................................................... MD 2.80 2.72 2.41 2.10 1.79 1.48

CECIL .......................................................... MD 3.00 2.80 2.51 2.22 1.93 1.64

CHARLES ................................................... MD 3.00 2.76 2.48 2.21 1.93 1.66

DORCHESTER ........................................... MD 3.00 2.68 2.46 2.24 2.02 1.80

FREDERICK ................................................ MD 2.80 2.72 2.41 2.10 1.79 1.48

GARRETT ................................................... MD 2.60 2.55 2.32 2.09 1.86 1.63

HARFORD ................................................... MD 3.00 2.74 2.45 2.15 1.86 1.57

HOWARD .................................................... MD 3.00 2.73 2.44 2.14 1.85 1.55

KENT ........................................................... MD 3.00 2.75 2.48 2.20 1.93 1.65

MONTGOMERY .......................................... MD 3.00 2.73 2.44 2.14 1.85 1.55

PRINCE GEORGE’S ................................... MD 3.00 2.75 2.47 2.19 1.91 1.63

QUEEN ANNE’S ......................................... MD 3.00 2.76 2.49 2.23 1.96 1.69

SOMERSET ................................................ MD 3.00 2.77 2.52 2.26 2.01 1.75

ST. MARY’S ................................................ MD 3.00 2.64 2.46 2.27 2.09 1.91

TALBOT ...................................................... MD 3.00 2.78 2.52 2.27 2.01 1.76

WASHINGTON ............................................ MD 2.80 2.71 2.39 2.08 1.76 1.44

WICOMICO ................................................. MD 3.00 2.66 2.47 2.28 2.09 1.90

WORCESTER ............................................. MD 3.00 2.65 2.48 2.30 2.13 1.96

ANDROSCOGGIN ...................................... ME 2.80 2.67 2.43 2.18 1.94 1.69

AROOSTOOK ............................................. ME 2.60 2.09 1.91 1.72 1.54 1.35

CUMBERLAND ........................................... ME 3.00 2.76 2.53 2.29 2.06 1.83

FRANKLIN ................................................... ME 2.60 2.37 2.16 1.96 1.75 1.54

HANCOCK .................................................. ME 2.80 2.26 2.07 1.87 1.68 1.49

KENNEBEC ................................................. ME 2.80 2.37 2.18 1.98 1.79 1.59

KNOX .......................................................... ME 2.80 2.38 2.19 1.99 1.80 1.61

LINCOLN ..................................................... ME 2.80 2.47 2.27 2.08 1.88 1.68

OXFORD ..................................................... ME 2.80 2.42 2.24 2.05 1.87 1.69

PENOBSCOT .............................................. ME 2.80 2.25 2.03 1.80 1.58 1.36
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4993

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

PISCATAQUIS ............................................ ME 2.60 2.24 2.03 1.81 1.60 1.39

SAGADAHOC ............................................. ME 2.80 2.70 2.46 2.23 1.99 1.75

SOMERSET ................................................ ME 2.60 2.33 2.12 1.90 1.69 1.47

WALDO ....................................................... ME 2.80 2.32 2.12 1.91 1.71 1.51

WASHINGTON ............................................ ME 2.80 2.16 1.98 1.79 1.61 1.42

YORK .......................................................... ME 3.00 2.87 2.65 2.42 2.20 1.98

ALCONA ...................................................... MI 1.80 1.58 1.47 1.37 1.26 1.16

ALGER ........................................................ MI 1.80 1.28 1.21 1.14 1.07 1.00

ALLEGAN .................................................... MI 1.80 1.62 1.54 1.45 1.37 1.29

ALPENA ...................................................... MI 1.80 1.57 1.46 1.34 1.23 1.12

ANTRIM ....................................................... MI 1.80 1.55 1.42 1.29 1.16 1.03

ARENAC ..................................................... MI 1.80 1.59 1.50 1.40 1.31 1.22

BARAGA ..................................................... MI 1.70 1.27 1.19 1.10 1.02 0.94

BARRY ........................................................ MI 1.80 1.62 1.53 1.45 1.36 1.28

BAY ............................................................. MI 1.80 1.66 1.56 1.47 1.37 1.28

BENZIE ....................................................... MI 1.80 1.58 1.48 1.38 1.28 1.18

BERRIEN .................................................... MI 1.80 1.64 1.57 1.51 1.44 1.38

BRANCH ..................................................... MI 1.80 1.62 1.53 1.45 1.36 1.28

CALHOUN ................................................... MI 1.80 1.62 1.54 1.46 1.38 1.30

CASS ........................................................... MI 1.80 1.62 1.53 1.45 1.36 1.28

CHARLEVOIX ............................................. MI 1.80 1.55 1.41 1.28 1.14 1.01

CHEBOYGAN ............................................. MI 1.80 1.55 1.42 1.30 1.17 1.04

CHIPPEWA ................................................. MI 1.80 1.32 1.30 1.27 1.25 1.22

CLARE ........................................................ MI 1.80 1.60 1.52 1.44 1.36 1.28

CLINTON ..................................................... MI 1.80 1.68 1.62 1.55 1.49 1.42

CRAWFORD ............................................... MI 1.80 1.55 1.42 1.30 1.17 1.04

DELTA ......................................................... MI 1.70 1.11 1.07 1.04 1.00 0.96

DICKINSON ................................................ MI 1.70 1.09 1.03 0.98 0.92 0.86

EATON ........................................................ MI 1.80 1.64 1.57 1.51 1.44 1.38

EMMET ....................................................... MI 1.80 1.55 1.42 1.28 1.15 1.02

GENESEE ................................................... MI 1.80 1.67 1.59 1.51 1.43 1.35

GLADWIN .................................................... MI 1.80 1.59 1.50 1.41 1.32 1.23

GOGEBIC .................................................... MI 1.70 1.12 1.09 1.07 1.04 1.01

GRAND TRAVERSE ................................... MI 1.80 1.57 1.46 1.35 1.24 1.13

GRATIOT .................................................... MI 1.80 1.67 1.59 1.52 1.44 1.36

HILLSDALE ................................................. MI 1.80 1.66 1.57 1.49 1.40 1.31

HOUGHTON ............................................... MI 1.70 1.27 1.19 1.12 1.04 0.96

HURON ....................................................... MI 1.80 1.66 1.56 1.47 1.37 1.28

INGHAM ...................................................... MI 1.80 1.68 1.61 1.55 1.48 1.41

IONIA ........................................................... MI 1.80 1.63 1.56 1.49 1.42 1.35

IOSCO ......................................................... MI 1.80 1.58 1.48 1.39 1.29 1.19

IRON ........................................................... MI 1.70 1.10 1.04 0.99 0.93 0.88

ISABELLA ................................................... MI 1.80 1.61 1.54 1.46 1.39 1.32

JACKSON ................................................... MI 1.80 1.67 1.59 1.52 1.44 1.36

KALAMAZOO .............................................. MI 1.80 1.61 1.51 1.42 1.32 1.23

KALKASKA .................................................. MI 1.80 1.56 1.44 1.33 1.21 1.09

KENT ........................................................... MI 1.80 1.62 1.53 1.45 1.36 1.28

KEWEENAW ............................................... MI 1.70 1.28 1.20 1.13 1.05 0.98

LAKE ........................................................... MI 1.80 1.61 1.54 1.48 1.41 1.34

LAPEER ...................................................... MI 1.80 1.67 1.59 1.50 1.42 1.34

LEELANAU .................................................. MI 1.80 1.56 1.45 1.33 1.22 1.10

LENAWEE ................................................... MI 1.80 1.71 1.62 1.53 1.44 1.35

LIVINGSTON ............................................... MI 1.80 1.67 1.60 1.52 1.45 1.37

LUCE ........................................................... MI 1.80 1.30 1.25 1.21 1.16 1.11

MACKINAC ................................................. MI 1.80 1.30 1.25 1.21 1.16 1.11

MACOMB .................................................... MI 1.80 1.68 1.60 1.53 1.45 1.38

MANISTEE .................................................. MI 1.80 1.60 1.52 1.43 1.35 1.27

MARQUETTE .............................................. MI 1.80 1.27 1.18 1.10 1.01 0.93

MASON ....................................................... MI 1.80 1.62 1.56 1.49 1.43 1.37

MECOSTA ................................................... MI 1.80 1.61 1.54 1.48 1.41 1.34

MENOMINEE .............................................. MI 1.70 1.11 1.07 1.03 0.99 0.95

MIDLAND .................................................... MI 1.80 1.60 1.53 1.45 1.38 1.30

MISSAUKEE ............................................... MI 1.80 1.59 1.49 1.40 1.30 1.21

MONROE .................................................... MI 1.80 1.72 1.63 1.55 1.46 1.38

MONTCALM ................................................ MI 1.80 1.63 1.56 1.48 1.41 1.34

MONTMORENCY ....................................... MI 1.80 1.55 1.42 1.29 1.16 1.03

MUSKEGON ............................................... MI 1.80 1.63 1.57 1.50 1.44 1.37

NEWAYGO .................................................. MI 1.80 1.61 1.55 1.48 1.42 1.35

OAKLAND ................................................... MI 1.80 1.67 1.59 1.50 1.42 1.34

OCEANA ..................................................... MI 1.80 1.62 1.56 1.50 1.44 1.38
4994 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

OGEMAW .................................................... MI 1.80 1.58 1.47 1.37 1.26 1.16

ONTONAGON ............................................. MI 1.70 1.12 1.08 1.05 1.01 0.98

OSCEOLA ................................................... MI 1.80 1.61 1.53 1.46 1.38 1.31

OSCODA ..................................................... MI 1.80 1.56 1.44 1.33 1.21 1.09

OTSEGO ..................................................... MI 1.80 1.54 1.40 1.25 1.11 0.97

OTTAWA ..................................................... MI 1.80 1.62 1.54 1.46 1.38 1.30

PRESQUE ISLE .......................................... MI 1.80 1.56 1.44 1.33 1.21 1.09

ROSCOMMON ............................................ MI 1.80 1.57 1.46 1.35 1.24 1.13

SAGINAW ................................................... MI 1.80 1.67 1.59 1.50 1.42 1.34

SANILAC ..................................................... MI 1.80 1.66 1.57 1.49 1.40 1.31

SCHOOLCRAFT ......................................... MI 1.80 1.29 1.22 1.16 1.09 1.03

SHIAWASSEE ............................................. MI 1.80 1.68 1.61 1.53 1.46 1.39

ST. CLAIR ................................................... MI 1.80 1.68 1.60 1.53 1.45 1.38

ST. JOSEPH ............................................... MI 1.80 1.61 1.52 1.44 1.35 1.26

TUSCOLA ................................................... MI 1.80 1.66 1.57 1.48 1.39 1.30

VAN BUREN ............................................... MI 1.80 1.62 1.54 1.45 1.37 1.29

WASHTENAW ............................................. MI 1.80 1.67 1.59 1.52 1.44 1.36

WAYNE ....................................................... MI 1.80 1.67 1.60 1.52 1.45 1.37

WEXFORD .................................................. MI 1.80 1.59 1.50 1.42 1.33 1.24

AITKIN ......................................................... MN 1.65 1.13 1.13 1.12 1.12 1.11

ANOKA ........................................................ MN 1.70 1.15 1.15 1.16 1.16 1.17

BECKER ...................................................... MN 1.65 1.09 1.04 0.98 0.93 0.88

BELTRAMI .................................................. MN 1.65 1.13 1.05 0.98 0.90 0.83

BENTON ..................................................... MN 1.70 1.13 1.12 1.12 1.11 1.10

BIG STONE ................................................. MN 1.70 1.11 1.08 1.05 1.02 0.99

BLUE EARTH .............................................. MN 1.70 1.20 1.19 1.19 1.18 1.18

BROWN ....................................................... MN 1.70 1.19 1.19 1.18 1.18 1.17

CARLTON ................................................... MN 1.65 1.15 1.17 1.18 1.20 1.21

CARVER ..................................................... MN 1.70 1.15 1.15 1.16 1.16 1.17

CASS ........................................................... MN 1.65 1.10 1.07 1.03 1.00 0.96

CHIPPEWA ................................................. MN 1.70 1.12 1.11 1.09 1.08 1.06

CHISAGO .................................................... MN 1.70 1.14 1.14 1.15 1.15 1.15

CLAY ........................................................... MN 1.65 1.13 1.06 1.00 0.93 0.86

CLEARWATER ........................................... MN 1.65 1.13 1.05 0.98 0.90 0.83

COOK .......................................................... MN 1.65 1.17 1.13 1.10 1.06 1.03

COTTONWOOD .......................................... MN 1.70 1.20 1.19 1.19 1.18 1.18

CROW WING .............................................. MN 1.65 1.12 1.10 1.08 1.06 1.04

DAKOTA ...................................................... MN 1.70 1.14 1.15 1.15 1.16 1.16

DODGE ....................................................... MN 1.70 1.14 1.13 1.13 1.12 1.12

DOUGLAS ................................................... MN 1.70 1.10 1.07 1.03 1.00 0.96

FARIBAULT ................................................. MN 1.70 1.20 1.20 1.21 1.21 1.21

FILLMORE .................................................. MN 1.70 1.14 1.14 1.13 1.13 1.13

FREEBORN ................................................ MN 1.70 1.20 1.19 1.19 1.18 1.18

GOODHUE .................................................. MN 1.70 1.14 1.13 1.13 1.12 1.12

GRANT ........................................................ MN 1.70 1.10 1.06 1.03 0.99 0.95

HENNEPIN .................................................. MN 1.70 1.20 1.20 1.20 1.20 1.20

HOUSTON .................................................. MN 1.70 1.15 1.15 1.16 1.16 1.17

HUBBARD ................................................... MN 1.65 1.09 1.05 1.00 0.96 0.91

ISANTI ......................................................... MN 1.70 1.14 1.14 1.15 1.15 1.15

ITASCA ....................................................... MN 1.65 1.16 1.12 1.09 1.05 1.01

JACKSON ................................................... MN 1.70 1.20 1.20 1.21 1.21 1.21

KANABEC ................................................... MN 1.70 1.14 1.14 1.14 1.14 1.14

KANDIYOHI ................................................. MN 1.70 1.13 1.11 1.10 1.08 1.07

KITTSON ..................................................... MN 1.60 1.13 1.06 1.00 0.93 0.86

KOOCHICHING ........................................... MN 1.65 1.14 1.09 1.03 0.98 0.92

LAC QUI PARLE ......................................... MN 1.70 1.17 1.14 1.10 1.07 1.04

LAKE ........................................................... MN 1.65 1.18 1.16 1.15 1.13 1.11

LAKE OF THE WOODS ............................. MN 1.60 1.12 1.05 0.97 0.90 0.82

LE SUEUR .................................................. MN 1.70 1.15 1.15 1.16 1.16 1.17

LINCOLN ..................................................... MN 1.70 1.33 1.27 1.22 1.16 1.11

LYON ........................................................... MN 1.70 1.19 1.17 1.16 1.14 1.13

MAHNOMEN ............................................... MN 1.70 1.14 1.14 1.14 1.14 1.14

MARSHALL ................................................. MN 1.65 1.13 1.05 0.98 0.90 0.83

MARTIN ....................................................... MN 1.65 1.12 1.05 0.97 0.90 0.82

MCLEOD ..................................................... MN 1.70 1.20 1.20 1.21 1.21 1.21

MEEKER ..................................................... MN 1.70 1.13 1.12 1.12 1.11 1.10

MILLE LACS ............................................... MN 1.70 1.13 1.13 1.12 1.12 1.11

MORRISON ................................................. MN 1.70 1.12 1.10 1.08 1.06 1.04

MOWER ...................................................... MN 1.70 1.19 1.18 1.16 1.15 1.14

MURRAY ..................................................... MN 1.70 1.19 1.19 1.18 1.18 1.17
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4995

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

NICOLLET ................................................... MN 1.70 1.15 1.15 1.16 1.16 1.17

NOBLES ...................................................... MN 1.70 1.37 1.33 1.28 1.24 1.20

NORMAN .................................................... MN 1.65 1.13 1.07 1.00 0.94 0.87

OLMSTED ................................................... MN 1.70 1.18 1.16 1.14 1.12 1.10

OTTER TAIL ............................................... MN 1.65 1.10 1.05 1.01 0.96 0.92

PENNINGTON ............................................ MN 1.65 1.10 1.00 0.91 0.81 0.71

PINE ............................................................ MN 1.70 1.15 1.16 1.16 1.17 1.18

PIPESTONE ................................................ MN 1.70 1.36 1.31 1.25 1.20 1.15

POLK ........................................................... MN 1.65 1.13 1.06 0.99 0.92 0.85

POPE .......................................................... MN 1.70 1.11 1.08 1.06 1.03 1.00

RAMSEY ..................................................... MN 1.70 1.20 1.20 1.20 1.20 1.20

RED LAKE .................................................. MN 1.65 1.11 1.02 0.93 0.84 0.75

REDWOOD ................................................. MN 1.70 1.19 1.18 1.16 1.15 1.14

RENVILLE ................................................... MN 1.70 1.14 1.13 1.13 1.12 1.12

RICE ............................................................ MN 1.70 1.14 1.15 1.15 1.16 1.16

ROCK .......................................................... MN 1.70 1.41 1.36 1.30 1.25 1.20

ROSEAU ..................................................... MN 1.60 1.12 1.03 0.95 0.86 0.78

SCOTT ........................................................ MN 1.65 1.18 1.16 1.15 1.13 1.11

SHERBURNE .............................................. MN 1.70 1.15 1.15 1.16 1.16 1.17

SIBLEY ........................................................ MN 1.70 1.14 1.14 1.13 1.13 1.13

ST. LOUIS ................................................... MN 1.70 1.14 1.15 1.15 1.16 1.16

STEARNS ................................................... MN 1.70 1.12 1.11 1.09 1.08 1.06

STEELE ....................................................... MN 1.70 1.14 1.14 1.15 1.15 1.15

STEVENS .................................................... MN 1.70 1.11 1.08 1.04 1.01 0.98

SWIFT ......................................................... MN 1.70 1.12 1.10 1.07 1.05 1.03

TODD .......................................................... MN 1.70 1.11 1.08 1.05 1.02 0.99

TRAVERSE ................................................. MN 1.70 1.10 1.07 1.03 1.00 0.96

WABASHA .................................................. MN 1.70 1.13 1.12 1.12 1.11 1.10

WADENA ..................................................... MN 1.65 1.10 1.06 1.02 0.98 0.94

WASECA ..................................................... MN 1.70 1.15 1.15 1.16 1.16 1.17

WASHINGTON ............................................ MN 1.70 1.19 1.18 1.17 1.16 1.15

WATONWAN ............................................... MN 1.70 1.20 1.20 1.19 1.19 1.19

WILKIN ........................................................ MN 1.65 1.09 1.05 1.00 0.96 0.91

WINONA ...................................................... MN 1.70 1.14 1.14 1.15 1.15 1.15

WRIGHT ...................................................... MN 1.70 1.14 1.14 1.14 1.14 1.14

YELLOW MEDICINE ................................... MN 1.70 1.18 1.16 1.13 1.11 1.09

ADAIR ......................................................... MO 1.80 1.67 1.61 1.56 1.50 1.45

ANDREW .................................................... MO 1.80 1.84 1.75 1.67 1.58 1.50

ATCHISON .................................................. MO 1.80 1.84 1.76 1.68 1.60 1.52

AUDRAIN .................................................... MO 2.00 1.84 1.76 1.68 1.60 1.52

BARRY ........................................................ MO 2.20 2.01 1.82 1.64 1.45 1.27

BARTON ..................................................... MO 2.20 2.10 1.90 1.71 1.51 1.31

BATES ......................................................... MO 2.00 1.81 1.71 1.60 1.50 1.39

BENTON ..................................................... MO 2.00 1.82 1.71 1.61 1.50 1.40

BOLLINGER ................................................ MO 2.20 1.95 1.89 1.83 1.77 1.71

BOONE ....................................................... MO 2.00 1.85 1.78 1.71 1.64 1.57

BUCHANAN ................................................ MO 1.80 1.83 1.75 1.66 1.58 1.49

BUTLER ...................................................... MO 2.20 2.11 2.04 1.96 1.89 1.81

CALDWELL ................................................. MO 1.80 1.83 1.75 1.66 1.58 1.49

CALLAWAY ................................................. MO 2.00 1.85 1.78 1.70 1.63 1.56

CAMDEN ..................................................... MO 2.00 2.03 1.87 1.72 1.56 1.40

CAPE GIRARDEAU .................................... MO 2.20 1.95 1.89 1.84 1.78 1.72

CARROLL ................................................... MO 1.80 1.67 1.63 1.58 1.54 1.49

CARTER ...................................................... MO 2.20 2.10 2.00 1.91 1.81 1.72

CASS ........................................................... MO 2.00 1.82 1.72 1.63 1.53 1.43

CEDAR ........................................................ MO 2.20 2.02 1.84 1.67 1.49 1.32

CHARITON .................................................. MO 1.80 1.84 1.75 1.67 1.58 1.50

CHRISTIAN ................................................. MO 2.20 2.02 1.84 1.67 1.49 1.32

CLARK ........................................................ MO 1.80 1.66 1.60 1.55 1.49 1.43

CLAY ........................................................... MO 1.80 1.83 1.74 1.65 1.56 1.47

CLINTON ..................................................... MO 1.80 1.83 1.75 1.66 1.58 1.49

COLE ........................................................... MO 2.00 1.84 1.76 1.69 1.61 1.53

COOPER ..................................................... MO 2.00 1.84 1.76 1.69 1.61 1.53

CRAWFORD ............................................... MO 2.00 1.92 1.84 1.75 1.67 1.58

DADE .......................................................... MO 2.20 2.01 1.83 1.65 1.47 1.29

DALLAS ....................................................... MO 2.20 2.01 1.84 1.66 1.49 1.31

DAVIESS ..................................................... MO 1.80 1.84 1.76 1.67 1.59 1.51

DE KALB ..................................................... MO 1.80 1.84 1.75 1.67 1.58 1.50

DENT ........................................................... MO 2.00 2.06 1.94 1.81 1.69 1.56

DOUGLAS ................................................... MO 2.20 2.03 1.88 1.72 1.57 1.41
4996 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

DUNKLIN ..................................................... MO 2.20 2.44 2.32 2.21 2.09 1.98

FRANKLIN ................................................... MO 2.00 1.93 1.85 1.77 1.69 1.61

GASCONADE ............................................. MO 2.00 2.07 1.94 1.82 1.69 1.57

GENTRY ..................................................... MO 1.80 1.84 1.76 1.68 1.60 1.52

GREENE ..................................................... MO 2.20 2.01 1.84 1.66 1.49 1.31

GRUNDY ..................................................... MO 1.80 1.54 1.53 1.52 1.51 1.50

HARRISON ................................................. MO 1.80 1.54 1.54 1.53 1.53 1.52

HENRY ........................................................ MO 2.00 1.82 1.72 1.61 1.51 1.41

HICKORY .................................................... MO 2.00 2.02 1.85 1.69 1.52 1.35

HOLT ........................................................... MO 1.80 1.84 1.75 1.67 1.58 1.50

HOWARD .................................................... MO 2.00 1.84 1.77 1.69 1.62 1.54

HOWELL ..................................................... MO 2.20 2.07 1.95 1.84 1.72 1.60

IRON ........................................................... MO 2.00 2.08 1.97 1.87 1.76 1.65

JACKSON ................................................... MO 2.00 1.83 1.74 1.64 1.55 1.46

JASPER ...................................................... MO 2.20 2.10 1.89 1.69 1.48 1.28

JEFFERSON ............................................... MO 2.00 1.94 1.87 1.79 1.72 1.65

JOHNSON ................................................... MO 2.00 1.82 1.73 1.63 1.54 1.44

KNOX .......................................................... MO 1.80 1.66 1.60 1.54 1.48 1.42

LACLEDE .................................................... MO 2.20 2.03 1.86 1.70 1.53 1.37

LAFAYETTE ................................................ MO 2.00 1.83 1.74 1.66 1.57 1.48

LAWRENCE ................................................ MO 2.20 2.01 1.83 1.64 1.46 1.28

LEWIS ......................................................... MO 1.80 1.65 1.58 1.51 1.44 1.37

LINCOLN ..................................................... MO 2.00 1.85 1.78 1.72 1.65 1.58

LINN ............................................................ MO 1.80 1.67 1.62 1.58 1.53 1.48

LIVINGSTON ............................................... MO 1.80 1.68 1.63 1.59 1.54 1.50

MACON ....................................................... MO 2.20 2.01 1.82 1.64 1.45 1.27

MADISON .................................................... MO 1.80 1.67 1.62 1.56 1.51 1.46

MARIES ....................................................... MO 2.20 2.09 1.99 1.88 1.78 1.68

MARION ...................................................... MO 2.00 2.05 1.92 1.78 1.65 1.51

MCDONALD ................................................ MO 1.80 1.65 1.59 1.52 1.46 1.39

MERCER ..................................................... MO 1.80 1.54 1.53 1.53 1.52 1.51

MILLER ....................................................... MO 2.00 1.83 1.74 1.65 1.56 1.47

MISSISSIPPI ............................................... MO 2.20 2.28 2.17 2.05 1.94 1.83

MONITEAU ................................................. MO 2.00 1.84 1.77 1.69 1.62 1.54

MONROE .................................................... MO 1.80 1.67 1.62 1.57 1.52 1.47

MONTGOMERY .......................................... MO 2.00 1.85 1.78 1.70 1.63 1.56

MORGAN .................................................... MO 2.00 1.83 1.74 1.64 1.55 1.46

NEW MADRID ............................................. MO 2.20 2.29 2.19 2.09 1.99 1.89

NEWTON .................................................... MO 2.20 2.09 1.89 1.68 1.48 1.27

NODAWAY .................................................. MO 1.80 1.84 1.76 1.69 1.61 1.53

OREGON .................................................... MO 2.20 2.09 1.99 1.90 1.80 1.70

OSAGE ........................................................ MO 2.00 1.85 1.77 1.70 1.62 1.55

OZARK ........................................................ MO 2.20 2.05 1.91 1.77 1.63 1.49

PEMISCOT .................................................. MO 2.20 2.44 2.33 2.21 2.10 1.99

PERRY ........................................................ MO 2.20 1.94 1.87 1.79 1.72 1.65

PETTIS ........................................................ MO 2.00 1.83 1.74 1.65 1.56 1.47

PHELPS ...................................................... MO 2.00 2.05 1.92 1.78 1.65 1.51

PIKE ............................................................ MO 2.00 1.68 1.64 1.59 1.55 1.51

PLATTE ....................................................... MO 1.80 1.83 1.74 1.65 1.56 1.47

POLK ........................................................... MO 2.20 2.01 1.83 1.66 1.48 1.30

PULASKI ..................................................... MO 2.20 2.04 1.90 1.75 1.61 1.46

PUTNAM ..................................................... MO 1.80 1.54 1.52 1.51 1.49 1.48

RALLS ......................................................... MO 2.00 1.66 1.61 1.55 1.50 1.44

RANDOLPH ................................................ MO 1.80 1.84 1.76 1.67 1.59 1.51

RAY ............................................................. MO 1.80 1.67 1.63 1.58 1.54 1.49

REYNOLDS ................................................. MO 2.20 2.08 1.97 1.87 1.76 1.65

RIPLEY ........................................................ MO 2.20 2.11 2.03 1.96 1.88 1.80

SALINE ........................................................ MO 2.00 1.93 1.85 1.78 1.70 1.62

SCHUYLER ................................................. MO 1.80 1.53 1.51 1.50 1.48 1.46

SCOTLAND ................................................. MO 1.80 1.66 1.61 1.55 1.50 1.44

SCOTT ........................................................ MO 2.20 2.27 2.15 2.02 1.90 1.78

SHANNON .................................................. MO 2.20 2.08 1.96 1.85 1.73 1.62

SHELBY ...................................................... MO 1.80 1.66 1.60 1.55 1.49 1.43

ST. CHARLES ............................................. MO 2.00 1.93 1.85 1.78 1.70 1.62

ST. CLAIR ................................................... MO 2.00 1.81 1.70 1.58 1.47 1.36

ST. FRANCOIS ........................................... MO 2.00 1.94 1.86 1.79 1.71 1.64

ST. LOUIS ................................................... MO 2.00 1.94 1.87 1.80 1.73 1.66

ST. LOUIS CITY ......................................... MO 2.00 1.94 1.87 1.81 1.74 1.67

STE. GENEVIEVE ...................................... MO 2.00 1.94 1.86 1.79 1.71 1.64

STODDARD ................................................ MO 2.20 2.11 2.04 1.96 1.89 1.81
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4997

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

STONE ........................................................ MO 2.20 2.01 1.84 1.66 1.49 1.31

SULLIVAN ................................................... MO 1.80 1.67 1.63 1.58 1.54 1.49

TANEY ........................................................ MO 2.20 2.03 1.86 1.70 1.53 1.37

TEXAS ......................................................... MO 2.20 2.05 1.91 1.77 1.63 1.49

VERNON ..................................................... MO 2.20 2.11 1.92 1.73 1.54 1.35

WARREN .................................................... MO 2.00 1.93 1.84 1.76 1.67 1.59

WASHINGTON ............................................ MO 2.00 1.93 1.85 1.78 1.70 1.62

WAYNE ....................................................... MO 2.20 2.10 2.01 1.92 1.83 1.74

WEBSTER ................................................... MO 2.20 2.01 1.83 1.64 1.46 1.28

WORTH ....................................................... MO 1.80 1.84 1.76 1.69 1.61 1.53

WRIGHT ...................................................... MO 2.20 2.03 1.87 1.70 1.54 1.38

ADAMS ........................................................ MS 3.40 3.20 3.00 2.81 2.61 2.41

ALCORN ..................................................... MS 2.90 2.70 2.57 2.43 2.30 2.17

AMITE ......................................................... MS 3.40 3.20 3.01 2.81 2.62 2.42

ATTALA ....................................................... MS 3.10 2.95 2.82 2.70 2.57 2.44

BENTON ..................................................... MS 2.90 2.72 2.61 2.50 2.39 2.28

BOLIVAR ..................................................... MS 3.10 2.85 2.72 2.60 2.47 2.34

CALHOUN ................................................... MS 3.10 2.86 2.74 2.63 2.51 2.39

CARROLL ................................................... MS 3.10 2.95 2.82 2.68 2.55 2.42

CHICKASAW ............................................... MS 3.10 2.85 2.73 2.60 2.48 2.35

CHOCTAW .................................................. MS 3.10 2.95 2.82 2.68 2.55 2.42

CLAIBORNE ................................................ MS 3.30 3.11 2.94 2.76 2.59 2.42

CLARKE ...................................................... MS 3.30 3.13 2.98 2.84 2.69 2.54

CLAY ........................................................... MS 3.10 2.94 2.80 2.65 2.51 2.37

COAHOMA .................................................. MS 2.90 2.74 2.64 2.55 2.45 2.36

COPIAH ....................................................... MS 3.30 3.11 2.94 2.78 2.61 2.44

COVINGTON ............................................... MS 3.40 3.22 3.04 2.87 2.69 2.51

DE SOTO .................................................... MS 2.90 2.75 2.66 2.58 2.49 2.41

FORREST ................................................... MS 3.40 3.23 3.06 2.90 2.73 2.56

FRANKLIN ................................................... MS 3.40 3.20 3.01 2.81 2.62 2.42

GEORGE ..................................................... MS 3.40 3.41 3.23 3.06 2.88 2.71

GREENE ..................................................... MS 3.40 3.25 3.10 2.95 2.80 2.65

GRENADA ................................................... MS 3.10 2.87 2.75 2.64 2.52 2.41

HANCOCK .................................................. MS 3.50 3.37 3.16 2.96 2.75 2.54

HARRISON ................................................. MS 3.50 3.39 3.20 3.02 2.83 2.64

HINDS ......................................................... MS 3.30 3.11 2.94 2.78 2.61 2.44

HOLMES ..................................................... MS 3.10 2.95 2.82 2.68 2.55 2.42

HUMPHREYS ............................................. MS 3.10 2.95 2.81 2.68 2.54 2.41

ISSAQUENA ............................................... MS 3.10 3.02 2.86 2.71 2.55 2.39

ITAWAMBA ................................................. MS 2.90 2.71 2.59 2.46 2.34 2.22

JACKSON ................................................... MS 3.50 3.41 3.24 3.08 2.91 2.74

JASPER ...................................................... MS 3.30 3.13 2.98 2.82 2.67 2.52

JEFFERSON ............................................... MS 3.40 3.20 3.01 2.81 2.62 2.42

JEFFERSON DAVIS ................................... MS 3.40 3.22 3.04 2.85 2.67 2.49

JONES ........................................................ MS 3.40 3.23 3.06 2.88 2.71 2.54

KEMPER ..................................................... MS 3.10 3.03 2.89 2.74 2.60 2.45

LAFAYETTE ................................................ MS 2.90 2.74 2.65 2.55 2.46 2.37

LAMAR ........................................................ MS 3.40 3.23 3.05 2.88 2.70 2.53

LAUDERDALE ............................................ MS 3.30 3.12 2.96 2.81 2.65 2.49

LAWRENCE ................................................ MS 3.40 3.21 3.02 2.84 2.65 2.46

LEAKE ......................................................... MS 3.10 3.04 2.89 2.75 2.60 2.46

LEE .............................................................. MS 2.90 2.72 2.60 2.49 2.37 2.26

LEFLORE .................................................... MS 3.10 2.94 2.81 2.67 2.54 2.40

LINCOLN ..................................................... MS 3.40 3.21 3.02 2.82 2.63 2.44

LOWNDES .................................................. MS 3.10 2.93 2.79 2.64 2.50 2.35

MADISON .................................................... MS 3.10 3.03 2.88 2.74 2.59 2.44

MARION ...................................................... MS 3.40 3.22 3.04 2.85 2.67 2.49

MARSHALL ................................................. MS 2.90 2.74 2.64 2.55 2.45 2.36

MONROE .................................................... MS 3.10 2.84 2.71 2.57 2.44 2.30

MONTGOMERY .......................................... MS 3.10 2.95 2.82 2.68 2.55 2.42

NESHOBA ................................................... MS 3.10 3.04 2.89 2.75 2.60 2.46

NEWTON .................................................... MS 3.30 3.12 2.96 2.80 2.64 2.48

NOXUBEE ................................................... MS 3.10 2.95 2.81 2.68 2.54 2.41

OKTIBBEHA ................................................ MS 3.10 2.94 2.81 2.67 2.54 2.40

PANOLA ...................................................... MS 2.90 2.74 2.66 2.57 2.49 2.40

PEARL RIVER ............................................ MS 3.40 3.37 3.16 2.94 2.73 2.52

PERRY ........................................................ MS 3.40 3.24 3.08 2.92 2.76 2.60

PIKE ............................................................ MS 3.40 3.21 3.02 2.82 2.63 2.44

PONTOTOC ................................................ MS 2.90 2.73 2.63 2.53 2.43 2.33

PRENTISS .................................................. MS 2.90 2.70 2.57 2.44 2.31 2.18
4998 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

QUITMAN .................................................... MS 2.90 2.74 2.65 2.57 2.48 2.39

RANKIN ....................................................... MS 3.30 3.12 2.95 2.79 2.62 2.46

SCOTT ........................................................ MS 3.30 3.12 2.96 2.79 2.63 2.47

SHARKEY ................................................... MS 3.10 3.02 2.87 2.71 2.56 2.40

SIMPSON .................................................... MS 3.30 3.12 2.96 2.79 2.63 2.47

SMITH ......................................................... MS 3.30 3.12 2.96 2.81 2.65 2.49

STONE ........................................................ MS 3.40 3.38 3.19 2.99 2.80 2.60

SUNFLOWER ............................................. MS 3.10 2.86 2.74 2.62 2.50 2.38

TALLAHATCHIE .......................................... MS 3.10 2.86 2.75 2.63 2.52 2.40

TATE ........................................................... MS 2.90 2.74 2.66 2.57 2.49 2.40

TIPPAH ....................................................... MS 2.90 2.71 2.60 2.48 2.37 2.25

TISHOMINGO ............................................. MS 2.90 2.69 2.54 2.40 2.25 2.11

TUNICA ....................................................... MS 2.90 2.74 2.65 2.57 2.48 2.39

UNION ......................................................... MS 2.90 2.72 2.61 2.51 2.40 2.29

WALTHALL ................................................. MS 3.40 3.21 3.02 2.84 2.65 2.46

WARREN .................................................... MS 3.30 3.11 2.94 2.76 2.59 2.42

WASHINGTON ............................................ MS 3.10 2.94 2.80 2.65 2.51 2.37

WAYNE ....................................................... MS 3.40 3.24 3.08 2.91 2.75 2.59

WEBSTER ................................................... MS 3.10 2.95 2.81 2.68 2.54 2.41

WILKINSON ................................................ MS 3.40 3.20 3.00 2.81 2.61 2.41

WINSTON ................................................... MS 3.10 2.95 2.82 2.69 2.56 2.43

YALOBUSHA .............................................. MS 3.10 2.86 2.75 2.63 2.52 2.40

YAZOO ........................................................ MS 3.10 3.03 2.88 2.73 2.58 2.43

BEAVERHEAD ............................................ MT 1.60 1.47 1.34 1.21 1.08 0.95

BIG HORN .................................................. MT 1.60 1.50 1.40 1.31 1.21 1.11

BLAINE ........................................................ MT 1.60 1.53 1.45 1.38 1.30 1.23

BROADWATER ........................................... MT 1.60 1.48 1.36 1.24 1.12 1.00

CARBON ..................................................... MT 1.60 1.49 1.38 1.26 1.15 1.04

CARTER ...................................................... MT 1.65 1.48 1.35 1.23 1.10 0.98

CASCADE ................................................... MT 1.60 1.54 1.48 1.42 1.36 1.30

CHOUTEAU ................................................ MT 1.60 1.54 1.48 1.41 1.35 1.29

CUSTER ...................................................... MT 1.60 1.49 1.38 1.28 1.17 1.06

DANIELS ..................................................... MT 1.60 1.50 1.41 1.31 1.22 1.12

DAWSON .................................................... MT 1.60 1.49 1.38 1.28 1.17 1.06

DEER LODGE ............................................. MT 1.60 1.50 1.40 1.29 1.19 1.09

FALLON ...................................................... MT 1.65 1.48 1.36 1.25 1.13 1.01

FERGUS ..................................................... MT 1.60 1.52 1.43 1.35 1.26 1.18

FLATHEAD .................................................. MT 1.60 1.52 1.43 1.35 1.26 1.18

GALLATIN ................................................... MT 1.60 1.44 1.28 1.11 0.95 0.79

GARFIELD .................................................. MT 1.60 1.51 1.42 1.34 1.25 1.16

GLACIER ..................................................... MT 1.60 1.53 1.46 1.38 1.31 1.24

GOLDEN VALLEY ...................................... MT 1.60 1.50 1.41 1.31 1.22 1.12

GRANITE .................................................... MT 1.60 1.52 1.43 1.35 1.26 1.18

HILL ............................................................. MT 1.60 1.53 1.47 1.40 1.34 1.27

JEFFERSON ............................................... MT 1.60 1.48 1.36 1.25 1.13 1.01

JUDITH BASIN ............................................ MT 1.60 1.52 1.44 1.36 1.28 1.20

LAKE ........................................................... MT 1.60 1.52 1.44 1.35 1.27 1.19

LEWIS AND CLARK ................................... MT 1.60 1.52 1.44 1.35 1.27 1.19

LIBERTY ..................................................... MT 1.60 1.54 1.47 1.41 1.34 1.28

LINCOLN ..................................................... MT 1.80 1.50 1.40 1.29 1.19 1.09

MADISON .................................................... MT 1.60 1.50 1.40 1.30 1.20 1.10

MCCONE .................................................... MT 1.60 1.45 1.31 1.16 1.02 0.87

MEAGHER .................................................. MT 1.60 1.49 1.38 1.26 1.15 1.04

MINERAL .................................................... MT 1.80 1.51 1.42 1.32 1.23 1.14

MISSOULA .................................................. MT 1.60 1.52 1.44 1.37 1.29 1.21

MUSSELSHELL .......................................... MT 1.60 1.51 1.42 1.33 1.24 1.15

PARK ........................................................... MT 1.60 1.45 1.29 1.14 0.98 0.83

PETROLEUM .............................................. MT 1.60 1.51 1.43 1.34 1.26 1.17

PHILLIPS ..................................................... MT 1.60 1.52 1.44 1.36 1.28 1.20

PONDERA ................................................... MT 1.60 1.54 1.47 1.41 1.34 1.28

POWDER RIVER ........................................ MT 1.60 1.49 1.37 1.26 1.14 1.03

POWELL ..................................................... MT 1.60 1.51 1.42 1.34 1.25 1.16

PRAIRIE ...................................................... MT 1.60 1.49 1.39 1.28 1.18 1.07

RAVALLI ...................................................... MT 1.60 1.52 1.44 1.37 1.29 1.21

RICHLAND .................................................. MT 1.60 1.49 1.38 1.27 1.16 1.05

ROOSEVELT .............................................. MT 1.60 1.50 1.39 1.29 1.18 1.08

ROSEBUD ................................................... MT 1.60 1.50 1.40 1.31 1.21 1.11

SANDERS ................................................... MT 1.80 1.51 1.41 1.32 1.22 1.13

SHERIDAN .................................................. MT 1.60 1.50 1.39 1.29 1.18 1.08

SILVER BOW .............................................. MT 1.60 1.49 1.37 1.26 1.14 1.03
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 4999

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

STILLWATER .............................................. MT 1.60 1.48 1.36 1.24 1.12 1.00

SWEET GRASS .......................................... MT 1.60 1.47 1.34 1.21 1.08 0.95

TETON ........................................................ MT 1.60 1.54 1.48 1.42 1.36 1.30

TOOLE ........................................................ MT 1.60 1.54 1.47 1.41 1.34 1.28

TREASURE ................................................. MT 1.60 1.51 1.41 1.32 1.22 1.13

VALLEY ....................................................... MT 1.60 1.51 1.42 1.34 1.25 1.16

WHEATLAND .............................................. MT 1.60 1.50 1.39 1.29 1.18 1.08

WIBAUX ...................................................... MT 1.60 1.49 1.37 1.26 1.14 1.03

YELLOWSTONE ......................................... MT 1.60 1.51 1.42 1.33 1.24 1.15

YELLOWSTONE NATIONAL PARK ........... MT 1.60 1.45 1.30 1.15 1.00 0.85

ALAMANCE ................................................. NC 3.10 2.86 2.63 2.41 2.18 1.96

ALEXANDER ............................................... NC 2.95 2.70 2.48 2.25 2.03 1.80

ALLEGHANY ............................................... NC 2.95 2.69 2.45 2.22 1.98 1.74

ANSON ........................................................ NC 3.10 2.88 2.68 2.49 2.29 2.09

ASHE ........................................................... NC 2.95 2.69 2.45 2.22 1.98 1.74

AVERY ........................................................ NC 2.95 2.70 2.47 2.24 2.01 1.78

BEAUFORT ................................................. NC 3.20 3.06 2.90 2.73 2.57 2.40

BERTIE ....................................................... NC 3.20 3.03 2.84 2.64 2.45 2.25

BLADEN ...................................................... NC 3.30 3.07 2.91 2.76 2.60 2.44

BRUNSWICK .............................................. NC 3.30 3.11 2.99 2.86 2.74 2.62

BUNCOMBE ................................................ NC 2.95 2.72 2.51 2.29 2.08 1.87

BURKE ........................................................ NC 2.95 2.71 2.49 2.26 2.04 1.82

CABARRUS ................................................ NC 3.10 2.84 2.61 2.37 2.14 1.90

CALDWELL ................................................. NC 2.95 2.70 2.47 2.25 2.02 1.79

CAMDEN ..................................................... NC 3.20 3.03 2.84 2.64 2.45 2.25

CARTERET ................................................. NC 3.20 3.09 2.95 2.81 2.67 2.53

CASWELL ................................................... NC 3.10 2.84 2.60 2.36 2.12 1.88

CATAWBA ................................................... NC 3.10 2.83 2.58 2.33 2.08 1.83

CHATHAM ................................................... NC 3.10 2.88 2.68 2.48 2.28 2.08

CHEROKEE ................................................ NC 2.95 2.77 2.60 2.44 2.27 2.11

CHOWAN .................................................... NC 3.20 3.03 2.83 2.64 2.44 2.24

CLAY ........................................................... NC 2.95 2.77 2.61 2.46 2.30 2.14

CLEVELAND ............................................... NC 3.10 2.84 2.61 2.37 2.14 1.90

COLUMBUS ................................................ NC 3.30 3.09 2.95 2.82 2.68 2.54

CRAVEN ..................................................... NC 3.20 3.08 2.93 2.79 2.64 2.49

CUMBERLAND ........................................... NC 3.30 3.04 2.84 2.65 2.45 2.26

CURRITUCK ............................................... NC 3.20 3.03 2.83 2.64 2.44 2.24

DARE .......................................................... NC 3.20 3.05 2.88 2.70 2.53 2.35

DAVIDSON .................................................. NC 3.10 2.85 2.62 2.38 2.15 1.92

DAVIE .......................................................... NC 3.10 2.83 2.59 2.34 2.10 1.85

DUPLIN ....................................................... NC 3.30 3.07 2.91 2.75 2.59 2.43

DURHAM ..................................................... NC 3.10 2.87 2.66 2.46 2.25 2.04

EDGECOMBE ............................................. NC 3.20 3.03 2.83 2.64 2.44 2.24

FORSYTH ................................................... NC 3.10 2.84 2.59 2.35 2.10 1.86

FRANKLIN ................................................... NC 3.10 2.88 2.68 2.49 2.29 2.09

GASTON ..................................................... NC 3.10 2.84 2.60 2.35 2.11 1.87

GATES ........................................................ NC 3.20 3.02 2.81 2.60 2.39 2.18

GRAHAM ..................................................... NC 2.95 2.76 2.58 2.41 2.23 2.06

GRANVILLE ................................................ NC 3.10 2.86 2.65 2.43 2.22 2.00

GREENE ..................................................... NC 3.20 3.05 2.87 2.70 2.52 2.34

GUILFORD .................................................. NC 3.10 2.85 2.62 2.38 2.15 1.92

HALIFAX ..................................................... NC 3.10 2.89 2.70 2.51 2.32 2.13

HARNETT ................................................... NC 3.30 3.02 2.81 2.59 2.38 2.17

HAYWOOD ................................................. NC 2.95 2.73 2.54 2.34 2.15 1.95

HENDERSON ............................................. NC 2.95 2.74 2.54 2.35 2.15 1.96

HERTFORD ................................................ NC 3.20 3.02 2.81 2.59 2.38 2.17

HOKE .......................................................... NC 3.30 3.03 2.83 2.64 2.44 2.24

HYDE .......................................................... NC 3.20 3.07 2.91 2.75 2.59 2.43

IREDELL ..................................................... NC 3.10 2.83 2.58 2.33 2.08 1.83

JACKSON ................................................... NC 2.95 2.75 2.57 2.40 2.22 2.04

JOHNSTON ................................................. NC 3.20 3.03 2.82 2.62 2.41 2.21

JONES ........................................................ NC 3.20 3.08 2.93 2.77 2.62 2.47

LEE .............................................................. NC 3.10 2.89 2.70 2.50 2.31 2.12

LENOIR ....................................................... NC 3.20 3.07 2.91 2.75 2.59 2.43

LINCOLN ..................................................... NC 3.10 2.83 2.59 2.34 2.10 1.85

MACON ....................................................... NC 2.95 2.71 2.49 2.27 2.05 1.83

MADISON .................................................... NC 2.95 2.76 2.59 2.42 2.25 2.08

MARTIN ....................................................... NC 2.95 2.71 2.50 2.28 2.07 1.85

MCDOWELL ................................................ NC 3.20 3.04 2.86 2.67 2.49 2.30

MECKLENBURG ......................................... NC 3.10 2.84 2.60 2.37 2.13 1.89
5000 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

MITCHELL ................................................... NC 2.95 2.70 2.48 2.25 2.03 1.80

MONTGOMERY .......................................... NC 3.10 2.87 2.66 2.44 2.23 2.02

MOORE ....................................................... NC 3.10 2.89 2.69 2.50 2.30 2.11

NASH .......................................................... NC 3.10 2.90 2.72 2.54 2.36 2.18

NEW HANOVER ......................................... NC 3.30 3.11 2.98 2.86 2.73 2.61

NORTHAMPTON ........................................ NC 3.10 2.88 2.69 2.49 2.30 2.10

ONSLOW .................................................... NC 3.30 3.09 2.95 2.80 2.66 2.52

ORANGE ..................................................... NC 3.10 2.87 2.65 2.44 2.22 2.01

PAMLICO .................................................... NC 3.20 3.08 2.93 2.78 2.63 2.48

PASQUOTANK ........................................... NC 3.20 3.03 2.84 2.64 2.45 2.25

PENDER ..................................................... NC 3.30 3.09 2.95 2.81 2.67 2.53

PERQUIMANS ............................................ NC 3.20 3.04 2.84 2.65 2.45 2.26

PERSON ..................................................... NC 3.10 2.85 2.62 2.38 2.15 1.92

PITT ............................................................. NC 3.20 3.05 2.88 2.70 2.53 2.35

POLK ........................................................... NC 3.10 2.85 2.63 2.40 2.18 1.95

RANDOLPH ................................................ NC 3.10 2.86 2.64 2.42 2.20 1.98

RICHMOND ................................................. NC 3.10 2.90 2.72 2.53 2.35 2.17

ROBESON .................................................. NC 3.30 3.05 2.88 2.70 2.53 2.35

ROCKINGHAM ............................................ NC 2.95 2.71 2.50 2.28 2.07 1.85

ROWAN ....................................................... NC 3.10 2.84 2.60 2.37 2.13 1.89

RUTHERFORD ........................................... NC 3.10 2.84 2.60 2.37 2.13 1.89

SAMPSON .................................................. NC 3.30 3.05 2.87 2.70 2.52 2.34

SCOTLAND ................................................. NC 3.30 3.03 2.83 2.64 2.44 2.24

STANLY ...................................................... NC 3.10 2.86 2.64 2.41 2.19 1.97

STOKES ...................................................... NC 2.95 2.70 2.47 2.25 2.02 1.79

SURRY ........................................................ NC 2.95 2.70 2.47 2.23 2.00 1.77

SWAIN ......................................................... NC 2.95 2.75 2.57 2.39 2.21 2.03

TRANSYLVANIA ......................................... NC 2.95 2.75 2.56 2.38 2.19 2.01

TYRRELL .................................................... NC 3.20 3.05 2.87 2.70 2.52 2.34

UNION ......................................................... NC 3.10 2.86 2.65 2.43 2.22 2.00

VANCE ........................................................ NC 3.10 2.86 2.64 2.43 2.21 1.99

WAKE .......................................................... NC 3.10 2.89 2.70 2.50 2.31 2.12

WARREN .................................................... NC 3.10 2.86 2.65 2.43 2.22 2.00

WASHINGTON ............................................ NC 3.30 3.05 2.87 2.69 2.51 2.33

WATAUGA .................................................. NC 2.95 2.70 2.46 2.23 1.99 1.76

WAYNE ....................................................... NC 3.20 3.05 2.87 2.68 2.50 2.32

WILKES ....................................................... NC 2.95 2.70 2.47 2.24 2.01 1.78

WILSON ...................................................... NC 3.20 3.03 2.83 2.62 2.42 2.22

YADKIN ....................................................... NC 3.10 2.71 2.49 2.26 2.04 1.82

YANCEY ...................................................... NC 2.95 2.71 2.49 2.26 2.04 1.82

ADAMS ........................................................ ND 1.65 1.15 1.10 1.05 1.00 0.95

BARNES ...................................................... ND 1.65 1.15 1.10 1.05 1.00 0.95

BENSON ..................................................... ND 1.60 1.15 1.11 1.06 1.02 0.97

BILLINGS .................................................... ND 1.60 1.16 1.12 1.09 1.05 1.01

BOTTINEAU ................................................ ND 1.60 1.16 1.12 1.07 1.03 0.99

BOWMAN .................................................... ND 1.65 1.15 1.11 1.06 1.02 0.97

BURKE ........................................................ ND 1.60 1.16 1.13 1.09 1.06 1.02

BURLEIGH .................................................. ND 1.65 1.15 1.10 1.06 1.01 0.96

CASS ........................................................... ND 1.65 1.14 1.08 1.01 0.95 0.89

CAVALIER ................................................... ND 1.60 1.15 1.10 1.06 1.01 0.96

DICKEY ....................................................... ND 1.65 1.15 1.10 1.05 1.00 0.95

DIVIDE ........................................................ ND 1.60 1.17 1.14 1.10 1.07 1.04

DUNN .......................................................... ND 1.60 1.16 1.12 1.07 1.03 0.99

EDDY .......................................................... ND 1.65 1.16 1.11 1.07 1.02 0.98

EMMONS .................................................... ND 1.65 1.15 1.10 1.05 1.00 0.95

FOSTER ...................................................... ND 1.65 1.15 1.11 1.06 1.02 0.97

GOLDEN VALLEY ...................................... ND 1.60 1.16 1.13 1.09 1.06 1.02

GRAND FORKS .......................................... ND 1.65 1.16 1.12 1.08 1.04 1.00

GRANT ........................................................ ND 1.65 1.15 1.10 1.05 1.00 0.95

GRIGGS ...................................................... ND 1.65 1.15 1.11 1.06 1.02 0.97

HETTINGER ................................................ ND 1.65 1.15 1.10 1.06 1.01 0.96

KIDDER ....................................................... ND 1.65 1.15 1.11 1.06 1.02 0.97

LA MOURE ................................................. ND 1.65 1.15 1.10 1.05 1.00 0.95

LOGAN ........................................................ ND 1.65 1.15 1.10 1.05 1.00 0.95

MCHENRY .................................................. ND 1.60 1.16 1.11 1.07 1.02 0.98

MCINTOSH ................................................. ND 1.65 1.15 1.10 1.05 1.00 0.95

MCKENZIE .................................................. ND 1.60 1.17 1.13 1.10 1.06 1.03

MCLEAN ..................................................... ND 1.60 1.16 1.11 1.07 1.02 0.98

MERCER ..................................................... ND 1.60 1.16 1.11 1.07 1.02 0.98

MORTON .................................................... ND 1.65 1.15 1.10 1.06 1.01 0.96
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5001

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

MOUNTRAIL ............................................... ND 1.60 1.16 1.12 1.09 1.05 1.01

NELSON ...................................................... ND 1.65 1.16 1.11 1.07 1.02 0.98

OLIVER ....................................................... ND 1.60 1.15 1.11 1.06 1.02 0.97

PEMBINA .................................................... ND 1.60 1.14 1.09 1.03 0.98 0.92

PIERCE ....................................................... ND 1.60 1.15 1.11 1.06 1.02 0.97

RAMSEY ..................................................... ND 1.60 1.16 1.11 1.07 1.02 0.98

RANSOM ..................................................... ND 1.65 1.14 1.09 1.03 0.98 0.92

RENVILLE ................................................... ND 1.60 1.16 1.12 1.08 1.04 1.00

RICHLAND .................................................. ND 1.65 1.14 1.08 1.03 0.97 0.91

ROLETTE .................................................... ND 1.60 1.16 1.11 1.07 1.02 0.98

SARGENT ................................................... ND 1.65 1.15 1.09 1.04 0.98 0.93

SHERIDAN .................................................. ND 1.60 1.15 1.11 1.06 1.02 0.97

SIOUX ......................................................... ND 1.65 1.15 1.10 1.05 1.00 0.95

SLOPE ........................................................ ND 1.65 1.16 1.12 1.07 1.03 0.99

STARK ........................................................ ND 1.60 1.16 1.12 1.07 1.03 0.99

STEELE ....................................................... ND 1.65 1.15 1.11 1.06 1.02 0.97

STUTSMAN ................................................. ND 1.65 1.15 1.10 1.05 1.00 0.95

TOWNER .................................................... ND 1.60 1.15 1.11 1.06 1.02 0.97

TRAILL ........................................................ ND 1.65 1.15 1.10 1.05 1.00 0.95

WALSH ........................................................ ND 1.60 1.15 1.10 1.06 1.01 0.96

WARD ......................................................... ND 1.60 1.16 1.12 1.07 1.03 0.99

WELLS ........................................................ ND 1.65 1.15 1.11 1.06 1.02 0.97

WILLIAMS ................................................... ND 1.60 1.17 1.13 1.10 1.06 1.03

ADAMS ........................................................ NE 1.80 1.65 1.54 1.44 1.33 1.23

ANTELOPE ................................................. NE 1.75 1.54 1.44 1.33 1.23 1.12

ARTHUR ..................................................... NE 1.80 1.22 1.17 1.12 1.07 1.02

BANNER ..................................................... NE 1.80 1.72 1.54 1.37 1.19 1.01

BLAINE ........................................................ NE 1.75 1.37 1.29 1.22 1.14 1.07

BOONE ....................................................... NE 1.80 1.64 1.52 1.41 1.29 1.18

BOX BUTTE ................................................ NE 1.80 1.72 1.53 1.35 1.16 0.98

BOYD .......................................................... NE 1.75 1.45 1.35 1.25 1.16 1.06

BROWN ....................................................... NE 1.75 1.42 1.32 1.22 1.13 1.03

BUFFALO .................................................... NE 1.80 1.63 1.51 1.40 1.28 1.16

BURT ........................................................... NE 1.80 1.68 1.61 1.53 1.46 1.39

BUTLER ...................................................... NE 1.80 1.67 1.59 1.50 1.42 1.34

CASS ........................................................... NE 1.85 1.70 1.66 1.61 1.57 1.52

CEDAR ........................................................ NE 1.75 1.56 1.46 1.35 1.25 1.14

CHASE ........................................................ NE 1.80 1.62 1.49 1.35 1.22 1.09

CHERRY ..................................................... NE 1.75 1.39 1.29 1.19 1.08 0.98

CHEYENNE ................................................ NE 1.80 1.72 1.55 1.37 1.20 1.02

CLAY ........................................................... NE 1.80 1.65 1.55 1.46 1.36 1.26

COLFAX ...................................................... NE 1.80 1.66 1.57 1.48 1.39 1.30

CUMING ...................................................... NE 1.80 1.59 1.52 1.44 1.37 1.29

CUSTER ...................................................... NE 1.80 1.62 1.49 1.37 1.24 1.11

DAKOTA ...................................................... NE 1.75 1.65 1.56 1.46 1.37 1.27

DAWES ....................................................... NE 1.80 1.71 1.52 1.34 1.15 0.96

DAWSON .................................................... NE 1.80 1.62 1.50 1.37 1.25 1.12

DEUEL ........................................................ NE 1.80 1.73 1.55 1.38 1.20 1.03

DIXON ......................................................... NE 1.75 1.64 1.53 1.42 1.31 1.20

DODGE ....................................................... NE 1.80 1.68 1.61 1.54 1.47 1.40

DOUGLAS ................................................... NE 1.85 1.70 1.66 1.61 1.57 1.52

DUNDY ........................................................ NE 1.80 1.62 1.50 1.37 1.25 1.12

FILLMORE .................................................. NE 1.80 1.66 1.57 1.49 1.40 1.31

FRANKLIN ................................................... NE 1.80 1.64 1.54 1.43 1.33 1.22

FRONTIER .................................................. NE 1.80 1.62 1.50 1.37 1.25 1.12

FURNAS ...................................................... NE 1.80 1.62 1.50 1.37 1.25 1.12

GAGE .......................................................... NE 1.85 1.68 1.61 1.54 1.47 1.40

GARDEN ..................................................... NE 1.80 1.72 1.54 1.37 1.19 1.01

GARFIELD .................................................. NE 1.75 1.46 1.37 1.28 1.20 1.11

GOSPER ..................................................... NE 1.80 1.63 1.51 1.38 1.26 1.14

GRANT ........................................................ NE 1.75 1.23 1.17 1.11 1.05 0.99

GREELEY ................................................... NE 1.80 1.63 1.52 1.40 1.29 1.17

HALL ........................................................... NE 1.80 1.64 1.53 1.43 1.32 1.21

HAMILTON .................................................. NE 1.80 1.65 1.55 1.45 1.35 1.25

HARLAN ...................................................... NE 1.80 1.64 1.53 1.41 1.30 1.19

HAYES ........................................................ NE 1.80 1.62 1.49 1.37 1.24 1.11

HITCHCOCK ............................................... NE 1.80 1.63 1.50 1.38 1.25 1.13

HOLT ........................................................... NE 1.75 1.51 1.40 1.29 1.19 1.08

HOOKER ..................................................... NE 1.75 1.29 1.22 1.14 1.07 1.00

HOWARD .................................................... NE 1.80 1.63 1.52 1.40 1.29 1.17
5002 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

JEFFERSON ............................................... NE 1.80 1.67 1.59 1.51 1.43 1.35

JOHNSON ................................................... NE 1.85 1.69 1.63 1.57 1.51 1.45

KEARNEY ................................................... NE 1.80 1.64 1.53 1.41 1.30 1.19

KEITH .......................................................... NE 1.80 1.61 1.47 1.32 1.18 1.04

KEYA PAHA ................................................ NE 1.75 1.42 1.32 1.22 1.13 1.03

KIMBALL ..................................................... NE 1.80 1.72 1.55 1.37 1.20 1.02

KNOX .......................................................... NE 1.75 1.62 1.49 1.36 1.23 1.10

LANCASTER ............................................... NE 1.85 1.68 1.61 1.54 1.47 1.40

LINCOLN ..................................................... NE 1.80 1.61 1.48 1.34 1.21 1.07

LOGAN ........................................................ NE 1.80 1.32 1.26 1.20 1.15 1.09

LOUP ........................................................... NE 1.75 1.43 1.35 1.26 1.18 1.10

MADISON .................................................... NE 1.80 1.27 1.22 1.16 1.11 1.05

MCPHERSON ............................................. NE 1.80 1.64 1.53 1.41 1.30 1.19

MERRICK .................................................... NE 1.80 1.65 1.54 1.44 1.33 1.23

MORRILL .................................................... NE 1.80 1.72 1.54 1.36 1.18 1.00

NANCE ........................................................ NE 1.80 1.64 1.54 1.43 1.33 1.22

NEMAHA ..................................................... NE 1.85 1.70 1.65 1.60 1.55 1.50

NUCKOLLS ................................................. NE 1.80 1.65 1.56 1.46 1.37 1.27

OTOE .......................................................... NE 1.85 1.70 1.65 1.59 1.54 1.49

PAWNEE ..................................................... NE 1.85 1.69 1.62 1.56 1.49 1.43

PERKINS ..................................................... NE 1.80 1.61 1.47 1.33 1.19 1.05

PHELPS ...................................................... NE 1.80 1.63 1.52 1.40 1.29 1.17

PIERCE ....................................................... NE 1.75 1.57 1.46 1.35 1.24 1.13

PLATTE ....................................................... NE 1.80 1.65 1.55 1.46 1.36 1.26

POLK ........................................................... NE 1.80 1.66 1.56 1.47 1.37 1.28

RED WILLOW ............................................. NE 1.80 1.63 1.51 1.40 1.28 1.16

RICHARDSON ............................................ NE 1.85 1.70 1.64 1.59 1.53 1.48

ROCK .......................................................... NE 1.75 1.43 1.34 1.24 1.15 1.05

SALINE ........................................................ NE 1.80 1.67 1.59 1.52 1.44 1.36

SARPY ........................................................ NE 1.85 1.71 1.67 1.62 1.58 1.54

SAUNDERS ................................................ NE 1.85 1.69 1.63 1.56 1.50 1.44

SCOTTS BLUFF ......................................... NE 1.80 1.72 1.54 1.37 1.19 1.01

SEWARD ..................................................... NE 1.80 1.67 1.59 1.51 1.43 1.35

SHERIDAN .................................................. NE 1.80 1.71 1.53 1.34 1.16 0.97

SHERMAN .................................................. NE 1.80 1.63 1.51 1.39 1.27 1.15

SIOUX ......................................................... NE 1.80 1.71 1.53 1.34 1.16 0.97

STANTON ................................................... NE 1.80 1.65 1.54 1.44 1.33 1.23

THAYER ...................................................... NE 1.80 1.66 1.58 1.49 1.41 1.32

THOMAS ..................................................... NE 1.75 1.32 1.24 1.17 1.09 1.02

THURSTON ................................................ NE 1.75 1.66 1.57 1.48 1.39 1.30

VALLEY ....................................................... NE 1.80 1.63 1.51 1.38 1.26 1.14

WASHINGTON ............................................ NE 1.85 1.70 1.64 1.59 1.53 1.48

WAYNE ....................................................... NE 1.75 1.64 1.53 1.42 1.31 1.20

WEBSTER ................................................... NE 1.80 1.65 1.55 1.44 1.34 1.24

WHEELER ................................................... NE 1.75 1.52 1.42 1.32 1.23 1.13

YORK .......................................................... NE 1.80 1.66 1.57 1.47 1.38 1.29

BELKNAP .................................................... NH 2.80 2.80 2.58 2.36 2.14 1.92

CARROLL ................................................... NH 2.80 2.76 2.52 2.29 2.05 1.82

CHESHIRE .................................................. NH 2.80 2.82 2.60 2.38 2.16 1.94

COOS .......................................................... NH 2.60 2.41 2.22 2.02 1.83 1.64

GRAFTON ................................................... NH 2.60 2.49 2.31 2.12 1.94 1.76

HILLSBOROUGH ........................................ NH 3.00 2.95 2.72 2.50 2.27 2.05

MERRIMACK .............................................. NH 3.00 2.86 2.63 2.41 2.18 1.95

ROCKINGHAM ............................................ NH 3.00 2.96 2.75 2.54 2.33 2.12

STRAFFORD .............................................. NH 3.00 2.86 2.65 2.44 2.23 2.02

SULLIVAN ................................................... NH 2.80 2.74 2.51 2.28 2.05 1.82

ATLANTIC ................................................... NJ 3.00 2.73 2.53 2.33 2.13 1.93

BERGEN ..................................................... NJ 3.15 2.92 2.69 2.47 2.24 2.02

BURLINGTON ............................................. NJ 3.00 2.82 2.58 2.35 2.11 1.88

CAMDEN ..................................................... NJ 3.00 2.84 2.59 2.34 2.09 1.84

CAPE MAY .................................................. NJ 3.00 2.71 2.52 2.33 2.14 1.95

CUMBERLAND ........................................... NJ 3.00 2.72 2.49 2.27 2.04 1.82

ESSEX ........................................................ NJ 3.15 2.91 2.67 2.44 2.20 1.97

GLOUCESTER ............................................ NJ 3.00 2.83 2.57 2.32 2.06 1.80

HUDSON ..................................................... NJ 3.15 2.92 2.69 2.47 2.24 2.02

HUNTERDON ............................................. NJ 3.10 2.82 2.57 2.31 2.06 1.81

MERCER ..................................................... NJ 3.10 2.86 2.62 2.39 2.15 1.92

MIDDLESEX ................................................ NJ 3.10 2.87 2.64 2.42 2.19 1.97

MONMOUTH ............................................... NJ 3.10 2.83 2.63 2.42 2.22 2.01

MORRIS ...................................................... NJ 3.10 2.85 2.62 2.38 2.15 1.91
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5003

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

OCEAN ........................................................ NJ 3.10 2.74 2.56 2.37 2.19 2.00

PASSAIC ..................................................... NJ 3.15 2.90 2.66 2.43 2.19 1.95

SALEM ........................................................ NJ 3.00 2.82 2.55 2.29 2.02 1.75

SOMERSET ................................................ NJ 3.10 2.84 2.61 2.37 2.14 1.91

SUSSEX ...................................................... NJ 3.10 2.77 2.53 2.30 2.06 1.83

UNION ......................................................... NJ 3.15 2.91 2.67 2.44 2.20 1.97

WARREN .................................................... NJ 3.10 2.79 2.53 2.28 2.02 1.77

BERNALILLO .............................................. NM 2.35 2.25 2.16 2.06 1.97 1.87

CATRON ..................................................... NM 2.10 2.18 2.01 1.84 1.67 1.50

CHAVES ...................................................... NM 2.10 2.04 1.89 1.73 1.58 1.42

CIBOLA ....................................................... NM 1.90 2.23 2.11 1.99 1.87 1.75

COLFAX ...................................................... NM 2.35 2.24 2.12 2.01 1.89 1.78

CURRY ........................................................ NM 2.10 2.13 1.92 1.70 1.49 1.27

DE BACA .................................................... NM 2.10 2.17 1.99 1.81 1.63 1.45

DONA ANA ................................................. NM 2.10 2.15 1.95 1.76 1.56 1.36

EDDY .......................................................... NM 2.10 2.06 1.92 1.78 1.64 1.50

GRANT ........................................................ NM 2.10 2.16 1.96 1.77 1.57 1.38

GUADALUPE .............................................. NM 2.35 2.21 2.06 1.92 1.77 1.63

HARDING .................................................... NM 2.35 2.20 2.05 1.90 1.75 1.60

HIDALGO .................................................... NM 2.10 2.15 1.94 1.74 1.53 1.33

LEA .............................................................. NM 2.10 2.07 1.94 1.80 1.67 1.54

LINCOLN ..................................................... NM 2.10 2.18 2.01 1.84 1.67 1.50

LOS ALAMOS ............................................. NM 2.35 2.29 2.23 2.16 2.10 2.04

LUNA ........................................................... NM 2.10 2.15 1.95 1.76 1.56 1.36

MCKINLEY .................................................. NM 1.90 2.23 2.11 1.99 1.87 1.75

MORA .......................................................... NM 2.35 2.25 2.16 2.06 1.97 1.87

OTERO ........................................................ NM 2.10 2.17 1.99 1.80 1.62 1.44

QUAY .......................................................... NM 2.35 2.17 1.99 1.81 1.63 1.45

RIO ARRIBA ............................................... NM 1.90 2.28 2.20 2.13 2.05 1.98

ROOSEVELT .............................................. NM 2.10 2.13 1.91 1.69 1.47 1.25

SAN JUAN .................................................. NM 2.35 2.27 2.19 2.12 2.04 1.96

SAN MIGUEL .............................................. NM 1.90 2.13 2.06 1.98 1.91 1.84

SANDOVAL ................................................. NM 2.35 2.26 2.16 2.07 1.97 1.88

SANTA FE ................................................... NM 2.35 2.28 2.22 2.15 2.09 2.02

SIERRA ....................................................... NM 2.10 2.17 1.99 1.82 1.64 1.46

SOCORRO .................................................. NM 2.10 2.20 2.05 1.90 1.75 1.60

TAOS ........................................................... NM 1.90 2.27 2.18 2.10 2.01 1.93

TORRANCE ................................................ NM 2.35 2.23 2.11 2.00 1.88 1.76

UNION ......................................................... NM 2.35 2.19 2.04 1.88 1.73 1.57

VALENCIA ................................................... NM 2.35 2.23 2.11 2.00 1.88 1.76

CARSON CITY ............................................ NV 1.70 1.16 1.08 0.99 0.91 0.83

CHURCHILL ................................................ NV 1.70 1.22 1.14 1.05 0.97 0.88

CLARK ........................................................ NV 2.00 1.65 1.69 1.74 1.78 1.83

DOUGLAS ................................................... NV 1.70 1.15 1.08 1.00 0.93 0.85

ELKO ........................................................... NV 1.90 1.72 1.54 1.36 1.18 1.00

ESMERALDA .............................................. NV 1.60 1.24 1.20 1.15 1.11 1.06

EUREKA ...................................................... NV 1.70 1.49 1.39 1.28 1.18 1.07

HUMBOLDT ................................................ NV 1.70 1.42 1.30 1.19 1.07 0.95

LANDER ...................................................... NV 1.70 1.43 1.32 1.22 1.11 1.00

LINCOLN ..................................................... NV 1.60 1.59 1.59 1.58 1.58 1.57

LYON ........................................................... NV 1.70 0.97 0.94 0.90 0.87 0.84

MINERAL .................................................... NV 1.60 1.17 1.10 1.04 0.97 0.90

NYE ............................................................. NV 1.60 1.47 1.39 1.30 1.22 1.14

PERSHING .................................................. NV 1.70 1.39 1.27 1.16 1.04 0.93

STOREY ...................................................... NV 1.70 1.15 1.06 0.98 0.89 0.81

WASHOE .................................................... NV 1.70 1.16 1.09 1.02 0.95 0.88

WHITE PINE ............................................... NV 1.90 1.77 1.63 1.50 1.36 1.23

ALBANY ...................................................... NY 2.60 2.42 2.24 2.06 1.88 1.70

ALLEGANY ................................................. NY 2.30 2.08 1.89 1.70 1.51 1.32

BRONX ........................................................ NY 3.15 2.93 2.71 2.50 2.28 2.07

BROOME .................................................... NY 2.60 2.31 2.07 1.84 1.60 1.36

CATTARAUGUS ......................................... NY 2.10 1.93 1.77 1.60 1.44 1.27

CAYUGA ..................................................... NY 2.30 2.14 1.93 1.73 1.52 1.31

CHAUTAUQUA ........................................... NY 2.10 1.86 1.70 1.55 1.39 1.23

CHEMUNG .................................................. NY 2.40 2.18 1.96 1.74 1.52 1.30

CHENANGO ................................................ NY 2.40 2.28 2.06 1.84 1.62 1.40

CLINTON ..................................................... NY 2.20 2.07 1.94 1.82 1.69 1.56

COLUMBIA .................................................. NY 2.80 2.52 2.34 2.17 1.99 1.81

CORTLAND ................................................. NY 2.40 2.22 2.00 1.77 1.55 1.32

DELAWARE ................................................ NY 2.60 2.35 2.15 1.95 1.75 1.55
5004 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

DUTCHESS ................................................. NY 2.80 2.59 2.43 2.26 2.10 1.94

ERIE ............................................................ NY 2.20 1.93 1.79 1.64 1.50 1.36

ESSEX ........................................................ NY 2.40 2.17 2.02 1.87 1.72 1.57

FRANKLIN ................................................... NY 2.20 2.00 1.88 1.75 1.63 1.51

FULTON ...................................................... NY 2.60 2.31 2.13 1.94 1.76 1.58

GENESEE ................................................... NY 2.20 2.01 1.85 1.70 1.54 1.38

GREENE ..................................................... NY 2.60 2.51 2.31 2.12 1.92 1.73

HAMILTON .................................................. NY 2.40 2.24 2.06 1.89 1.71 1.53

HERKIMER ................................................. NY 2.40 2.27 2.07 1.88 1.68 1.48

JEFFERSON ............................................... NY 2.20 2.04 1.88 1.73 1.57 1.41

KINGS ......................................................... NY 3.15 2.92 2.70 2.48 2.26 2.04

LEWIS ......................................................... NY 2.20 2.14 1.96 1.78 1.60 1.42

LIVINGSTON ............................................... NY 2.30 2.01 1.84 1.68 1.51 1.35

MADISON .................................................... NY 2.40 2.19 1.99 1.78 1.58 1.37

MONROE .................................................... NY 2.30 2.02 1.86 1.71 1.55 1.40

MONTGOMERY .......................................... NY 2.60 2.36 2.17 1.97 1.78 1.59

NASSAU ...................................................... NY 3.15 2.94 2.73 2.53 2.32 2.12

NEW YORK ................................................. NY 3.15 2.92 2.70 2.47 2.25 2.03

NIAGARA .................................................... NY 2.20 1.94 1.80 1.67 1.53 1.40

ONEIDA ....................................................... NY 2.40 2.18 1.98 1.79 1.59 1.40

ONONDAGA ............................................... NY 2.40 2.14 1.93 1.73 1.52 1.31

ONTARIO .................................................... NY 2.30 2.09 1.90 1.72 1.53 1.35

ORANGE ..................................................... NY 3.00 2.81 2.58 2.34 2.11 1.88

ORLEANS ................................................... NY 2.20 2.02 1.86 1.71 1.55 1.40

OSWEGO .................................................... NY 2.30 2.11 1.92 1.73 1.54 1.35

OTSEGO ..................................................... NY 2.60 2.30 2.10 1.91 1.71 1.51

PUTNAM ..................................................... NY 3.00 2.84 2.64 2.44 2.24 2.04

QUEENS ..................................................... NY 3.15 2.93 2.71 2.50 2.28 2.07

RENSSELAER ............................................ NY 2.60 2.43 2.26 2.09 1.92 1.75

RICHMOND ................................................. NY 3.15 2.92 2.69 2.47 2.24 2.02

ROCKLAND ................................................ NY 3.15 2.91 2.68 2.46 2.23 2.00

SARATOGA ................................................ NY 2.60 2.35 2.17 2.00 1.82 1.65

SCHENECTADY ......................................... NY 2.60 2.41 2.22 2.04 1.85 1.66

SCHOHARIE ............................................... NY 2.60 2.40 2.20 2.01 1.81 1.61

SCHUYLER ................................................. NY 2.30 2.16 1.94 1.73 1.51 1.30

SENECA ...................................................... NY 2.30 2.08 1.89 1.70 1.51 1.32

ST. LAWRENCE ......................................... NY 2.20 1.99 1.85 1.72 1.58 1.45

STEUBEN ................................................... NY 2.30 2.12 1.92 1.72 1.52 1.32

SUFFOLK .................................................... NY 3.15 2.96 2.79 2.61 2.44 2.26

SULLIVAN ................................................... NY 2.80 2.50 2.30 2.10 1.90 1.70

TIOGA ......................................................... NY 2.40 2.28 2.03 1.79 1.54 1.30

TOMPKINS .................................................. NY 2.40 2.24 2.00 1.77 1.53 1.30

ULSTER ...................................................... NY 2.80 2.56 2.37 2.18 1.99 1.80

WARREN .................................................... NY 2.60 2.25 2.09 1.92 1.76 1.59

WASHINGTON ............................................ NY 2.60 2.31 2.14 1.98 1.81 1.65

WAYNE ....................................................... NY 2.30 2.09 1.91 1.72 1.54 1.36

WESTCHESTER ......................................... NY 3.15 2.93 2.71 2.50 2.28 2.07

WYOMING .................................................. NY 2.20 2.01 1.85 1.68 1.52 1.36

YATES ......................................................... NY 2.30 2.12 1.92 1.72 1.52 1.32

ADAMS ........................................................ OH 2.20 2.00 1.89 1.78 1.67 1.56

ALLEN ......................................................... OH 2.00 1.77 1.65 1.52 1.40 1.27

ASHLAND ................................................... OH 2.00 1.88 1.76 1.64 1.52 1.40

ASHTABULA ............................................... OH 2.00 1.88 1.77 1.65 1.54 1.42

ATHENS ...................................................... OH 2.00 2.01 1.91 1.81 1.71 1.61

AUGLAIZE ................................................... OH 2.00 1.78 1.66 1.55 1.43 1.31

BELMONT ................................................... OH 2.00 1.92 1.84 1.75 1.67 1.59

BROWN ....................................................... OH 2.20 1.99 1.87 1.75 1.63 1.51

BUTLER ...................................................... OH 2.00 1.92 1.80 1.69 1.57 1.45

CARROLL ................................................... OH 2.00 1.90 1.80 1.70 1.60 1.50

CHAMPAIGN ............................................... OH 2.00 1.93 1.81 1.70 1.58 1.47

CLARK ........................................................ OH 2.00 1.92 1.81 1.69 1.58 1.46

CLERMONT ................................................ OH 2.20 1.98 1.86 1.73 1.61 1.48

CLINTON ..................................................... OH 2.00 1.93 1.82 1.72 1.61 1.50

COLUMBIANA ............................................. OH 2.00 1.90 1.80 1.69 1.59 1.49

COSHOCTON ............................................. OH 2.00 1.93 1.82 1.70 1.59 1.48

CRAWFORD ............................................... OH 2.00 1.80 1.69 1.59 1.48 1.38

CUYAHOGA ................................................ OH 2.00 1.91 1.82 1.72 1.63 1.54

DARKE ........................................................ OH 2.00 1.80 1.70 1.61 1.51 1.41

DEFIANCE .................................................. OH 1.80 1.69 1.59 1.48 1.38 1.27

DELAWARE ................................................ OH 2.00 1.93 1.82 1.70 1.59 1.48
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5005

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

ERIE ............................................................ OH 2.00 1.73 1.65 1.58 1.50 1.43

FAIRFIELD .................................................. OH 2.00 1.95 1.86 1.76 1.67 1.58

FAYETTE .................................................... OH 2.00 1.94 1.84 1.74 1.64 1.54

FRANKLIN ................................................... OH 2.00 1.95 1.85 1.76 1.66 1.57

FULTON ...................................................... OH 1.80 1.70 1.61 1.51 1.42 1.32

GALLIA ........................................................ OH 2.20 2.02 1.93 1.84 1.75 1.66

GEAUGA ..................................................... OH 2.00 1.90 1.79 1.69 1.58 1.48

GREENE ..................................................... OH 2.00 1.93 1.82 1.70 1.59 1.48

GUERNSEY ................................................ OH 2.00 1.94 1.84 1.73 1.63 1.53

HAMILTON .................................................. OH 2.20 1.98 1.85 1.71 1.58 1.45

HANCOCK .................................................. OH 2.00 1.69 1.59 1.48 1.38 1.27

HARDIN ....................................................... OH 2.00 1.79 1.68 1.56 1.45 1.34

HARRISON ................................................. OH 2.00 1.91 1.82 1.74 1.65 1.56

HENRY ........................................................ OH 1.80 1.69 1.58 1.48 1.37 1.26

HIGHLAND .................................................. OH 2.20 1.99 1.88 1.76 1.65 1.53

HOCKING .................................................... OH 2.00 1.95 1.86 1.78 1.69 1.60

HOLMES ..................................................... OH 2.00 1.89 1.77 1.66 1.54 1.43

HURON ....................................................... OH 2.00 1.72 1.64 1.57 1.49 1.41

JACKSON ................................................... OH 2.20 2.01 1.91 1.82 1.72 1.62

JEFFERSON ............................................... OH 2.00 1.92 1.84 1.76 1.68 1.60

KNOX .......................................................... OH 2.00 1.92 1.80 1.69 1.57 1.45

LAKE ........................................................... OH 2.00 1.90 1.80 1.69 1.59 1.49

LAWRENCE ................................................ OH 2.20 2.02 1.93 1.85 1.76 1.67

LICKING ...................................................... OH 2.00 1.94 1.84 1.73 1.63 1.53

LOGAN ........................................................ OH 2.00 1.80 1.70 1.59 1.49 1.39

LORAIN ....................................................... OH 2.00 1.89 1.79 1.68 1.58 1.47

LUCAS ........................................................ OH 1.80 1.72 1.64 1.55 1.47 1.39

MADISON .................................................... OH 2.00 1.94 1.83 1.73 1.62 1.52

MAHONING ................................................. OH 2.00 1.89 1.79 1.68 1.58 1.47

MARION ...................................................... OH 2.00 1.80 1.70 1.60 1.50 1.40

MEDINA ...................................................... OH 2.00 1.89 1.78 1.67 1.56 1.45

MEIGS ......................................................... OH 2.00 2.02 1.93 1.83 1.74 1.65

MERCER ..................................................... OH 2.00 1.79 1.68 1.57 1.46 1.35

MIAMI .......................................................... OH 2.00 1.92 1.79 1.67 1.54 1.42

MONROE .................................................... OH 2.00 1.92 1.84 1.75 1.67 1.59

MONTGOMERY .......................................... OH 2.00 1.92 1.80 1.69 1.57 1.45

MORGAN .................................................... OH 2.00 1.95 1.86 1.76 1.67 1.58

MORROW ................................................... OH 2.00 1.80 1.71 1.61 1.52 1.42

MUSKINGUM .............................................. OH 2.00 1.94 1.84 1.73 1.63 1.53

NOBLE ........................................................ OH 2.00 1.94 1.85 1.75 1.66 1.56

OTTAWA ..................................................... OH 2.00 1.72 1.64 1.56 1.48 1.40

PAULDING .................................................. OH 1.80 1.69 1.59 1.48 1.38 1.27

PERRY ........................................................ OH 2.00 1.95 1.85 1.76 1.66 1.57

PICKAWAY ................................................. OH 2.00 1.95 1.85 1.76 1.66 1.57

PIKE ............................................................ OH 2.20 2.01 1.90 1.80 1.69 1.59

PORTAGE ................................................... OH 2.00 1.89 1.78 1.68 1.57 1.46

PREBLE ...................................................... OH 2.00 1.92 1.80 1.69 1.57 1.45

PUTNAM ..................................................... OH 1.80 1.68 1.56 1.45 1.33 1.21

RICHLAND .................................................. OH 2.00 1.80 1.70 1.59 1.49 1.39

ROSS .......................................................... OH 2.00 2.00 1.90 1.79 1.69 1.58

SANDUSKY ................................................. OH 2.00 1.72 1.63 1.55 1.46 1.38

SCIOTO ....................................................... OH 2.20 2.01 1.91 1.82 1.72 1.62

SENECA ...................................................... OH 2.00 1.71 1.62 1.54 1.45 1.36

SHELBY ...................................................... OH 2.00 1.80 1.69 1.59 1.48 1.38

STARK ........................................................ OH 2.00 1.88 1.76 1.64 1.52 1.40

SUMMIT ...................................................... OH 2.00 1.89 1.79 1.68 1.58 1.47

TRUMBULL ................................................. OH 2.00 1.89 1.78 1.66 1.55 1.44

TUSCARAWAS ........................................... OH 2.00 1.89 1.79 1.68 1.58 1.47

UNION ......................................................... OH 2.00 1.81 1.71 1.62 1.52 1.43

VAN WERT ................................................. OH 1.80 1.78 1.66 1.54 1.42 1.30

VINTON ....................................................... OH 2.00 2.01 1.91 1.81 1.71 1.61

WARREN .................................................... OH 2.00 1.93 1.81 1.70 1.58 1.47

WASHINGTON ............................................ OH 2.00 2.01 1.90 1.80 1.69 1.59

WAYNE ....................................................... OH 2.00 1.88 1.76 1.65 1.53 1.41

WILLIAMS ................................................... OH 1.80 1.70 1.59 1.49 1.38 1.28

WOOD ......................................................... OH 2.00 1.71 1.61 1.52 1.42 1.33

WYANDOT .................................................. OH 2.00 1.79 1.68 1.57 1.46 1.35

ADAIR ......................................................... OK 2.60 2.35 2.11 1.86 1.62 1.38

ALFALFA ..................................................... OK 2.40 2.35 2.10 1.86 1.61 1.37

ATOKA ........................................................ OK 2.80 2.69 2.37 2.06 1.74 1.43
5006 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

BEAVER ...................................................... OK 2.40 2.35 2.11 1.88 1.64 1.40

BECKHAM ................................................... OK 2.40 2.37 2.15 1.92 1.70 1.48

BLAINE ........................................................ OK 2.40 2.36 2.12 1.89 1.65 1.42

BRYAN ........................................................ OK 2.80 2.68 2.37 2.05 1.74 1.42

CADDO ....................................................... OK 2.60 2.51 2.25 1.98 1.72 1.46

CANADIAN .................................................. OK 2.60 2.51 2.24 1.98 1.71 1.45

CARTER ...................................................... OK 2.80 2.69 2.37 2.06 1.74 1.43

CHEROKEE ................................................ OK 2.60 2.35 2.11 1.88 1.64 1.40

CHOCTAW .................................................. OK 2.80 2.69 2.38 2.06 1.75 1.44

CIMARRON ................................................. OK 2.40 2.37 2.15 1.92 1.70 1.48

CLEVELAND ............................................... OK 2.60 2.51 2.24 1.98 1.71 1.45

COAL ........................................................... OK 2.80 2.50 2.23 1.97 1.70 1.43

COMANCHE ............................................... OK 2.60 2.69 2.38 2.08 1.77 1.46

COTTON ..................................................... OK 2.80 2.69 2.39 2.08 1.78 1.47

CRAIG ......................................................... OK 2.40 2.34 2.09 1.84 1.59 1.34

CREEK ........................................................ OK 2.60 2.36 2.14 1.91 1.69 1.46

CUSTER ...................................................... OK 2.40 2.36 2.13 1.90 1.67 1.44

DELAWARE ................................................ OK 2.40 2.34 2.09 1.83 1.58 1.33

DEWEY ....................................................... OK 2.40 2.36 2.13 1.89 1.66 1.43

ELLIS ........................................................... OK 2.40 2.35 2.12 1.88 1.65 1.41

GARFIELD .................................................. OK 2.40 2.35 2.11 1.88 1.64 1.40

GARVIN ....................................................... OK 2.60 2.50 2.24 1.97 1.71 1.44

GRADY ........................................................ OK 2.60 2.51 2.24 1.98 1.71 1.45

GRANT ........................................................ OK 2.40 2.34 2.10 1.85 1.61 1.36

GREER ........................................................ OK 2.60 2.70 2.40 2.09 1.79 1.49

HARMON .................................................... OK 2.60 2.70 2.40 2.11 1.81 1.51

HARPER ..................................................... OK 2.40 2.35 2.11 1.86 1.62 1.38

HASKELL .................................................... OK 2.80 2.51 2.25 2.00 1.74 1.48

HUGHES ..................................................... OK 2.60 2.51 2.24 1.98 1.71 1.45

JACKSON ................................................... OK 2.60 2.70 2.40 2.10 1.80 1.50

JEFFERSON ............................................... OK 2.80 2.69 2.38 2.07 1.76 1.45

JOHNSTON ................................................. OK 2.80 2.68 2.37 2.05 1.74 1.42

KAY ............................................................. OK 2.40 2.35 2.10 1.86 1.61 1.37

KINGFISHER .............................................. OK 2.40 2.36 2.12 1.89 1.65 1.42

KIOWA ........................................................ OK 2.60 2.70 2.39 2.09 1.78 1.48

LATIMER ..................................................... OK 2.80 2.51 2.25 2.00 1.74 1.48

LE FLORE ................................................... OK 2.80 2.52 2.27 2.03 1.78 1.53

LINCOLN ..................................................... OK 2.60 2.51 2.24 1.98 1.71 1.45

LOGAN ........................................................ OK 2.40 2.36 2.13 1.89 1.66 1.43

LOVE ........................................................... OK 2.80 2.69 2.37 2.06 1.74 1.43

MAJOR ........................................................ OK 2.60 2.50 2.24 1.97 1.71 1.44

MARSHALL ................................................. OK 2.80 2.71 2.42 2.13 1.84 1.55

MAYES ........................................................ OK 2.60 2.51 2.25 1.98 1.72 1.46

MCCLAIN .................................................... OK 2.40 2.35 2.11 1.87 1.63 1.39

MCCURTAIN ............................................... OK 2.80 2.68 2.37 2.05 1.74 1.42

MCINTOSH ................................................. OK 2.40 2.35 2.11 1.86 1.62 1.38

MURRAY ..................................................... OK 2.80 2.69 2.37 2.06 1.74 1.43

MUSKOGEE ................................................ OK 2.60 2.36 2.13 1.91 1.68 1.45

NOBLE ........................................................ OK 2.40 2.35 2.12 1.88 1.65 1.41

NOWATA ..................................................... OK 2.40 2.34 2.10 1.85 1.61 1.36

OKFUSKEE ................................................. OK 2.60 2.51 2.24 1.98 1.71 1.45

OKLAHOMA ................................................ OK 2.60 2.51 2.24 1.98 1.71 1.45

OKMULGEE ................................................ OK 2.60 2.36 2.14 1.91 1.69 1.46

OSAGE ........................................................ OK 2.40 2.35 2.11 1.88 1.64 1.40

OTTAWA ..................................................... OK 2.40 2.33 2.07 1.82 1.56 1.30

PAWNEE ..................................................... OK 2.40 2.36 2.13 1.90 1.67 1.44

PAYNE ........................................................ OK 2.40 2.36 2.13 1.90 1.67 1.44

PITTSBURG ................................................ OK 2.80 2.51 2.25 1.98 1.72 1.46

PONTOTOC ................................................ OK 2.80 2.50 2.23 1.97 1.70 1.43

POTTAWATOMIE ....................................... OK 2.60 2.51 2.24 1.98 1.71 1.45

PUSHMATAHA ........................................... OK 2.80 2.69 2.39 2.08 1.78 1.47

ROGER MILLS ............................................ OK 2.40 2.36 2.14 1.91 1.69 1.46

ROGERS ..................................................... OK 2.40 2.35 2.11 1.88 1.64 1.40

SEMINOLE .................................................. OK 2.60 2.51 2.24 1.98 1.71 1.45

SEQUOYAH ................................................ OK 2.80 2.51 2.26 2.00 1.75 1.49

STEPHENS ................................................. OK 2.80 2.69 2.38 2.07 1.76 1.45

TEXAS ......................................................... OK 2.40 2.35 2.12 1.88 1.65 1.41

TILLMAN ..................................................... OK 2.60 2.70 2.40 2.09 1.79 1.49

TULSA ......................................................... OK 2.60 2.36 2.14 1.91 1.69 1.46

WAGONER ................................................. OK 2.60 2.36 2.13 1.89 1.66 1.43
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5007

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

WASHINGTON ............................................ OK 2.40 2.35 2.11 1.86 1.62 1.38

WASHITA .................................................... OK 2.40 2.36 2.14 1.91 1.69 1.46

WOODS ...................................................... OK 2.40 2.35 2.10 1.86 1.61 1.37

WOODWARD .............................................. OK 2.40 2.35 2.11 1.88 1.64 1.40

BAKER ........................................................ OR 1.60 1.40 1.29 1.19 1.08 0.98

BENTON ..................................................... OR 1.90 1.73 1.57 1.40 1.24 1.07

CLACKAMAS .............................................. OR 1.90 1.71 1.52 1.34 1.15 0.96

CLATSOP .................................................... OR 1.90 1.72 1.54 1.35 1.17 0.99

COLUMBIA .................................................. OR 1.90 1.71 1.53 1.34 1.16 0.97

COOS .......................................................... OR 1.90 1.71 1.60 1.50 1.39 1.28

CROOK ....................................................... OR 1.75 1.61 1.46 1.32 1.17 1.03

CURRY ........................................................ OR 1.90 1.73 1.64 1.55 1.46 1.37

DESCHUTES .............................................. OR 1.75 1.61 1.48 1.34 1.21 1.07

DOUGLAS ................................................... OR 1.90 1.77 1.64 1.52 1.39 1.26

GILLIAM ...................................................... OR 1.75 1.59 1.44 1.28 1.13 0.97

GRANT ........................................................ OR 1.60 1.40 1.30 1.19 1.09 0.99

HARNEY ..................................................... OR 1.60 1.40 1.30 1.21 1.11 1.01

HOOD RIVER ............................................. OR 1.90 1.71 1.53 1.34 1.16 0.97

JACKSON ................................................... OR 1.90 1.73 1.64 1.56 1.47 1.38

JEFFERSON ............................................... OR 1.75 1.60 1.46 1.31 1.17 1.02

JOSEPHINE ................................................ OR 1.90 1.74 1.65 1.57 1.48 1.40

KLAMATH ................................................... OR 1.75 1.65 1.55 1.46 1.36 1.26

LAKE ........................................................... OR 1.75 1.62 1.50 1.37 1.25 1.12

LANE ........................................................... OR 1.90 1.75 1.59 1.44 1.28 1.13

LINCOLN ..................................................... OR 1.90 1.74 1.58 1.41 1.25 1.09

LINN ............................................................ OR 1.90 1.73 1.56 1.39 1.22 1.05

MALHEUR ................................................... OR 1.60 1.39 1.28 1.18 1.07 0.96

MARION ...................................................... OR 1.90 1.72 1.54 1.36 1.18 1.00

MORROW ................................................... OR 1.75 1.59 1.44 1.28 1.13 0.97

MULTNOMAH ............................................. OR 1.90 1.71 1.52 1.33 1.14 0.95

POLK ........................................................... OR 1.90 1.73 1.55 1.38 1.20 1.03

SHERMAN .................................................. OR 1.75 1.59 1.44 1.28 1.13 0.97

TILLAMOOK ................................................ OR 1.90 1.72 1.54 1.37 1.19 1.01

UMATILLA ................................................... OR 1.75 1.59 1.44 1.28 1.13 0.97

UNION ......................................................... OR 1.60 1.40 1.29 1.19 1.08 0.98

WALLOWA .................................................. OR 1.60 1.60 1.45 1.29 1.14 0.99

WASCO ....................................................... OR 1.75 1.60 1.44 1.29 1.13 0.98

WASHINGTON ............................................ OR 1.90 1.71 1.52 1.34 1.15 0.96

WHEELER ................................................... OR 1.75 1.60 1.45 1.30 1.15 1.00

YAMHILL ..................................................... OR 1.90 1.72 1.54 1.36 1.18 1.00

ADAMS ........................................................ PA 2.80 2.70 2.38 2.05 1.73 1.40

ALLEGHENY ............................................... PA 2.10 1.91 1.81 1.72 1.62 1.53

ARMSTRONG ............................................. PA 2.30 1.89 1.78 1.67 1.56 1.45

BEAVER ...................................................... PA 2.10 1.90 1.81 1.71 1.62 1.52

BEDFORD ................................................... PA 2.30 2.23 2.05 1.88 1.70 1.52

BERKS ........................................................ PA 2.80 2.55 2.30 2.05 1.80 1.55

BLAIR .......................................................... PA 2.30 2.18 2.01 1.83 1.66 1.49

BRADFORD ................................................ PA 2.40 2.37 2.11 1.84 1.58 1.32

BUCKS ........................................................ PA 3.00 2.83 2.57 2.32 2.06 1.80

BUTLER ...................................................... PA 2.10 1.89 1.78 1.66 1.55 1.44

CAMBRIA .................................................... PA 2.30 2.51 2.27 2.04 1.80 1.56

CAMERON .................................................. PA 2.30 1.87 1.74 1.62 1.49 1.36

CARBON ..................................................... PA 2.80 2.55 2.32 2.08 1.85 1.61

CENTRE ...................................................... PA 2.30 2.14 1.95 1.77 1.58 1.40

CHESTER ................................................... PA 3.00 2.80 2.51 2.21 1.92 1.63

CLARION .................................................... PA 2.30 1.88 1.75 1.63 1.50 1.38

CLEARFIELD .............................................. PA 2.30 2.16 1.98 1.79 1.61 1.42

CLINTON ..................................................... PA 2.30 2.19 2.01 1.82 1.64 1.45

COLUMBIA .................................................. PA 2.60 2.46 2.23 1.99 1.76 1.52

CRAWFORD ............................................... PA 2.10 1.87 1.74 1.61 1.48 1.35

CUMBERLAND ........................................... PA 2.80 2.71 2.39 2.06 1.74 1.42

DAUPHIN .................................................... PA 2.80 2.48 2.23 1.97 1.72 1.47

DELAWARE ................................................ PA 3.00 2.81 2.53 2.25 1.97 1.69

ELK .............................................................. PA 2.30 1.87 1.74 1.61 1.48 1.35

ERIE ............................................................ PA 2.10 1.87 1.73 1.60 1.46 1.33

FAYETTE .................................................... PA 2.30 1.92 1.84 1.77 1.69 1.61

FOREST ...................................................... PA 2.30 1.86 1.72 1.59 1.45 1.31

FRANKLIN ................................................... PA 2.80 2.58 2.26 1.95 1.63 1.31

FULTON ...................................................... PA 2.60 2.59 2.30 2.01 1.72 1.43

GREENE ..................................................... PA 2.10 1.92 1.85 1.77 1.70 1.62
5008 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

HUNTINGDON ............................................ PA 2.30 2.21 2.02 1.82 1.63 1.44

INDIANA ...................................................... PA 2.30 2.18 2.01 1.85 1.68 1.51

JEFFERSON ............................................... PA 2.30 1.88 1.76 1.65 1.53 1.41

JUNIATA ..................................................... PA 2.60 2.55 2.27 1.98 1.70 1.41

LACKAWANNA ........................................... PA 2.60 2.45 2.22 2.00 1.77 1.55

LANCASTER ............................................... PA 2.80 2.61 2.33 2.06 1.78 1.50

LAWRENCE ................................................ PA 2.10 1.89 1.78 1.67 1.56 1.45

LEBANON ................................................... PA 2.80 2.62 2.34 2.05 1.77 1.49

LEHIGH ....................................................... PA 2.80 2.80 2.51 2.21 1.92 1.63

LUZERNE .................................................... PA 2.60 2.43 2.21 1.98 1.76 1.54

LYCOMING ................................................. PA 2.60 2.30 2.11 1.91 1.72 1.53

MCKEAN ..................................................... PA 2.30 1.98 1.80 1.63 1.45 1.28

MERCER ..................................................... PA 2.10 1.88 1.75 1.63 1.50 1.38

MIFFLIN ...................................................... PA 2.60 2.21 2.01 1.80 1.60 1.40

MONROE .................................................... PA 2.80 2.73 2.47 2.20 1.94 1.67

MONTGOMERY .......................................... PA 3.00 2.81 2.53 2.26 1.98 1.70

MONTOUR .................................................. PA 2.60 2.46 2.23 1.99 1.76 1.53

NORTHAMPTON ........................................ PA 2.80 2.61 2.38 2.16 1.93 1.70

NORTHUMBERLAND ................................. PA 2.60 2.46 2.22 1.99 1.75 1.51

PERRY ........................................................ PA 2.60 2.58 2.29 2.01 1.72 1.43

PHILADELPHIA ........................................... PA 3.00 2.83 2.56 2.30 2.03 1.77

PIKE ............................................................ PA 2.80 2.74 2.48 2.23 1.97 1.71

POTTER ...................................................... PA 2.30 2.09 1.90 1.72 1.53 1.35

SCHUYLKILL .............................................. PA 2.80 2.51 2.26 2.02 1.77 1.53

SNYDER ..................................................... PA 2.60 2.43 2.19 1.96 1.72 1.49

SOMERSET ................................................ PA 2.30 2.20 2.05 1.91 1.76 1.61

SULLIVAN ................................................... PA 2.60 2.33 2.10 1.88 1.65 1.43

SUSQUEHANNA ......................................... PA 2.60 2.44 2.19 1.93 1.68 1.42

TIOGA ......................................................... PA 2.30 2.16 1.96 1.77 1.57 1.38

UNION ......................................................... PA 2.60 2.42 2.19 1.97 1.74 1.51

VENANGO .................................................. PA 2.10 1.87 1.74 1.62 1.49 1.36

WARREN .................................................... PA 2.10 1.85 1.70 1.55 1.40 1.25

WASHINGTON ............................................ PA 2.10 1.92 1.84 1.75 1.67 1.59

WAYNE ....................................................... PA 2.60 2.47 2.25 2.02 1.80 1.57

WESTMORELAND ...................................... PA 2.30 1.91 1.83 1.74 1.66 1.57

WYOMING .................................................. PA 2.60 2.39 2.16 1.92 1.69 1.46

YORK .......................................................... PA 2.80 2.72 2.40 2.09 1.77 1.46

BRISTOL ..................................................... RI 3.25 3.07 2.89 2.72 2.54 2.37

KENT ........................................................... RI 3.25 3.06 2.89 2.71 2.54 2.36

NEWPORT .................................................. RI 3.25 3.07 2.89 2.72 2.54 2.37

PROVIDENCE ............................................. RI 3.25 3.06 2.87 2.69 2.50 2.32

WASHINGTON ............................................ RI 3.25 3.06 2.88 2.70 2.52 2.34

ABBEVILLE ................................................. SC 3.10 2.92 2.75 2.59 2.42 2.26

AIKEN .......................................................... SC 3.30 3.07 2.90 2.74 2.57 2.41

ALLENDALE ................................................ SC 3.30 3.10 2.96 2.83 2.69 2.56

ANDERSON ................................................ SC 3.10 2.90 2.73 2.55 2.38 2.20

BAMBERG .................................................. SC 3.30 3.09 2.94 2.80 2.65 2.51

BARNWELL ................................................. SC 3.30 3.08 2.93 2.78 2.63 2.48

BEAUFORT ................................................. SC 3.30 3.14 3.05 2.95 2.86 2.77

BERKELEY ................................................. SC 3.30 3.11 2.98 2.86 2.73 2.61

CALHOUN ................................................... SC 3.30 3.06 2.90 2.73 2.57 2.40

CHARLESTON ............................................ SC 3.30 3.12 3.01 2.89 2.78 2.67

CHEROKEE ................................................ SC 3.10 2.86 2.63 2.41 2.18 1.96

CHESTER ................................................... SC 3.10 2.88 2.68 2.47 2.27 2.07

CHESTERFIELD ......................................... SC 3.30 3.02 2.81 2.61 2.40 2.19

CLARENDON .............................................. SC 3.30 3.08 2.92 2.77 2.61 2.46

COLLETON ................................................. SC 3.30 3.11 2.99 2.86 2.74 2.62

DARLINGTON ............................................. SC 3.30 3.05 2.86 2.68 2.49 2.31

DILLON ....................................................... SC 3.30 3.06 2.89 2.72 2.55 2.38

DORCHESTER ........................................... SC 3.30 3.11 2.98 2.86 2.73 2.61

EDGEFIELD ................................................ SC 3.30 3.05 2.87 2.69 2.51 2.33

FAIRFIELD .................................................. SC 3.30 3.02 2.81 2.59 2.38 2.17

FLORENCE ................................................. SC 3.30 3.07 2.90 2.74 2.57 2.41

GEORGETOWN .......................................... SC 3.30 3.11 3.00 2.88 2.77 2.65

GREENVILLE .............................................. SC 3.10 2.88 2.68 2.49 2.29 2.09

GREENWOOD ............................................ SC 3.10 2.91 2.75 2.58 2.42 2.25

HAMPTON .................................................. SC 3.30 3.11 2.99 2.88 2.76 2.64

HORRY ....................................................... SC 3.30 3.11 2.98 2.86 2.73 2.61

JASPER ...................................................... SC 3.30 3.13 3.03 2.94 2.84 2.74

KERSHAW .................................................. SC 3.30 3.03 2.83 2.62 2.42 2.22
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5009

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

LANCASTER ............................................... SC 3.10 2.88 2.68 2.48 2.28 2.08

LAURENS ................................................... SC 3.10 2.90 2.72 2.53 2.35 2.17

LEE .............................................................. SC 3.30 3.05 2.87 2.68 2.50 2.32

LEXINGTON ................................................ SC 3.30 3.04 2.85 2.66 2.47 2.28

MARION ...................................................... SC 3.10 2.93 2.78 2.63 2.48 2.33

MARLBORO ................................................ SC 3.30 3.08 2.92 2.77 2.61 2.46

MCCORMICK .............................................. SC 3.30 3.04 2.84 2.65 2.45 2.26

NEWBERRY ................................................ SC 3.30 3.02 2.81 2.61 2.40 2.19

OCONEE ..................................................... SC 3.10 2.90 2.72 2.55 2.37 2.19

ORANGEBURG .......................................... SC 3.30 3.07 2.92 2.76 2.61 2.45

PICKENS ..................................................... SC 3.10 2.89 2.70 2.51 2.32 2.13

RICHLAND .................................................. SC 3.30 3.04 2.85 2.66 2.47 2.28

SALUDA ...................................................... SC 3.30 3.04 2.85 2.65 2.46 2.27

SPARTANBURG ......................................... SC 3.10 2.87 2.66 2.46 2.25 2.04

SUMTER ..................................................... SC 3.30 3.06 2.89 2.71 2.54 2.37

UNION ......................................................... SC 3.10 2.88 2.68 2.47 2.27 2.07

WILLIAMSBURG ......................................... SC 3.30 3.10 2.96 2.83 2.69 2.56

YORK .......................................................... SC 3.10 2.86 2.64 2.41 2.19 1.97

AURORA ..................................................... SD 1.70 1.41 1.32 1.22 1.13 1.04

BEADLE ...................................................... SD 1.70 1.41 1.31 1.22 1.12 1.03

BENNETT .................................................... SD 1.70 1.39 1.27 1.16 1.04 0.93

BON HOMME .............................................. SD 1.75 1.42 1.34 1.26 1.18 1.10

BROOKINGS ............................................... SD 1.70 1.34 1.28 1.22 1.17 1.11

BROWN ....................................................... SD 1.70 1.15 1.11 1.06 1.02 0.97

BRULE ........................................................ SD 1.70 1.40 1.31 1.21 1.12 1.02

BUFFALO .................................................... SD 1.70 1.29 1.22 1.15 1.07 1.00

BUTTE ......................................................... SD 1.65 1.14 1.08 1.03 0.97 0.91

CAMPBELL ................................................. SD 1.65 1.08 1.05 1.01 0.98 0.95

CHARLES MIX ............................................ SD 1.75 1.41 1.32 1.24 1.15 1.06

CLARK ........................................................ SD 1.70 1.41 1.31 1.22 1.12 1.03

CLAY ........................................................... SD 1.75 1.43 1.37 1.30 1.24 1.17

CODINGTON .............................................. SD 1.70 1.41 1.32 1.22 1.13 1.04

CORSON ..................................................... SD 1.65 1.08 1.04 1.01 0.97 0.94

CUSTER ...................................................... SD 1.80 1.82 1.59 1.36 1.13 0.90

DAVISON .................................................... SD 1.70 1.41 1.33 1.24 1.16 1.07

DAY ............................................................. SD 1.70 1.16 1.12 1.07 1.03 0.99

DEUEL ........................................................ SD 1.70 1.41 1.32 1.24 1.15 1.06

DEWEY ....................................................... SD 1.65 1.12 1.08 1.03 0.99 0.94

DOUGLAS ................................................... SD 1.75 1.41 1.32 1.24 1.15 1.06

EDMUNDS .................................................. SD 1.70 1.15 1.10 1.05 1.00 0.95

FALL RIVER ................................................ SD 1.80 1.83 1.60 1.38 1.15 0.93

FAULK ......................................................... SD 1.70 1.21 1.15 1.09 1.02 0.96

GRANT ........................................................ SD 1.70 1.16 1.13 1.09 1.06 1.02

GREGORY .................................................. SD 1.75 1.40 1.31 1.21 1.12 1.02

HAAKON ..................................................... SD 1.70 1.11 1.06 1.01 0.97 0.92

HAMLIN ....................................................... SD 1.70 1.29 1.23 1.18 1.12 1.06

HAND .......................................................... SD 1.70 1.27 1.20 1.13 1.07 1.00

HANSON ..................................................... SD 1.70 1.42 1.33 1.25 1.16 1.08

HARDING .................................................... SD 1.65 1.71 1.52 1.33 1.14 0.95

HUGHES ..................................................... SD 1.70 1.20 1.14 1.08 1.02 0.96

HUTCHINSON ............................................ SD 1.75 1.42 1.34 1.26 1.18 1.10

HYDE .......................................................... SD 1.70 1.24 1.18 1.12 1.05 0.99

JACKSON ................................................... SD 1.70 1.38 1.27 1.15 1.04 0.92

JERAULD .................................................... SD 1.70 1.41 1.31 1.22 1.12 1.03

JONES ........................................................ SD 1.70 1.21 1.15 1.08 1.02 0.95

KINGSBURY ............................................... SD 1.70 1.41 1.33 1.24 1.16 1.07

LAKE ........................................................... SD 1.70 1.42 1.34 1.27 1.19 1.11

LAWRENCE ................................................ SD 1.80 1.82 1.59 1.36 1.13 0.90

LINCOLN ..................................................... SD 1.75 1.44 1.38 1.31 1.25 1.19

LYMAN ........................................................ SD 1.70 1.23 1.17 1.10 1.04 0.98

MARSHALL ................................................. SD 1.70 1.42 1.35 1.27 1.20 1.12

MCCOOK .................................................... SD 1.70 1.15 1.10 1.05 1.00 0.95

MCPHERSON ............................................. SD 1.70 1.15 1.10 1.06 1.01 0.96

MEADE ........................................................ SD 1.65 1.78 1.56 1.33 1.11 0.89

MELLETTE .................................................. SD 1.70 1.39 1.28 1.16 1.05 0.94

MINER ......................................................... SD 1.70 1.42 1.33 1.25 1.16 1.08

MINNEHAHA ............................................... SD 1.70 1.44 1.37 1.31 1.24 1.18

MOODY ....................................................... SD 1.70 1.43 1.36 1.28 1.21 1.14

PENNINGTON ............................................ SD 1.80 1.81 1.58 1.34 1.11 0.87

PERKINS ..................................................... SD 1.65 1.71 1.51 1.32 1.12 0.93
5010 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

POTTER ...................................................... SD 1.70 1.20 1.14 1.08 1.01 0.95

ROBERTS ................................................... SD 1.70 1.15 1.11 1.06 1.02 0.97

SANBORN ................................................... SD 1.70 1.41 1.32 1.23 1.14 1.05

SHANNON .................................................. SD 1.80 1.82 1.60 1.37 1.15 0.92

SPINK .......................................................... SD 1.70 1.40 1.30 1.20 1.10 1.00

STANLEY .................................................... SD 1.70 1.20 1.13 1.07 1.00 0.94

SULLY ......................................................... SD 1.70 1.18 1.12 1.07 1.01 0.96

TODD .......................................................... SD 1.70 1.39 1.28 1.18 1.07 0.96

TRIPP .......................................................... SD 1.70 1.40 1.30 1.19 1.09 0.99

TURNER ..................................................... SD 1.75 1.43 1.36 1.30 1.23 1.16

UNION ......................................................... SD 1.75 1.44 1.38 1.32 1.26 1.20

WALWORTH ............................................... SD 1.70 1.15 1.10 1.04 0.99 0.94

YANKTON ................................................... SD 1.75 1.42 1.34 1.27 1.19 1.11

ZIEBACH ..................................................... SD 1.65 1.42 1.30 1.17 1.05 0.92

ANDERSON ................................................ TN 2.80 2.58 2.39 2.21 2.02 1.83

BEDFORD ................................................... TN 2.60 2.44 2.27 2.11 1.94 1.78

BENTON ..................................................... TN 2.60 2.46 2.31 2.17 2.02 1.88

BLEDSOE ................................................... TN 2.60 2.46 2.32 2.18 2.04 1.90

BLOUNT ...................................................... TN 2.80 2.61 2.45 2.29 2.13 1.97

BRADLEY .................................................... TN 2.80 2.64 2.50 2.37 2.23 2.10

CAMPBELL ................................................. TN 2.80 2.56 2.35 2.15 1.94 1.73

CANNON ..................................................... TN 2.60 2.43 2.26 2.09 1.92 1.75

CARROLL ................................................... TN 2.60 2.47 2.34 2.20 2.07 1.94

CARTER ...................................................... TN 2.80 2.57 2.37 2.17 1.97 1.77

CHEATHAM ................................................ TN 2.60 2.37 2.20 2.02 1.85 1.67

CHESTER ................................................... TN 2.80 2.49 2.38 2.28 2.17 2.06

CLAIBORNE ................................................ TN 2.80 2.57 2.37 2.16 1.96 1.76

CLAY ........................................................... TN 2.60 2.36 2.17 1.98 1.79 1.60

COCKE ........................................................ TN 2.80 2.59 2.42 2.24 2.07 1.89

COFFEE ...................................................... TN 2.60 2.45 2.30 2.14 1.99 1.84

CROCKETT ................................................. TN 2.60 2.49 2.38 2.28 2.17 2.06

CUMBERLAND ........................................... TN 2.80 2.58 2.39 2.20 2.01 1.82

DAVIDSON .................................................. TN 2.60 2.37 2.19 2.01 1.83 1.65

DE KALB ..................................................... TN 2.60 2.47 2.34 2.22 2.09 1.96

DECATUR ................................................... TN 2.60 2.43 2.25 2.08 1.90 1.73

DICKSON .................................................... TN 2.60 2.39 2.23 2.06 1.90 1.74

DYER .......................................................... TN 2.60 2.49 2.38 2.26 2.15 2.04

FAYETTE .................................................... TN 2.80 2.67 2.57 2.48 2.38 2.28

FENTRESS ................................................. TN 2.60 2.37 2.20 2.02 1.85 1.67

FRANKLIN ................................................... TN 2.80 2.59 2.42 2.24 2.07 1.89

GIBSON ...................................................... TN 2.60 2.48 2.36 2.23 2.11 1.99

GILES .......................................................... TN 2.80 2.58 2.39 2.21 2.02 1.83

GRAINGER ................................................. TN 2.80 2.58 2.39 2.21 2.02 1.83

GREENE ..................................................... TN 2.80 2.58 2.40 2.21 2.03 1.84

GRUNDY ..................................................... TN 2.60 2.47 2.33 2.20 2.06 1.93

HAMBLEN ................................................... TN 2.80 2.58 2.40 2.21 2.03 1.84

HAMILTON .................................................. TN 2.80 2.64 2.50 2.37 2.23 2.10

HANCOCK .................................................. TN 2.80 2.57 2.37 2.16 1.96 1.76

HARDEMAN ................................................ TN 2.80 2.65 2.53 2.42 2.30 2.18

HARDIN ....................................................... TN 2.80 2.62 2.47 2.33 2.18 2.03

HAWKINS .................................................... TN 2.80 2.58 2.38 2.19 1.99 1.80

HAYWOOD ................................................. TN 2.60 2.59 2.48 2.37 2.26 2.15

HENDERSON ............................................. TN 2.60 2.48 2.35 2.23 2.10 1.98

HENRY ........................................................ TN 2.60 2.41 2.27 2.14 2.00 1.86

HICKMAN .................................................... TN 2.60 2.44 2.28 2.11 1.95 1.79

HOUSTON .................................................. TN 2.60 2.40 2.25 2.09 1.94 1.79

HUMPHREYS ............................................. TN 2.60 2.45 2.29 2.14 1.98 1.83

JACKSON ................................................... TN 2.60 2.37 2.19 2.00 1.82 1.64

JEFFERSON ............................................... TN 2.80 2.59 2.41 2.24 2.06 1.88

JOHNSON ................................................... TN 2.80 2.56 2.36 2.15 1.95 1.74

KNOX .......................................................... TN 2.80 2.59 2.42 2.24 2.07 1.89

LAKE ........................................................... TN 2.60 2.43 2.31 2.19 2.07 1.95

LAUDERDALE ............................................ TN 2.60 2.59 2.48 2.36 2.25 2.14

LAWRENCE ................................................ TN 2.80 2.59 2.41 2.24 2.06 1.88

LEWIS ......................................................... TN 2.60 2.45 2.30 2.14 1.99 1.84

LINCOLN ..................................................... TN 2.80 2.58 2.39 2.21 2.02 1.83

LOUDON ..................................................... TN 2.80 2.60 2.44 2.27 2.11 1.94

MACON ....................................................... TN 2.80 2.62 2.47 2.33 2.18 2.03

MADISON .................................................... TN 2.80 2.63 2.50 2.36 2.23 2.09

MARION ...................................................... TN 2.60 2.36 2.17 1.97 1.78 1.59
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5011

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

MARSHALL ................................................. TN 2.60 2.49 2.39 2.28 2.18 2.07

MAURY ....................................................... TN 2.80 2.62 2.46 2.31 2.15 2.00

MCMINN ...................................................... TN 2.60 2.44 2.27 2.11 1.94 1.78

MCNAIRY .................................................... TN 2.60 2.44 2.27 2.11 1.94 1.78

MEIGS ......................................................... TN 2.80 2.61 2.45 2.30 2.14 1.98

MONROE .................................................... TN 2.80 2.62 2.47 2.32 2.17 2.02

MONTGOMERY .......................................... TN 2.60 2.38 2.21 2.05 1.88 1.71

MOORE ....................................................... TN 2.80 2.58 2.39 2.21 2.02 1.83

MORGAN .................................................... TN 2.80 2.57 2.37 2.18 1.98 1.78

OBION ......................................................... TN 2.60 2.42 2.30 2.17 2.05 1.92

OVERTON ................................................... TN 2.60 2.37 2.20 2.02 1.85 1.67

PERRY ........................................................ TN 2.60 2.46 2.32 2.18 2.04 1.90

PICKETT ..................................................... TN 2.60 2.36 2.17 1.97 1.78 1.59

POLK ........................................................... TN 2.80 2.64 2.51 2.38 2.25 2.12

PUTNAM ..................................................... TN 2.60 2.42 2.24 2.06 1.88 1.70

RHEA .......................................................... TN 2.80 2.60 2.44 2.27 2.11 1.94

ROANE ........................................................ TN 2.80 2.59 2.42 2.24 2.07 1.89

ROBERTSON .............................................. TN 2.60 2.37 2.19 2.00 1.82 1.64

RUTHERFORD ........................................... TN 2.60 2.42 2.24 2.07 1.89 1.71

SCOTT ........................................................ TN 2.80 2.41 2.23 2.04 1.86 1.67

SEQUATCHIE ............................................. TN 2.80 2.61 2.45 2.29 2.13 1.97

SEVIER ....................................................... TN 2.80 2.60 2.43 2.27 2.10 1.93

SHELBY ...................................................... TN 2.80 2.69 2.61 2.54 2.46 2.38

SMITH ......................................................... TN 2.60 2.37 2.19 2.01 1.83 1.65

STEWART ................................................... TN 2.60 2.40 2.25 2.10 1.95 1.80

SULLIVAN ................................................... TN 2.80 2.57 2.37 2.16 1.96 1.76

SUMNER ..................................................... TN 2.60 2.36 2.18 1.99 1.81 1.62

TIPTON ....................................................... TN 2.80 2.61 2.52 2.42 2.33 2.24

TROUSDALE .............................................. TN 2.60 2.36 2.18 1.99 1.81 1.62

UNICOI ........................................................ TN 2.80 2.58 2.39 2.19 2.00 1.81

UNION ......................................................... TN 2.80 2.58 2.39 2.19 2.00 1.81

VAN BUREN ............................................... TN 2.60 2.45 2.30 2.16 2.01 1.86

WARREN .................................................... TN 2.60 2.44 2.28 2.13 1.97 1.81

WASHINGTON ............................................ TN 2.80 2.57 2.38 2.18 1.99 1.79

WAYNE ....................................................... TN 2.80 2.60 2.44 2.27 2.11 1.94

WEAKLEY ................................................... TN 2.60 2.42 2.29 2.17 2.04 1.91

WHITE ......................................................... TN 2.60 2.43 2.27 2.10 1.94 1.77

WILLIAMSON .............................................. TN 2.60 2.42 2.24 2.05 1.87 1.69

WILSON ...................................................... TN 2.60 2.37 2.19 2.02 1.84 1.66

ANDERSON ................................................ TX 3.15 3.04 2.77 2.50 2.23 1.96

ANDREWS .................................................. TX 2.40 2.70 2.46 2.21 1.97 1.72

ANGELINA .................................................. TX 3.15 3.10 2.86 2.61 2.37 2.13

ARANSAS ................................................... TX 3.65 3.49 3.29 3.08 2.88 2.68

ARCHER ..................................................... TX 2.80 2.63 2.35 2.07 1.79 1.51

ARMSTRONG ............................................. TX 2.40 2.29 2.10 1.90 1.71 1.51

ATASCOSA ................................................. TX 3.45 2.70 2.60 2.51 2.41 2.31

AUSTIN ....................................................... TX 3.60 3.44 3.18 2.93 2.67 2.41

BAILEY ........................................................ TX 2.40 2.26 2.03 1.80 1.57 1.34

BANDERA ................................................... TX 3.30 2.66 2.52 2.37 2.23 2.09

BASTROP ................................................... TX 3.30 3.20 2.93 2.67 2.40 2.14

BAYLOR ...................................................... TX 2.60 2.64 2.37 2.10 1.83 1.56

BEE ............................................................. TX 3.65 3.45 3.21 2.98 2.74 2.50

BELL ............................................................ TX 3.15 3.05 2.79 2.52 2.26 2.00

BEXAR ........................................................ TX 3.45 3.30 3.03 2.75 2.48 2.20

BLANCO ...................................................... TX 3.30 2.63 2.46 2.29 2.12 1.95

BORDEN ..................................................... TX 2.40 2.70 2.45 2.19 1.94 1.69

BOSQUE ..................................................... TX 3.15 3.02 2.73 2.45 2.16 1.87

BOWIE ........................................................ TX 3.00 2.79 2.51 2.22 1.94 1.65

BRAZORIA .................................................. TX 3.60 3.48 3.26 3.03 2.81 2.59

BRAZOS ...................................................... TX 3.30 3.16 2.96 2.77 2.57 2.37

BREWSTER ................................................ TX 2.40 2.13 2.06 1.99 1.92 1.85

BRISCOE .................................................... TX 2.40 2.30 2.11 1.91 1.72 1.53

BROOKS ..................................................... TX 3.65 3.59 3.36 3.12 2.89 2.66

BROWN ....................................................... TX 2.80 2.72 2.48 2.25 2.01 1.78

BURLESON ................................................. TX 3.30 3.14 2.93 2.71 2.50 2.28

BURNET ...................................................... TX 3.30 3.15 2.84 2.52 2.21 1.90

CALDWELL ................................................. TX 3.45 3.29 3.00 2.70 2.41 2.12

CALHOUN ................................................... TX 3.65 3.47 3.25 3.04 2.82 2.60

CALLAHAN ................................................. TX 2.80 2.70 2.46 2.21 1.97 1.72

CAMERON .................................................. TX 3.65 3.67 3.43 3.19 2.95 2.71
5012 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

CAMP .......................................................... TX 3.00 2.85 2.54 2.23 1.92 1.61

CARSON ..................................................... TX 2.40 2.29 2.10 1.90 1.71 1.51

CASS ........................................................... TX 3.00 2.81 2.54 2.27 2.00 1.73

CASTRO ..................................................... TX 2.40 2.28 2.07 1.85 1.64 1.43

CHAMBERS ................................................ TX 3.60 3.46 3.23 2.99 2.76 2.52

CHEROKEE ................................................ TX 3.15 3.03 2.76 2.48 2.21 1.93

CHILDRESS ................................................ TX 2.40 2.30 2.11 1.91 1.72 1.53

CLAY ........................................................... TX 2.80 2.62 2.34 2.05 1.77 1.48

COCHRAN .................................................. TX 2.40 2.27 2.05 1.83 1.61 1.39

COKE .......................................................... TX 2.60 2.72 2.48 2.25 2.01 1.78

COLEMAN ................................................... TX 2.80 2.72 2.49 2.25 2.02 1.79

COLLIN ....................................................... TX 3.00 2.84 2.51 2.19 1.86 1.54

COLLINGSWORTH ..................................... TX 2.40 2.29 2.10 1.90 1.71 1.51

COLORADO ................................................ TX 3.60 3.44 3.18 2.92 2.66 2.40

COMAL ........................................................ TX 3.45 3.29 2.99 2.70 2.40 2.11

COMANCHE ............................................... TX 2.80 3.00 2.69 2.37 2.06 1.75

CONCHO .................................................... TX 2.80 2.45 2.29 2.14 1.98 1.83

COOKE ....................................................... TX 3.00 2.82 2.48 2.13 1.79 1.45

CORYELL .................................................... TX 3.15 3.03 2.75 2.47 2.19 1.91

COTTLE ...................................................... TX 2.40 2.31 2.12 1.94 1.75 1.57

CRANE ........................................................ TX 2.40 2.13 2.05 1.98 1.90 1.83

CROCKETT ................................................. TX 2.60 2.30 2.20 2.11 2.01 1.91

CROSBY ..................................................... TX 2.40 2.31 2.14 1.96 1.79 1.61

CULBERSON .............................................. TX 2.40 2.08 1.95 1.83 1.70 1.58

DALLAM ...................................................... TX 2.40 2.29 2.10 1.90 1.71 1.51

DALLAS ....................................................... TX 3.00 2.86 2.57 2.27 1.98 1.68

DAWSON .................................................... TX 2.40 2.70 2.45 2.19 1.94 1.69

DE WITT ..................................................... TX 2.40 2.28 2.07 1.85 1.64 1.43

DEAF SMITH .............................................. TX 3.00 2.81 2.46 2.10 1.75 1.40

DELTA ......................................................... TX 3.00 2.84 2.51 2.19 1.86 1.54

DENTON ..................................................... TX 3.60 3.34 3.11 2.87 2.64 2.40

DICKENS .................................................... TX 2.40 2.34 2.19 2.03 1.88 1.73

DIMMIT ........................................................ TX 3.45 2.70 2.60 2.49 2.39 2.29

DONLEY ...................................................... TX 2.40 2.30 2.10 1.91 1.71 1.52

DUVAL ........................................................ TX 3.65 3.57 3.32 3.08 2.83 2.58

EASTLAND ................................................. TX 2.80 2.70 2.45 2.21 1.96 1.71

ECTOR ........................................................ TX 2.40 2.72 2.49 2.25 2.02 1.79

EDWARDS .................................................. TX 2.80 2.49 2.37 2.26 2.14 2.03

EL PASO ..................................................... TX 3.00 2.89 2.62 2.35 2.08 1.81

ELLIS ........................................................... TX 2.25 2.15 1.95 1.75 1.55 1.35

ERATH ........................................................ TX 3.00 2.99 2.68 2.36 2.05 1.73

FALLS ......................................................... TX 3.15 3.07 2.82 2.58 2.33 2.09

FANNIN ....................................................... TX 3.00 2.81 2.46 2.12 1.77 1.42

FAYETTE .................................................... TX 3.60 3.42 3.14 2.86 2.58 2.30

FISHER ....................................................... TX 2.60 2.70 2.45 2.21 1.96 1.71

FLOYD ........................................................ TX 2.40 2.30 2.12 1.93 1.75 1.56

FOARD ........................................................ TX 2.60 2.67 2.39 2.12 1.84 1.56

FORT BEND ............................................... TX 3.60 3.46 3.23 2.99 2.76 2.52

FRANKLIN ................................................... TX 3.00 2.83 2.50 2.16 1.83 1.50

FREESTONE .............................................. TX 3.15 3.05 2.80 2.54 2.29 2.03

FRIO ............................................................ TX 3.45 2.70 2.60 2.49 2.39 2.29

GAINES ....................................................... TX 2.40 2.31 2.13 1.95 1.77 1.59

GALVESTON .............................................. TX 3.60 3.48 3.25 3.03 2.80 2.58

GARZA ........................................................ TX 2.40 2.32 2.16 1.99 1.83 1.66

GILLESPIE .................................................. TX 3.30 2.63 2.46 2.30 2.13 1.96

GLASSCOCK .............................................. TX 2.60 2.72 2.49 2.27 2.04 1.81

GOLIAD ....................................................... TX 3.65 3.45 3.21 2.98 2.74 2.50

GONZALES ................................................. TX 3.45 3.32 3.06 2.79 2.53 2.27

GRAY .......................................................... TX 2.40 2.29 2.09 1.90 1.70 1.50

GRAYSON .................................................. TX 3.00 2.82 2.47 2.13 1.78 1.44

GREGG ....................................................... TX 3.00 2.89 2.62 2.34 2.07 1.80

GRIMES ...................................................... TX 3.30 3.16 2.97 2.77 2.58 2.38

GUADALUPE .............................................. TX 3.45 3.29 3.01 2.72 2.44 2.15

HALE ........................................................... TX 2.40 2.30 2.10 1.91 1.71 1.52

HALL ........................................................... TX 2.40 2.30 2.11 1.91 1.72 1.53

HAMILTON .................................................. TX 3.15 3.01 2.71 2.42 2.12 1.82

HANSFORD ................................................ TX 2.40 2.28 2.07 1.87 1.66 1.45

HARDEMAN ................................................ TX 2.60 2.63 2.36 2.08 1.81 1.53

HARDIN ....................................................... TX 3.60 3.44 3.19 2.93 2.68 2.42

HARRIS ....................................................... TX 3.60 3.46 3.22 2.99 2.75 2.51
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5013

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

HARRISON ................................................. TX 3.00 2.89 2.63 2.36 2.10 1.83

HARTLEY .................................................... TX 2.40 2.29 2.09 1.90 1.70 1.50

HASKELL .................................................... TX 2.60 2.68 2.42 2.15 1.89 1.62

HAYS ........................................................... TX 3.45 3.27 2.95 2.64 2.32 2.01

HEMPHILL .................................................. TX 2.40 2.28 2.08 1.87 1.67 1.46

HENDERSON ............................................. TX 3.00 3.02 2.73 2.43 2.14 1.85

HIDALGO .................................................... TX 3.65 3.66 3.40 3.15 2.89 2.64

HILL ............................................................. TX 3.15 3.02 2.73 2.45 2.16 1.87

HOCKLEY ................................................... TX 2.40 2.29 2.10 1.90 1.71 1.51

HOOD .......................................................... TX 3.00 2.87 2.58 2.29 2.00 1.71

HOPKINS .................................................... TX 3.00 2.81 2.47 2.12 1.78 1.43

HOUSTON .................................................. TX 3.15 3.09 2.84 2.58 2.33 2.08

HOWARD .................................................... TX 2.40 2.71 2.48 2.24 2.01 1.77

HUDSPETH ................................................. TX 2.25 2.18 2.01 1.83 1.66 1.49

HUNT .......................................................... TX 3.00 2.86 2.56 2.27 1.97 1.67

HUTCHINSON ............................................ TX 2.40 2.29 2.09 1.89 1.69 1.49

IRION .......................................................... TX 2.60 2.29 2.18 2.08 1.97 1.86

JACK ........................................................... TX 2.80 2.66 2.38 2.09 1.81 1.52

JACKSON ................................................... TX 3.60 3.37 3.16 2.95 2.74 2.53

JASPER ...................................................... TX 3.30 3.14 2.94 2.73 2.53 2.33

JEFF DAVIS ................................................ TX 2.40 2.09 1.99 1.88 1.78 1.67

JEFFERSON ............................................... TX 3.60 3.46 3.22 2.97 2.73 2.49

JIM HOGG .................................................. TX 3.65 2.83 2.76 2.70 2.63 2.56

JIM WELLS ................................................. TX 3.65 3.58 3.34 3.09 2.85 2.61

JOHNSON ................................................... TX 3.00 2.88 2.60 2.31 2.03 1.75

JONES ........................................................ TX 2.60 2.69 2.44 2.18 1.93 1.67

KARNES ...................................................... TX 3.65 3.43 3.17 2.91 2.65 2.39

KAUFMAN ................................................... TX 3.00 2.87 2.58 2.29 2.00 1.71

KENDALL .................................................... TX 3.30 2.65 2.50 2.35 2.20 2.05

KENEDY ...................................................... TX 3.65 3.60 3.38 3.16 2.94 2.72

KENT ........................................................... TX 2.60 2.69 2.43 2.18 1.92 1.66

KERR .......................................................... TX 3.30 2.64 2.48 2.33 2.17 2.01

KIMBLE ....................................................... TX 2.80 2.47 2.33 2.20 2.06 1.93

KING ............................................................ TX 2.60 2.68 2.41 2.14 1.87 1.60

KINNEY ....................................................... TX 3.30 2.66 2.52 2.37 2.23 2.09

KLEBERG ................................................... TX 3.65 3.60 3.38 3.15 2.93 2.71

KNOX .......................................................... TX 2.60 2.68 2.41 2.13 1.86 1.59

LA SALLE .................................................... TX 3.00 2.81 2.46 2.12 1.77 1.42

LAMAR ........................................................ TX 2.40 2.28 2.07 1.85 1.64 1.43

LAMB ........................................................... TX 3.15 3.02 2.74 2.45 2.17 1.88

LAMPASAS ................................................. TX 3.45 2.71 2.62 2.52 2.43 2.34

LAVACA ...................................................... TX 3.60 3.34 3.09 2.85 2.60 2.36

LEE .............................................................. TX 3.30 3.21 2.95 2.70 2.44 2.19

LEON ........................................................... TX 3.15 3.10 2.86 2.63 2.39 2.15

LIBERTY ..................................................... TX 3.60 3.45 3.19 2.94 2.68 2.43

LIMESTONE ................................................ TX 3.15 3.06 2.81 2.55 2.30 2.05

LIPSCOMB .................................................. TX 2.40 2.28 2.07 1.85 1.64 1.43

LIVE OAK .................................................... TX 3.65 3.46 3.22 2.99 2.75 2.52

LLANO ......................................................... TX 3.30 2.62 2.44 2.25 2.07 1.89

LOVING ....................................................... TX 2.40 2.09 1.98 1.88 1.77 1.66

LUBBOCK ................................................... TX 2.40 2.31 2.13 1.96 1.78 1.60

LYNN ........................................................... TX 2.40 2.32 2.15 1.97 1.80 1.63

MADISON .................................................... TX 2.80 2.45 2.29 2.14 1.98 1.83

MARION ...................................................... TX 3.15 3.05 2.79 2.52 2.26 2.00

MARTIN ....................................................... TX 3.45 2.72 2.64 2.57 2.49 2.41

MASON ....................................................... TX 3.30 3.14 2.92 2.69 2.47 2.25

MATAGORDA ............................................. TX 3.00 2.88 2.60 2.33 2.05 1.77

MAVERICK .................................................. TX 2.40 2.71 2.47 2.24 2.00 1.76

MCCULLOCH .............................................. TX 2.80 2.46 2.32 2.18 2.04 1.90

MCLENNAN ................................................ TX 3.60 3.38 3.19 2.99 2.80 2.60

MCMULLEN ................................................ TX 3.30 2.67 2.55 2.42 2.30 2.17

MEDINA ...................................................... TX 3.30 2.68 2.56 2.43 2.31 2.19

MENARD ..................................................... TX 2.80 2.46 2.32 2.17 2.03 1.89

MIDLAND .................................................... TX 2.40 2.72 2.49 2.27 2.04 1.81

MILAM ......................................................... TX 3.30 3.12 2.87 2.63 2.38 2.14

MILLS .......................................................... TX 2.80 3.01 2.71 2.41 2.11 1.81

MITCHELL ................................................... TX 2.60 2.71 2.47 2.23 1.99 1.75

MONTAGUE ................................................ TX 2.80 2.62 2.33 2.03 1.74 1.45

MONTGOMERY .......................................... TX 3.60 3.45 3.19 2.94 2.68 2.43

MOORE ....................................................... TX 2.40 2.29 2.09 1.90 1.70 1.50
5014 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

MORRIS ...................................................... TX 3.00 2.85 2.55 2.24 1.94 1.63

MOTLEY ...................................................... TX 2.40 2.31 2.12 1.94 1.75 1.57

NACOGDOCHES ........................................ TX 3.15 3.07 2.81 2.54 2.28 2.01

NAVARRO ................................................... TX 3.15 3.03 2.75 2.47 2.19 1.91

NEWTON .................................................... TX 3.30 3.14 2.94 2.75 2.55 2.35

NOLAN ........................................................ TX 2.60 2.71 2.47 2.22 1.98 1.74

NUECES ..................................................... TX 3.65 3.59 3.37 3.14 2.92 2.69

OCHILTREE ................................................ TX 2.40 2.28 2.07 1.86 1.65 1.44

OLDHAM ..................................................... TX 2.40 2.29 2.09 1.88 1.68 1.48

ORANGE ..................................................... TX 3.60 3.46 3.22 2.97 2.73 2.49

PALO PINTO ............................................... TX 2.80 2.69 2.43 2.16 1.90 1.64

PANOLA ...................................................... TX 3.00 2.92 2.68 2.43 2.19 1.95

PARKER ...................................................... TX 3.00 2.85 2.54 2.23 1.92 1.61

PARMER ..................................................... TX 2.40 2.26 2.03 1.80 1.57 1.34

PECOS ........................................................ TX 2.40 2.13 2.05 1.98 1.90 1.83

POLK ........................................................... TX 3.30 3.13 2.92 2.70 2.49 2.28

POTTER ...................................................... TX 2.40 2.29 2.10 1.90 1.71 1.51

PRESIDIO ................................................... TX 2.40 2.11 2.01 1.92 1.82 1.73

RAINS ......................................................... TX 3.00 2.84 2.52 2.20 1.88 1.56

RANDALL .................................................... TX 2.40 2.29 2.09 1.90 1.70 1.50

REAGAN ..................................................... TX 2.60 2.29 2.18 2.08 1.97 1.86

REAL ........................................................... TX 3.30 2.65 2.51 2.36 2.22 2.07

RED RIVER ................................................. TX 3.00 2.83 2.49 2.16 1.82 1.49

REEVES ...................................................... TX 2.40 2.09 1.99 1.88 1.78 1.67

REFUGIO .................................................... TX 3.65 3.47 3.26 3.04 2.83 2.61

ROBERTS ................................................... TX 2.40 2.29 2.09 1.88 1.68 1.48

ROBERTSON .............................................. TX 3.30 3.13 2.90 2.68 2.45 2.22

ROCKWALL ................................................ TX 3.00 2.85 2.54 2.24 1.93 1.62

RUNNELS ................................................... TX 2.80 2.72 2.49 2.25 2.02 1.79

RUSK .......................................................... TX 3.00 2.91 2.66 2.40 2.15 1.90

SABINE ....................................................... TX 3.15 3.12 2.89 2.67 2.44 2.22

SAN AUGUSTINE ....................................... TX 3.15 3.11 2.87 2.64 2.40 2.17

SAN JACINTO ............................................ TX 3.30 3.43 3.15 2.88 2.60 2.33

SAN PATRICIO ........................................... TX 3.65 3.58 3.35 3.11 2.88 2.64

SAN SABA .................................................. TX 2.80 2.45 2.30 2.14 1.99 1.84

SCHLEICHER ............................................. TX 2.80 2.46 2.32 2.17 2.03 1.89

SCURRY ..................................................... TX 2.60 2.70 2.45 2.20 1.95 1.70

SHACKELFORD ......................................... TX 2.80 2.69 2.44 2.18 1.93 1.67

SHELBY ...................................................... TX 3.15 3.09 2.83 2.58 2.32 2.07

SHERMAN .................................................. TX 2.40 2.29 2.08 1.88 1.67 1.47

SMITH ......................................................... TX 3.00 2.90 2.64 2.38 2.12 1.86

SOMERVELL .............................................. TX 3.00 2.88 2.60 2.33 2.05 1.77

STARR ........................................................ TX 3.65 2.83 2.76 2.70 2.63 2.56

STEPHENS ................................................. TX 2.80 2.69 2.43 2.18 1.92 1.66

STERLING .................................................. TX 2.60 2.72 2.49 2.27 2.04 1.81

STONEWALL .............................................. TX 2.60 2.69 2.43 2.17 1.91 1.65

SUTTON ...................................................... TX 2.80 2.47 2.33 2.20 2.06 1.93

SWISHER .................................................... TX 2.40 2.29 2.09 1.89 1.69 1.49

TARRANT ................................................... TX 3.00 2.86 2.57 2.27 1.98 1.68

TAYLOR ...................................................... TX 2.60 2.71 2.46 2.22 1.97 1.73

TERRELL .................................................... TX 2.60 2.30 2.20 2.11 2.01 1.91

TERRY ........................................................ TX 2.40 2.31 2.13 1.95 1.77 1.59

THROCKMORTON ..................................... TX 2.80 2.68 2.41 2.15 1.88 1.61

TITUS .......................................................... TX 3.00 2.84 2.52 2.20 1.88 1.56

TOM GREEN .............................................. TX 2.80 2.73 2.50 2.28 2.05 1.83

TRAVIS ....................................................... TX 3.30 3.16 2.85 2.55 2.24 1.94

TRINITY ...................................................... TX 3.30 3.11 2.88 2.64 2.41 2.18

TYLER ......................................................... TX 3.30 3.13 2.92 2.72 2.51 2.30

UPSHUR ..................................................... TX 3.00 2.87 2.58 2.29 2.00 1.71

UPTON ........................................................ TX 2.40 2.13 2.06 2.00 1.93 1.86

UVALDE ...................................................... TX 3.30 2.66 2.53 2.39 2.26 2.12

VAL VERDE ................................................ TX 2.80 2.48 2.36 2.24 2.12 2.00

VAN ZANDT ................................................ TX 3.00 2.88 2.59 2.31 2.02 1.74

VICTORIA ................................................... TX 3.65 3.46 3.22 2.99 2.75 2.52

WALKER ..................................................... TX 3.30 3.15 2.94 2.74 2.53 2.32

WALLER ...................................................... TX 3.60 3.45 3.19 2.94 2.68 2.43

WARD ......................................................... TX 2.40 2.11 2.02 1.94 1.85 1.76

WASHINGTON ............................................ TX 3.30 3.43 3.16 2.90 2.63 2.36

WEBB .......................................................... TX 3.45 2.73 2.65 2.58 2.50 2.43

WHARTON .................................................. TX 3.60 3.37 3.15 2.94 2.72 2.51
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5015

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

WHEELER ................................................... TX 2.40 2.29 2.09 1.89 1.69 1.49

WICHITA ..................................................... TX 2.80 2.63 2.35 2.06 1.78 1.50

WILBARGER ............................................... TX 2.60 2.63 2.35 2.08 1.80 1.52

WILLACY ..................................................... TX 3.65 3.67 3.42 3.18 2.93 2.69

WILLIAMSON .............................................. TX 3.30 3.16 2.87 2.57 2.28 1.98

WILSON ...................................................... TX 3.45 3.32 3.06 2.81 2.55 2.29

WINKLER .................................................... TX 2.40 2.10 2.01 1.91 1.82 1.72

WISE ........................................................... TX 3.00 2.83 2.50 2.16 1.83 1.50

WOOD ......................................................... TX 3.00 2.85 2.54 2.24 1.93 1.62

YOAKUM ..................................................... TX 2.40 2.30 2.10 1.91 1.71 1.52

YOUNG ....................................................... TX 2.80 2.67 2.39 2.12 1.84 1.56

ZAPATA ...................................................... TX 3.65 2.82 2.75 2.67 2.60 2.52

ZAVALA ....................................................... TX 3.30 2.68 2.56 2.45 2.33 2.21

BEAVER ...................................................... UT 1.60 1.58 1.56 1.54 1.52 1.50

BOX ELDER ................................................ UT 1.90 1.73 1.55 1.38 1.20 1.03

CACHE ........................................................ UT 1.90 1.73 1.56 1.38 1.21 1.04

CARBON ..................................................... UT 1.90 1.78 1.66 1.53 1.41 1.29

DAGGETT ................................................... UT 1.90 1.77 1.64 1.50 1.37 1.24

DAVIS .......................................................... UT 1.90 1.74 1.58 1.41 1.25 1.09

DUCHESNE ................................................ UT 1.90 1.76 1.62 1.49 1.35 1.21

EMERY ........................................................ UT 1.90 1.80 1.70 1.59 1.49 1.39

GARFIELD .................................................. UT 1.60 1.60 1.60 1.60 1.60 1.60

GRAND ....................................................... UT 1.90 1.84 1.79 1.73 1.68 1.62

IRON ........................................................... UT 1.60 1.60 1.61 1.61 1.62 1.62

JUAB ........................................................... UT 1.90 1.75 1.60 1.46 1.31 1.16

KANE ........................................................... UT 1.60 1.62 1.63 1.65 1.66 1.68

MILLARD ..................................................... UT 1.90 1.78 1.67 1.55 1.44 1.32

MORGAN .................................................... UT 1.90 1.74 1.57 1.41 1.24 1.08

PIUTE .......................................................... UT 1.60 1.58 1.56 1.54 1.52 1.50

RICH ............................................................ UT 1.90 1.73 1.56 1.39 1.22 1.05

SALT LAKE ................................................. UT 1.90 1.74 1.57 1.41 1.24 1.08

SAN JUAN .................................................. UT 1.60 1.63 1.66 1.68 1.71 1.74

SANPETE .................................................... UT 1.90 1.77 1.64 1.52 1.39 1.26

SEVIER ....................................................... UT 1.90 1.81 1.72 1.62 1.53 1.44

SUMMIT ...................................................... UT 1.90 1.74 1.58 1.41 1.25 1.09

TOOELE ...................................................... UT 1.90 1.74 1.57 1.41 1.24 1.08

UINTAH ....................................................... UT 1.90 1.79 1.68 1.57 1.46 1.35

UTAH ........................................................... UT 1.90 1.73 1.55 1.38 1.20 1.03

WASATCH .................................................. UT 1.90 1.73 1.56 1.39 1.22 1.05

WASHINGTON ............................................ UT 1.60 1.63 1.65 1.68 1.70 1.73

WAYNE ....................................................... UT 1.60 1.59 1.57 1.56 1.54 1.53

WEBER ....................................................... UT 1.90 1.73 1.57 1.40 1.24 1.07

ACCOMACK ................................................ VA 3.00 2.98 2.73 2.49 2.24 1.99

ALBEMARLE ............................................... VA 2.80 2.66 2.38 2.11 1.83 1.56

ALEXANDRIA CITY .................................... VA 3.00 2.75 2.46 2.18 1.89 1.61

ALLEGHANY ............................................... VA 2.80 2.67 2.41 2.14 1.88 1.62

AMELIA ....................................................... VA 3.10 2.82 2.56 2.30 2.04 1.78

AMHERST ................................................... VA 2.80 2.68 2.43 2.18 1.93 1.68

APPOMATTOX ........................................... VA 2.80 2.69 2.45 2.20 1.96 1.72

ARLINGTON ............................................... VA 3.00 2.74 2.45 2.17 1.88 1.59

AUGUSTA ................................................... VA 2.80 2.66 2.39 2.12 1.85 1.58

BATH ........................................................... VA 2.80 2.67 2.41 2.14 1.88 1.62

BEDFORD ................................................... VA 2.80 2.68 2.43 2.17 1.92 1.67

BEDFORD CITY ......................................... VA 2.80 2.68 2.43 2.17 1.92 1.67

BLAND ........................................................ VA 2.80 2.68 2.43 2.19 1.94 1.69

BOTETOURT .............................................. VA 2.80 2.67 2.41 2.14 1.88 1.62

BRISTOL CITY ............................................ VA 2.80 2.56 2.35 2.15 1.94 1.73

BRUNSWICK .............................................. VA 3.10 2.86 2.64 2.42 2.20 1.98

BUCHANAN ................................................ VA 2.80 2.56 2.35 2.13 1.92 1.71

BUCKINGHAM ............................................ VA 2.80 2.80 2.52 2.24 1.96 1.68

BUENA VISTA CITY ................................... VA 2.80 2.67 2.41 2.16 1.90 1.64

CAMPBELL ................................................. VA 2.80 2.69 2.45 2.20 1.96 1.72

CAROLINE .................................................. VA 3.10 2.80 2.53 2.25 1.98 1.70

CARROLL ................................................... VA 2.80 2.69 2.45 2.20 1.96 1.72

CHARLES CITY .......................................... VA 3.10 2.84 2.60 2.37 2.13 1.89

CHARLOTTE ............................................... VA 3.10 2.83 2.57 2.32 2.06 1.81

CHARLOTTESVILLE CITY ......................... VA 2.80 2.66 2.38 2.11 1.83 1.56

CHESAPEAKE CITY ................................... VA 3.20 3.02 2.80 2.59 2.37 2.16

CHESTERFIELD ......................................... VA 3.10 2.83 2.58 2.33 2.08 1.83

CLARKE ...................................................... VA 2.80 2.77 2.46 2.15 1.84 1.53
5016 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

CLIFTON FORGE CITY .............................. VA 2.80 2.67 2.41 2.15 1.89 1.63

COLONIAL HEIGHTS CITY ........................ VA 3.10 2.84 2.60 2.35 2.11 1.87

COVINGTON CITY ..................................... VA 2.80 2.67 2.41 2.14 1.88 1.62

CRAIG ......................................................... VA 2.80 2.67 2.41 2.15 1.89 1.63

CULPEPER ................................................. VA 2.80 2.78 2.48 2.17 1.87 1.57

CUMBERLAND ........................................... VA 2.80 2.80 2.53 2.25 1.98 1.70

DANVILLE CITY .......................................... VA 2.80 2.71 2.49 2.26 2.04 1.82

DICKENSON ............................................... VA 2.80 2.56 2.35 2.13 1.92 1.71

DINWIDDIE ................................................. VA 3.10 2.84 2.61 2.37 2.14 1.90

EMPORIA CITY .......................................... VA 3.00 2.87 2.66 2.45 2.24 2.08

ESSEX ........................................................ VA 3.10 2.94 2.65 2.36 2.07 1.78

FAIRFAX ..................................................... VA 3.00 2.74 2.45 2.17 1.88 1.59

FAIRFAX CITY ............................................ VA 3.00 2.74 2.45 2.16 1.87 1.58

FALLS CHURCH CITY ............................... VA 3.00 2.74 2.45 2.16 1.87 1.58

FAUQUIER .................................................. VA 3.00 2.78 2.47 2.17 1.86 1.56

FLOYD ........................................................ VA 2.80 2.68 2.43 2.19 1.94 1.69

FLUVANNA ................................................. VA 2.80 2.79 2.50 2.21 1.92 1.63

FRANKLIN ................................................... VA 2.80 2.68 2.43 2.19 1.94 1.69

FRANKLIN CITY ......................................... VA 3.00 2.74 2.45 2.16 1.87 1.58

FREDERICK ................................................ VA 3.00 2.74 2.45 2.16 1.87 1.58

FREDERICKSBURG CITY ......................... VA 2.80 2.79 2.50 2.22 1.93 1.64

GALAX CITY ............................................... VA 2.80 2.69 2.45 2.21 1.97 1.73

GILES .......................................................... VA 2.80 2.68 2.43 2.17 1.92 1.67

GLOUCESTER ............................................ VA 3.20 2.98 2.73 2.48 2.23 1.98

GOOCHLAND ............................................. VA 3.10 2.80 2.52 2.25 1.97 1.69

GRAYSON .................................................. VA 2.80 2.69 2.45 2.21 1.97 1.73

GREENE ..................................................... VA 2.80 2.65 2.38 2.10 1.83 1.55

GREENSVILLE ........................................... VA 3.10 2.87 2.65 2.44 2.22 2.01

HALIFAX ..................................................... VA 3.10 2.71 2.49 2.28 2.06 1.84

HAMPTON CITY ......................................... VA 3.20 3.00 2.77 2.54 2.31 2.08

HANOVER ................................................... VA 3.10 2.82 2.55 2.29 2.02 1.76

HARRISONBURG CITY .............................. VA 2.80 2.65 2.38 2.10 1.83 1.55

HENRICO .................................................... VA 3.10 2.82 2.56 2.30 2.04 1.78

HENRY ........................................................ VA 2.80 2.82 2.55 2.29 2.02 1.76

HIGHLAND .................................................. VA 2.80 2.67 2.40 2.14 1.87 1.61

HOPEWELL CITY ....................................... VA 3.10 2.84 2.60 2.37 2.13 1.89

ISLE OF WIGHT ......................................... VA 3.20 3.00 2.76 2.53 2.29 2.06

JAMES CITY ............................................... VA 3.10 2.98 2.72 2.47 2.21 1.96

KING AND QUEEN ..................................... VA 3.10 2.95 2.67 2.39 2.11 1.83

KING GEORGE ........................................... VA 3.10 2.80 2.53 2.25 1.98 1.70

KING WILLIAM ............................................ VA 3.10 2.82 2.56 2.31 2.05 1.79

LANCASTER ............................................... VA 3.10 2.96 2.69 2.42 2.15 1.88

LEE .............................................................. VA 2.80 2.56 2.36 2.15 1.95 1.74

LEXINGTON CITY ...................................... VA 2.80 2.67 2.41 2.15 1.89 1.63

LOUDOUN .................................................. VA 3.00 2.71 2.41 2.12 1.82 1.53

LOUISA ....................................................... VA 2.80 2.79 2.50 2.21 1.92 1.63

LUNENBURG .............................................. VA 3.10 2.84 2.59 2.35 2.10 1.86

LYNCHBURG CITY .................................... VA 2.80 2.69 2.45 2.20 1.96 1.72

MADISON .................................................... VA 2.80 2.77 2.47 2.16 1.86 1.55

MANASSAS CITY ....................................... VA 3.00 2.72 2.43 2.15 1.86 1.58

MANASSAS PARK CITY ............................ VA 3.00 2.78 2.48 2.18 1.88 1.58

MARTINSVILLE CITY ................................. VA 2.80 2.70 2.46 2.23 1.99 1.76

MATHEWS .................................................. VA 3.20 2.98 2.73 2.48 2.23 1.98

MECKLENBURG ......................................... VA 3.10 2.85 2.62 2.38 2.15 1.92

MIDDLESEX ................................................ VA 3.10 2.96 2.70 2.43 2.17 1.90

MONTGOMERY .......................................... VA 2.80 2.68 2.42 2.17 1.91 1.66

NELSON ...................................................... VA 2.80 2.67 2.41 2.14 1.88 1.62

NEW KENT ................................................. VA 3.10 2.83 2.59 2.34 2.10 1.85

NEWPORT NEWS CITY ............................. VA 3.20 2.99 2.75 2.52 2.28 2.04

NORFOLK CITY .......................................... VA 3.20 3.01 2.79 2.56 2.34 2.12

NORTHAMPTON ........................................ VA 3.00 2.99 2.75 2.52 2.28 2.04

NORTHUMBERLAND ................................. VA 3.10 2.80 2.57 2.33 2.10 1.87

NORTON CITY ........................................... VA 2.80 2.56 2.35 2.15 1.94 1.73

NOTTOWAY ................................................ VA 3.10 2.83 2.59 2.34 2.10 1.85

ORANGE ..................................................... VA 2.80 2.78 2.48 2.18 1.88 1.58

PAGE .......................................................... VA 2.80 2.77 2.47 2.16 1.86 1.55

PATRICK ..................................................... VA 2.80 2.69 2.46 2.22 1.99 1.75

PETERSBURG CITY .................................. VA 3.10 2.84 2.61 2.37 2.14 1.90

PITTSYLVANIA ........................................... VA 2.80 2.70 2.47 2.24 2.01 3.00

POQUOSON CITY ...................................... VA 3.20 2.99 2.75 2.52 2.28 2.04
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5017

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

PORTSMOUTH CITY ................................. VA 3.20 3.01 2.79 2.56 2.34 2.12

POWHATAN ................................................ VA 3.10 2.81 2.54 2.27 2.00 3.10

PRINCE EDWARD ...................................... VA 3.10 2.82 2.55 2.29 2.02 1.76

PRINCE GEORGE ...................................... VA 3.10 2.85 2.61 2.38 2.14 1.91

PRINCE WILLIAM ....................................... VA 3.00 2.72 2.44 2.15 1.87 1.59

PULASKI ..................................................... VA 2.80 2.68 2.43 2.18 1.93 1.68

RADFORD CITY ......................................... VA 2.80 2.68 2.43 2.17 1.92 1.67

RAPPAHANNOCK ...................................... VA 2.80 2.77 2.47 2.16 1.86 1.55

RICHMOND ................................................. VA 3.10 2.95 2.66 2.38 2.09 1.81

RICHMOND CITY ....................................... VA 3.10 2.82 2.56 2.30 2.04 1.78

ROANOKE .................................................. VA 2.80 2.67 2.41 2.14 1.88 1.62

ROANOKE CITY ......................................... VA 2.80 2.67 2.41 2.15 1.89 1.63

ROCKBRIDGE ............................................ VA 2.80 2.67 2.41 2.15 1.89 1.63

ROCKINGHAM ............................................ VA 2.80 2.65 2.38 2.10 1.83 1.55

RUSSELL .................................................... VA 2.80 2.56 2.35 2.13 1.92 1.71

SALEM CITY ............................................... VA 2.80 2.79 2.50 2.20 1.91 1.62

SCOTT ........................................................ VA 2.80 2.57 2.37 2.16 1.96 1.76

SHENANDOAH ........................................... VA 2.80 2.77 2.47 2.16 1.86 1.55

SMYTH ........................................................ VA 2.80 2.69 2.44 2.20 1.95 1.71

SOUTH BOSTON CITY .............................. VA 3.10 2.70 2.48 2.25 2.03 1.80

SOUTHAMPTON ........................................ VA 3.10 2.88 2.67 2.47 2.26 2.06

SPOTSYLVANIA ......................................... VA 2.80 2.79 2.50 2.21 1.92 1.63

STAFFORD ................................................. VA 3.00 2.79 2.50 2.21 1.92 1.63

STAUNTON CITY ....................................... VA 2.80 2.66 2.39 2.11 1.84 1.57

SUFFOLK CITY .......................................... VA 3.20 3.01 2.79 2.56 2.34 2.12

SURRY ........................................................ VA 3.10 2.86 2.64 2.42 2.20 1.98

SUSSEX ...................................................... VA 3.10 2.87 2.65 2.44 2.22 2.01

TAZEWELL ................................................. VA 2.80 2.56 2.34 2.13 1.91 1.70

VIRGINIA BEACH CITY .............................. VA 3.20 3.01 2.80 2.58 2.37 2.15

WARREN .................................................... VA 2.80 2.77 2.46 2.16 1.85 1.54

WASHINGTON ............................................ VA 2.80 2.56 2.35 2.14 1.93 1.72

WAYNESBORO CITY ................................. VA 2.80 2.66 2.39 2.11 1.84 1.57

WESTMORELAND ...................................... VA 3.10 2.82 2.56 2.29 2.03 1.77

WILLIAMSBURG CITY ............................... VA 3.10 2.86 2.63 2.41 2.18 1.96

WINCHESTER CITY ................................... VA 2.80 2.77 2.46 2.15 1.84 1.53

WISE ........................................................... VA 2.80 2.56 2.35 2.15 1.94 1.73

WYTHE ....................................................... VA 2.80 2.68 2.44 2.19 1.95 1.70

YORK .......................................................... VA 3.20 2.98 2.74 2.49 2.25 2.00

ADDISON .................................................... VT 2.60 2.38 2.19 1.99 1.80 1.61

BENNINGTON ............................................ VT 2.80 2.52 2.32 2.13 1.93 1.73

CALEDONIA ................................................ VT 2.60 2.41 2.22 2.03 1.84 1.65

CHITTENDEN ............................................. VT 2.60 2.34 2.16 1.97 1.79 1.61

ESSEX ........................................................ VT 2.60 2.36 2.18 1.99 1.81 1.62

FRANKLIN ................................................... VT 2.40 2.24 2.07 1.91 1.74 1.58

GRAND ISLE .............................................. VT 2.40 2.21 2.05 1.90 1.74 1.58

LAMOILLE ................................................... VT 2.60 2.34 2.16 1.97 1.79 1.61

ORANGE ..................................................... VT 2.60 2.42 2.24 2.06 1.88 1.70

ORLEANS ................................................... VT 2.40 2.32 2.14 1.95 1.77 1.59

RUTLAND ................................................... VT 2.60 2.44 2.24 2.03 1.83 1.62

WASHINGTON ............................................ VT 2.60 2.37 2.19 2.01 1.83 1.65

WINDHAM ................................................... VT 2.80 2.76 2.53 2.30 2.07 1.84

WINDSOR ................................................... VT 2.60 2.69 2.45 2.20 1.96 1.71

ADAMS ........................................................ WA 1.75 1.58 1.41 1.25 1.08 0.91

ASOTIN ....................................................... WA 1.75 1.60 1.45 1.29 1.14 0.99

BENTON ..................................................... WA 1.75 1.59 1.43 1.27 1.11 0.95

CHELAN ...................................................... WA 1.75 1.58 1.41 1.23 1.06 0.89

CLALLAM .................................................... WA 1.90 1.58 1.41 1.24 1.07 0.90

CLARK ........................................................ WA 1.90 1.71 1.52 1.33 1.14 0.95

COLUMBIA .................................................. WA 1.75 1.59 1.43 1.27 1.11 0.95

COWLITZ .................................................... WA 1.90 1.71 1.53 1.34 1.16 0.97

DOUGLAS ................................................... WA 1.75 1.58 1.40 1.23 1.05 0.88

FERRY ........................................................ WA 1.90 1.70 1.49 1.29 1.08 0.88

FRANKLIN ................................................... WA 1.75 1.59 1.43 1.26 1.10 0.94

GARFIELD .................................................. WA 1.75 1.59 1.43 1.28 1.12 0.96

GRANT ........................................................ WA 1.75 1.58 1.41 1.24 1.07 0.90

GRAYS HARBOR ....................................... WA 1.90 1.72 1.53 1.35 1.16 0.98

ISLAND ....................................................... WA 1.90 1.70 1.50 1.29 1.09 0.89

JEFFERSON ............................................... WA 1.90 1.59 1.43 1.27 1.11 0.95

KING ............................................................ WA 1.90 1.72 1.54 1.36 1.18 1.00

KITSAP ........................................................ WA 1.90 1.72 1.54 1.36 1.18 1.00
5018 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

KITTITAS ..................................................... WA 1.75 1.59 1.43 1.26 1.10 0.94

KLICKITAT .................................................. WA 1.75 1.59 1.43 1.28 1.12 0.96

LEWIS ......................................................... WA 1.90 1.72 1.53 1.35 1.16 0.98

LINCOLN ..................................................... WA 1.90 1.70 1.49 1.29 1.08 0.88

MASON ....................................................... WA 1.90 1.72 1.54 1.35 1.17 0.99

OKANOGAN ................................................ WA 1.75 1.57 1.39 1.22 1.04 0.86

PACIFIC ...................................................... WA 1.90 1.72 1.54 1.35 1.17 0.99

PEND OREILLE .......................................... WA 1.90 1.71 1.51 1.32 1.12 0.93

PIERCE ....................................................... WA 1.90 1.72 1.54 1.36 1.18 1.00

SAN JUAN .................................................. WA 1.90 1.57 1.38 1.20 1.01 0.83

SKAGIT ....................................................... WA 1.90 1.68 1.46 1.24 1.02 0.80

SKAMANIA .................................................. WA 1.90 1.71 1.52 1.34 1.15 0.96

SNOHOMISH .............................................. WA 1.90 1.70 1.50 1.31 1.11 0.91

SPOKANE ................................................... WA 1.90 1.70 1.50 1.29 1.09 0.89

STEVENS .................................................... WA 1.90 1.70 1.50 1.29 1.09 0.89

THURSTON ................................................ WA 1.90 1.72 1.54 1.35 1.17 0.99

WAHKIAKUM .............................................. WA 1.90 1.72 1.54 1.35 1.17 0.99

WALLA WALLA ........................................... WA 1.75 1.59 1.43 1.27 1.11 0.95

WHATCOM ................................................. WA 1.90 1.63 1.42 1.21 1.00 0.79

WHITMAN ................................................... WA 1.90 1.71 1.52 1.32 1.13 0.94

YAKIMA ....................................................... WA 1.75 1.59 1.43 1.27 1.11 0.95

ADAMS ........................................................ WI 1.70 1.11 1.11 1.12 1.12 1.13

ASHLAND ................................................... WI 1.70 1.10 1.10 1.10 1.10 1.10

BARRON ..................................................... WI 1.70 1.11 1.11 1.12 1.12 1.13

BAYFIELD ................................................... WI 1.70 1.11 1.12 1.14 1.15 1.16

BROWN ....................................................... WI 1.75 1.14 1.16 1.19 1.21 1.23

BUFFALO .................................................... WI 1.70 1.10 1.11 1.11 1.12 1.12

BURNETT ................................................... WI 1.70 1.14 1.15 1.15 1.16 1.16

CALUMET ................................................... WI 1.75 1.17 1.20 1.24 1.27 1.30

CHIPPEWA ................................................. WI 1.70 1.10 1.10 1.11 1.11 1.11

CLARK ........................................................ WI 1.70 1.05 1.06 1.08 1.09 1.10

COLUMBIA .................................................. WI 1.75 1.15 1.15 1.16 1.16 1.17

CRAWFORD ............................................... WI 1.75 1.14 1.14 1.14 1.14 1.14

DANE .......................................................... WI 1.75 1.20 1.19 1.19 1.18 1.17

DODGE ....................................................... WI 1.75 1.17 1.21 1.24 1.28 1.31

DOOR .......................................................... WI 1.75 1.10 1.11 1.11 1.12 1.12

DOUGLAS ................................................... WI 1.70 1.16 1.18 1.19 1.21 1.23

DUNN .......................................................... WI 1.70 1.10 1.10 1.10 1.10 1.10

EAU CLAIRE ............................................... WI 1.70 1.10 1.11 1.11 1.12 1.12

FLORENCE ................................................. WI 1.70 1.09 1.03 0.98 0.92 0.86

FOND DU LAC ............................................ WI 1.75 1.17 1.20 1.24 1.27 1.30

FOREST ...................................................... WI 1.70 1.07 1.03 1.00 0.96 0.93

GRANT ........................................................ WI 1.75 1.15 1.15 1.16 1.16 1.17

GREEN ........................................................ WI 1.75 1.21 1.22 1.22 1.23 1.23

GREEN LAKE ............................................. WI 1.70 1.15 1.16 1.18 1.19 1.20

IOWA ........................................................... WI 1.75 1.14 1.14 1.15 1.15 1.15

IRON ........................................................... WI 1.70 1.13 1.11 1.09 1.07 1.05

JACKSON ................................................... WI 1.70 1.06 1.08 1.10 1.12 1.14

JEFFERSON ............................................... WI 1.75 1.31 1.30 1.30 1.29 1.29

JUNEAU ...................................................... WI 1.70 1.11 1.11 1.12 1.12 1.13

KENOSHA ................................................... WI 1.75 1.34 1.38 1.41 1.45 1.48

KEWAUNEE ................................................ WI 1.75 1.13 1.16 1.20 1.23 1.26

LA CROSSE ................................................ WI 1.70 1.12 1.14 1.15 1.17 1.19

LAFAYETTE ................................................ WI 1.75 1.15 1.17 1.18 1.20 1.21

LANGLADE ................................................. WI 1.70 1.03 1.02 1.00 0.99 0.98

LINCOLN ..................................................... WI 1.70 1.03 1.03 1.02 1.02 1.01

MANITOWOC .............................................. WI 1.75 1.19 1.24 1.29 1.34 1.39

MARATHON ................................................ WI 1.70 1.04 1.05 1.05 1.06 1.06

MARINETTE ................................................ WI 1.70 1.04 1.02 1.01 0.99 0.98

MARQUETTE .............................................. WI 1.70 1.11 1.12 1.13 1.14 1.15

MENOMINEE .............................................. WI 1.70 1.04 1.03 1.03 1.02 1.02

MILWAUKEE ............................................... WI 1.75 1.34 1.37 1.41 1.44 1.47

MONROE .................................................... WI 1.70 1.11 1.12 1.13 1.14 1.15

OCONTO ..................................................... WI 1.70 1.04 1.05 1.05 1.06 1.06

ONEIDA ....................................................... WI 1.70 1.03 1.02 1.00 0.99 0.98

OUTAGAMIE ............................................... WI 1.75 1.10 1.11 1.11 1.12 1.12

OZAUKEE ................................................... WI 1.75 1.21 1.28 1.35 1.42 1.49

PEPIN .......................................................... WI 1.70 1.10 1.10 1.10 1.10 1.10

PIERCE ....................................................... WI 1.70 1.13 1.12 1.12 1.11 1.10

POLK ........................................................... WI 1.70 1.14 1.14 1.14 1.14 1.14
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5019

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

PORTAGE ................................................... WI 1.70 1.05 1.06 1.06 1.07 1.08

PRICE ......................................................... WI 1.70 1.05 1.05 1.06 1.06 1.07

RACINE ....................................................... WI 1.75 1.34 1.37 1.39 1.42 1.45

RICHLAND .................................................. WI 1.75 1.14 1.14 1.14 1.14 1.14

ROCK .......................................................... WI 1.75 1.30 1.29 1.29 1.28 1.27

RUSK .......................................................... WI 1.70 1.10 1.10 1.11 1.11 1.11

SAUK ........................................................... WI 1.75 1.14 1.14 1.13 1.13 1.13

SAWYER ..................................................... WI 1.70 1.11 1.11 1.12 1.12 1.13

SHAWANO .................................................. WI 1.70 1.04 1.04 1.05 1.05 1.05

SHEBOYGAN .............................................. WI 1.75 1.21 1.29 1.36 1.44 1.51

ST. CROIX .................................................. WI 1.70 1.13 1.13 1.12 1.12 1.11

TAYLOR ...................................................... WI 1.70 1.05 1.06 1.06 1.07 1.08

TREMPEALEAU .......................................... WI 1.70 1.11 1.12 1.13 1.14 1.15

VERNON ..................................................... WI 1.75 1.14 1.15 1.15 1.16 1.16

VILAS .......................................................... WI 1.70 1.08 1.05 1.03 1.00 0.98

WALWORTH ............................................... WI 1.75 1.32 1.33 1.35 1.36 1.37

WASHBURN ............................................... WI 1.70 1.11 1.12 1.14 1.15 1.16

WASHINGTON ............................................ WI 1.75 1.19 1.25 1.30 1.36 1.41

WAUKESHA ................................................ WI 1.75 1.33 1.34 1.36 1.37 1.39

WAUPACA .................................................. WI 1.75 1.10 1.09 1.09 1.08 1.08

WAUSHARA ................................................ WI 1.70 1.10 1.11 1.11 1.12 1.12

WINNEBAGO .............................................. WI 1.75 1.15 1.16 1.16 1.17 1.18

WOOD ......................................................... WI 1.70 1.05 1.06 1.08 1.09 1.10

BARBOUR ................................................... WV 2.30 1.93 1.86 1.79 1.72 1.65

BERKELEY ................................................. WV 2.60 1.85 1.76 1.66 1.57 1.47

BOONE ....................................................... WV 2.20 2.10 2.01 1.93 1.84 1.75

BRAXTON ................................................... WV 2.20 1.94 1.87 1.81 1.74 1.68

BROOKE ..................................................... WV 2.10 1.92 1.85 1.77 1.70 1.62

CABELL ....................................................... WV 2.20 2.09 1.99 1.90 1.80 1.70

CALHOUN ................................................... WV 2.20 2.02 1.94 1.85 1.77 1.68

CLAY ........................................................... WV 2.20 2.09 2.00 1.90 1.81 1.71

DODDRIDGE .............................................. WV 2.10 1.93 1.86 1.78 1.71 1.64

FAYETTE .................................................... WV 2.20 2.09 2.00 1.90 1.81 1.71

GILMER ....................................................... WV 2.20 2.02 1.93 1.85 1.76 1.67

GRANT ........................................................ WV 2.60 1.92 1.84 1.76 1.68 1.60

GREENBRIER ............................................. WV 2.20 2.55 2.33 2.10 1.88 1.66

HAMPSHIRE ............................................... WV 2.60 1.91 1.83 1.74 1.66 1.57

HANCOCK .................................................. WV 2.10 1.92 1.84 1.75 1.67 1.59

HARDY ........................................................ WV 2.60 1.92 1.83 1.75 1.66 1.58

HARRISON ................................................. WV 2.10 1.93 1.86 1.79 1.72 1.65

JACKSON ................................................... WV 2.20 2.09 1.99 1.88 1.78 1.68

JEFFERSON ............................................... WV 2.60 1.90 1.80 1.70 1.60 1.50

KANAWHA .................................................. WV 2.20 2.10 2.02 1.93 1.85 1.76

LEWIS ......................................................... WV 2.10 1.93 1.86 1.80 1.73 1.66

LINCOLN ..................................................... WV 2.20 2.10 2.01 1.91 1.82 1.73

LOGAN ........................................................ WV 2.20 2.10 2.00 1.91 1.81 1.72

MARION ...................................................... WV 2.80 2.56 2.35 2.13 1.92 1.71

MARSHALL ................................................. WV 2.10 1.93 1.86 1.78 1.71 1.64

MASON ....................................................... WV 2.10 1.92 1.85 1.77 1.70 1.62

MCDOWELL ................................................ WV 2.20 2.09 1.98 1.88 1.77 1.67

MERCER ..................................................... WV 2.80 2.55 2.34 2.12 1.91 1.69

MINERAL .................................................... WV 2.60 1.92 1.84 1.76 1.68 1.60

MINGO ........................................................ WV 2.20 2.09 2.00 1.90 1.81 1.71

MONONGALIA ............................................ WV 2.10 1.93 1.85 1.78 1.70 1.63

MONROE .................................................... WV 2.20 2.55 2.32 2.10 1.87 1.65

MORGAN .................................................... WV 2.60 1.82 1.74 1.66 1.58 1.50

NICHOLAS .................................................. WV 2.20 2.09 1.99 1.89 1.79 1.69

OHIO ........................................................... WV 2.10 1.92 1.84 1.77 1.69 1.61

PENDLETON .............................................. WV 2.60 1.92 1.84 1.76 1.68 1.60

PLEASANTS ............................................... WV 2.20 2.01 1.91 1.80 1.70 1.60

POCAHONTAS ........................................... WV 2.20 2.54 2.32 2.09 1.87 1.64

PRESTON ................................................... WV 2.30 1.93 1.86 1.78 1.71 1.64

PUTNAM ..................................................... WV 2.20 2.10 2.01 1.91 1.82 1.73

RALEIGH ..................................................... WV 2.20 2.09 2.00 1.90 1.81 1.71

RANDOLPH ................................................ WV 2.30 1.93 1.85 1.78 1.70 1.63

RITCHIE ...................................................... WV 2.20 2.01 1.92 1.82 1.73 1.63

ROANE ........................................................ WV 2.20 2.09 1.99 1.89 1.79 1.69

SUMMERS .................................................. WV 2.20 2.55 2.33 2.11 1.89 1.67

TAYLOR ...................................................... WV 2.30 1.93 1.86 1.79 1.72 1.65

TUCKER ...................................................... WV 2.30 1.92 1.85 1.77 1.70 1.62
5020 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

COUNTY/PARISH STATE

OPTION 1A

DIFFERENTIAL

OPTION 1B DIFFERENTIAL

(Per Year)

1999 2000 2001 2002 2003 &

beyond

TYLER ......................................................... WV 2.10 1.93 1.85 1.78 1.70 1.63

UPSHUR ..................................................... WV 2.30 1.93 1.86 1.79 1.72 1.65

WAYNE ....................................................... WV 2.20 2.09 1.99 1.89 1.79 1.69

WEBSTER ................................................... WV 2.20 1.93 1.86 1.80 1.73 1.66

WETZEL ...................................................... WV 2.10 1.93 1.85 1.78 1.70 1.63

WIRT ........................................................... WV 2.20 2.02 1.93 1.84 1.75 1.66

WOOD ......................................................... WV 2.20 2.01 1.91 1.82 1.72 1.62

WYOMING .................................................. WV 2.20 2.10 2.00 1.91 1.81 1.72

ALBANY ...................................................... WY 1.90 1.86 1.68 1.49 1.31 1.12

BIG HORN .................................................. WY 1.60 1.65 1.49 1.34 1.18 1.03

CAMPBELL ................................................. WY 1.65 1.84 1.63 1.41 1.20 0.99

CARBON ..................................................... WY 1.90 1.67 1.53 1.40 1.26 1.13

CONVERSE ................................................ WY 1.70 1.84 1.63 1.43 1.22 1.01

CROOK ....................................................... WY 1.65 1.83 1.61 1.38 1.16 0.94

FREMONT ................................................... WY 1.60 1.49 1.37 1.26 1.14 1.03

GOSHEN ..................................................... WY 1.90 1.85 1.64 1.44 1.23 1.03

HOT SPRINGS ........................................... WY 1.60 1.48 1.36 1.25 1.13 1.01

JOHNSON ................................................... WY 1.65 1.64 1.48 1.33 1.17 1.01

LARAMIE ..................................................... WY 2.45 1.86 1.67 1.48 1.29 1.10

LINCOLN ..................................................... WY 1.60 1.49 1.37 1.26 1.14 1.03

NATRONA ................................................... WY 1.70 1.65 1.49 1.34 1.18 1.03

NIOBRARA .................................................. WY 1.70 1.84 1.62 1.41 1.19 0.98

PARK ........................................................... WY 1.60 1.47 1.34 1.21 1.08 0.95

PLATTE ....................................................... WY 1.90 1.85 1.65 1.46 1.26 1.06

SHERIDAN .................................................. WY 1.60 1.65 1.50 1.35 1.20 1.05

SUBLETTE .................................................. WY 1.60 1.48 1.37 1.25 1.14 1.02

SWEETWATER ........................................... WY 1.90 1.51 1.42 1.33 1.24 1.15

TETON ........................................................ WY 1.60 1.46 1.33 1.19 1.06 0.92

UINTA .......................................................... WY 1.90 1.50 1.40 1.31 1.21 1.11

WASHAKIE ................................................. WY 1.60 1.64 1.49 1.33 1.18 1.02

WESTON ..................................................... WY 1.70 1.82 1.59 1.36 1.13 0.90

§ 1000.53 Announcement of class prices

and component prices.

On or before the 5th day of the month,

the market administrator shall announce

for each Federal milk marketing order in

7 CFR, chapter X the following

applicable prices:

(a) For the following month:

(1) The Class I price;

(2) The Class I skim milk price;

(3) The Class I butterfat price;

(b) For the preceding month:

(1) The Class II price;

(2) The Class III price;

(3) The Class IV price;

(4) The Class II skim milk price;

(5) The Class III skim milk price;

(6) The Class IV skim milk price;

(7) The butterfat price;

(8) The nonfat solids price;

(9) The protein price;

(10) The other solids price; and

(11) The somatic cell adjustment rate.

§ 1000.54 Equivalent price.

If for any reason a price or pricing

constituent required for computing class

prices or for other purposes is not

available as prescribed in any Federal

milk order, the market administrator

shall use a price or pricing constituent

determined by the Deputy

Administrator, Dairy Programs,

Agricultural Marketing Service, to be

equivalent to the price or pricing

constituent that is required.

Subpart H—Payments for Milk

§ 1000.70 Producer-settlement fund.

The market administrator shall

establish and maintain a separate fund

known as the producer-settlement fund

into which the market administrator

shall deposit all payments made by

handlers pursuant to §§ll.71,

ll.76, and ll.77 of each Federal

milk order in 7 CFR, chapter X, and out

of which the market administrator shall

make all payments pursuant to

§§ ll.72 and ll.77 of each Federal

milk order in 7 CFR, chapter X.

Payments due any handler shall be

offset by any payments due from that

handler.

§ 1000.71 Payments to the producersettlement fund.

Each handler shall make a payment to

the producer-settlement fund in a

manner that provides receipt of the

funds by the market administrator no

later than the date specified in §ll.71

of each order in 7 CFR, chapter X.

Payment shall be the amount, if any, by

which the amount specified in (a) of this

section exceeds the amount specified in

(b) or (c) of this section:

(a) The total value of milk of the

handler for the month as determined

pursuant to §ll.60 of the order; and

(b) For orders in 7 CFR, chapter X

with component pricing, the sum of:

(1) An amount obtained by

multiplying the total hundredweight of

producer milk as determined pursuant

to § 1000.44(c) by the producer price

differential, adjusted pursuant to

§ ll.75 of the order;

(2) An amount obtained by

multiplying the pounds of protein, other

solids, and butterfat contained in

producer milk by the protein, other

solids, and butterfat prices, respectively;

(3) The total value of the somatic cell

adjustment to producer milk; and

(4) An amount obtained by

multiplying the pounds of skim milk

and butterfat for which a value was

computed pursuant to §ll.60(i) of the

order by the producer price differential

as adjusted pursuant to §ll.75 of the

order for the location of the plant from

which received; or

(c) For orders in 7 CFR, chapter X

with skim milk and butterfat pricing,

the sum of the value at the uniform

prices for skim milk and butterfat,

adjusted for plant location, of the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5021

handler’s receipts of producer milk; and

the value at the uniform price as

adjusted pursuant to §ll.75 of the

order applicable at the location of the

plant from which received of other

source milk for which a value is

computed pursuant to §ll.60(e) of the

order.

§ 1000.72 Payments from the producersettlement fund.

No later than one day after the date of

payment receipt required under

§ 1000.71, the market administrator

shall pay to each handler the amount, if

any, by which the amount computed

pursuant to § 1000.71(b) or (c), as the

case may be, exceeds the amount

computed pursuant to § 1000.71(a). If, at

such time, the balance in the producersettlement fund is insufficient to make

all payments pursuant to this section,

the market administrator shall reduce

uniformly such payments and shall

complete the payments as soon as the

funds are available.

§ 1000.76 Payments by a handler

operating a partially regulated distributing

plant.

On or before the 25th day after the

end of the month, the operator of a

partially regulated distributing plant

shall pay to the market administrator for

the producer-settlement fund the

amount computed pursuant to

paragraph (a) of this section or, if the

handler submits the information

specified in §§ll.30(b) and ll.31(b)

of the order, the handler may elect to

pay the amount computed pursuant to

paragraph (b) of this section:

(a) The payment under this paragraph

shall be an amount resulting from the

following computations:

(1) From the plant’s route disposition

in the marketing area:

(i) Subtract receipts of fluid milk

products classified as Class I milk from

pool plants and plants fully regulated

under other Federal orders in 7 CFR,

chapter X, except that subtracted under

a similar provision of another Federal

milk order in 7 CFR, chapter X;

(ii) Subtract receipts of fluid milk

products from another nonpool plant

that is not a plant fully regulated under

another Federal order in 7 CFR, chapter

X to the extent that an equivalent

amount of fluid milk products disposed

of to the nonpool plant by handlers fully

regulated under any Federal order in 7

CFR, chapter X is classified and priced

as Class I milk and is not used as an

offset for any payment obligation under

any order; and

(iii) Subtract the pounds of

reconstituted milk made from nonfluid

milk products which are then disposed

of as route disposition in the marketing

area;

(2) For orders in 7 CFR, chapter X

with multiple component pricing,

multiply the remaining pounds 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 in 7 CFR, chapter X

with skim milk and butterfat pricing,

multiply the remaining pounds by the

amount by which the 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) 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

Class I price applicable at the location

of the partially regulated distributing

plant less $1.00 and the Class IV price.

For any reconstituted milk that is not so

labeled, the Class I price shall not be

reduced by $1.00. Alternatively, for

such disposition, payments may be

made to the producer-settlement fund of

the order regulating the producer milk

used to produce the nonfluid milk

ingredients at the positive difference

between the Class I price applicable

under the other Federal order in 7 CFR,

chapter X at the location of the plant

where the nonfluid milk ingredients

were processed and the Class IV price.

This payment option shall apply only if

a majority of the total milk received at

the plant that processed the nonfluid

milk ingredients is regulated under one

or more Federal orders in 7 CFR,

chapter X and payment may only be

made to the producer-settlement fund of

the order pricing a plurality of the milk

used to produce the nonfluid milk

ingredients. This payment option shall

not apply if the source of the nonfluid

ingredients used in reconstituted fluid

milk products cannot be determined by

the market administrator.

(b) The payment under this paragraph

shall be the amount resulting from the

following computations:

(1) Determine the value that would

have been computed pursuant to

§ ll.60 of the order for the partially

regulated distributing plant if the plant

had been a pool plant, subject to the

following modifications:

(i) Fluid milk products and bulk fluid

cream products received at the plant

from a pool plant or a plant fully

regulated under another Federal order

plant shall be allocated at the partially

regulated distributing plant to the same

class in which such products were

classified at the fully regulated plant;

(ii) Fluid milk products and bulk fluid

cream products transferred from the

partially regulated distributing plant to

a pool plant or a plant fully regulated

under another Federal order in 7 CFR,

chapter X shall be classified at the

partially regulated distributing plant in

the class to which allocated at the fully

regulated plant. Such transfers shall be

computed to the extent possible to those

receipts at the partially regulated

distributing plant from the pool plant

and plants fully regulated under other

Federal orders in 7 CFR, chapter X that

are classified in the corresponding class

pursuant to paragraph (b)(1)(i) of this

section. Any such transfers remaining

after the above allocation which are in

Class I and for which a value is

computed pursuant to §ll.60 of the

order for the partially regulated

distributing plant shall be priced at the

statistical uniform price or uniform

price, whichever is applicable, of the

respective order regulating the handling

of milk at the receiving plant, with such

statistical uniform price or uniform

price adjusted to the location of the

nonpool plant (but not to be less than

the lowest announced class price of the

respective order); and

(iii) If the operator of the partially

regulated distributing plant so requests,

the handler’s value of milk determined

pursuant to §ll.60 of the order shall

include a value of milk determined for

each nonpool plant that is not a plant

fully regulated under another Federal

order in 7 CFR, chapter X which serves

as a supply plant for the partially

regulated distributing plant by making

shipments to the partially regulated

distributing plant during the month

equivalent to the requirements of

Section 7(c) of the order, subject to the

following conditions:

(A) The operator of the partially

regulated distributing plant submits

with its reports filed pursuant to

§§ ll.30(b) and ll.31(b) of the order

similar reports for each such nonpool

supply plant;

(B) The operator of the nonpool plant

maintains books and records showing

the utilization of all skim milk and

butterfat received at the plant which are

made available if requested by the

market administrator for verification

purposes; and

(C) The value of milk determined

pursuant to §ll.60 for the
5022 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

unregulated supply plant shall be

determined in the same manner

prescribed for computing the obligation

of the partially regulated distributing

plant; and

(2) From the partially regulated

distributing plant’s value of milk

computed pursuant to paragraph (b)(1)

of this section, subtract:

(i) The gross payments by the operator

of the partially regulated distributing

plant for milk received at the plant

during the month that would have been

producer milk had the plant been fully

regulated;

(ii) If paragraph (b)(1)(iii) of this

section applies, the gross payments by

the operator of such nonpool supply

plant for milk received at the plant

during the month that would have been

producer milk if the plant had been

fully regulated; and

(iii) The payments by the operator of

the partially regulated distributing plant

to the producer-settlement fund of

another Federal order in 7 CFR, chapter

X under which the plant is also a

partially regulated distributing plant

and like payments by the operator of the

nonpool supply plant if paragraph

(b)(1)(iii) of this section applies.

(c) Any handler may elect partially

regulated distributing plant status for

any plant with respect to receipts of

nonfluid milk ingredients assigned to

Class I use under § 1000.43(d).

Payments may be made to the producersettlement fund of the order regulating

the producer milk used to produce the

nonfluid milk ingredients at the positive

difference between the Class I price

applicable under the other order at the

location of the plant where the nonfluid

milk ingredients were processed and the

Class IV price. This payment option

shall apply only if a majority of the total

milk received at the plant that processed

the nonfluid milk ingredients is

regulated under one or more Federal

orders in 7 CFR, chapter X and payment

may only be made to the producersettlement fund of the order pricing a

plurality of the milk used to produce the

nonfluid milk ingredients. This

payment option shall not apply if the

source of the nonfluid ingredients used

in reconstituted fluid milk products

cannot be determined by the market

administrator.

§ 1000.77 Adjustment of accounts.

Whenever audit by the market

administrator of any handler’s reports,

books, records, or accounts, or other

verification discloses errors resulting in

money due the market administrator

from a handler, or due a handler from

the market administrator, or due a

producer or cooperative association

from a handler, the market

administrator shall promptly notify

such handler of any amount so due and

payment thereof shall be made on or

before the next date for making

payments as set forth in the provisions

under which the error(s) occurred.

§ 1000.78 Charges on overdue accounts.

Any unpaid obligation due the market

administrator, producers, or cooperative

associations from a handler pursuant to

the provisions of the order shall be

increased 1.0 percent each month

beginning with the day following the

date such obligation was due under the

order. Any remaining amount due shall

be increased at the same rate on the

corresponding day of each succeeding

month until paid. The amounts payable

pursuant to this section shall be

computed monthly on each unpaid

obligation and shall include any unpaid

charges previously computed pursuant

to this section. The late charges shall

accrue to the administrative assessment

fund. For the purpose of this section,

any obligation that was determined at a

date later than prescribed by the order

because of a handler’s failure to submit

a report to the market administrator

when due shall be considered to have

been payable by the date it would have

been due if the report had been filed

when due.

Subpart I—Administrative Assessment

and Marketing Service Deduction

§ 1000.85 Assessment for order

administration.

On or before the payment receipt date

specified under §ll.71 of each

Federal milk order in 7 CFR, chapter X,

each handler shall pay to the market

administrator its pro rata share of the

expense of administration of the order at

a rate specified by the market

administrator that is no more than 5

cents per hundredweight with respect

to:

(a) Receipts of producer milk

(including the handler’s own

production) other than such receipts by

a handler described in § 1000.9(c) that

were delivered to pool plants of other

handlers;

(b) Receipts from a handler described

in § 1000.9(c);

(c) Receipts of concentrated fluid milk

products from unregulated supply

plants and receipts of nonfluid milk

products assigned to Class I use

pursuant to § 1000.43(d) and other

source milk allocated to Class I pursuant

to § 1000.44(a)(3) and (8) and the

corresponding steps of § 1000.44(b),

except other source milk that is

excluded from the computations

pursuant to §ll.60(d) and (e) of Parts

1005, 1006, and 1007 or §ll.60(h) and

(i) of Parts 1001, 1030, 1032, 1033, 1124,

1126, 1131, and 1134 in 7 CFR, chapter

X; and

(d) Route disposition in the marketing

area from a partially regulated

distributing plant that exceeds the skim

milk and butterfat subtracted pursuant

to § 1000.76(a)(1)(i)and (ii).

§ 1000.86 Deduction for marketing

services.

(a) Except as provided in paragraph

(b) of this section, each handler in

making payments to producers for milk

(other than milk of such handler’s own

production) pursuant to §ll.73 of

each Federal milk order in 7 CFR,

chapter X, shall deduct an amount

specified by the market administrator

that is no more than 7 cents per

hundredweight and shall pay the

amount deducted to the market

administrator not later than the payment

receipt date specified under §ll.71 of

each Federal milk order in 7 CFR,

chapter X. The money shall be used by

the market administrator to verify or

establish weights, samples and tests of

producer milk and provide market

information for producers who are not

receiving such services from a

cooperative association. The services

shall be performed in whole or in part

by the market administrator or an agent

engaged by and responsible to the

market administrator;

(b) In the case of producers for whom

the market administrator has

determined that a cooperative

association is actually performing the

services set forth in paragraph (a) of this

section, each handler shall make

deductions from the payments to be

made to producers as may be authorized

by the membership agreement or

marketing contract between the

cooperative association and the

producers. On or before the 15th day

after the end of the month, such

deductions shall be paid to the

cooperative association rendering the

services accompanied by a statement

showing the amount of any deductions

and the amount of milk for which the

deduction was computed for each

producer. These deductions shall be

made in lieu of the deduction specified

in paragraph (a) of this section.

Subpart J—Miscellaneous Provisions

§ 1000.90 Dates.

If a date required for a report,

payment, or announcement contained in

a Federal milk order in 7 CFR, chapter

X falls on a Saturday, Sunday, or

national holiday, such report, payment,
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5023

or announcement will be on the next

day that the market administrator’s

office is open for public business.

§§ 1000.91—1000.92 [Reserved]

§ 1000.93 OMB control number assigned

pursuant to the Paperwork Reduction Act.

The information collection

requirements contained in this

regulation have been approved by the

Office of Management and Budget

(OMB) under the provisions of Title 44

U.S.C. chapter 35 and have been

assigned OMB control number 0581–

0032.

PART 1001—MILK IN THE

NORTHEAST MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1001.1 General Provisions.

Definitions

1001.2 Northeast marketing area.

1001.3 Route disposition.

1001.4 Plant.

1001.5 Distributing plant.

1001.6 Supply plant.

1001.7 Pool plant.

1001.8 Nonpool plant.

1001.9 Handler.

1001.10 Producer-handler.

1001.11 [Reserved]

1001.12 Producer.

1001.13 Producer milk.

1001.14 Other source milk.

1001.15 Fluid milk product.

1001.16 Fluid cream product.

1001.17 [Reserved]

1001.18 Cooperative association.

1001.19 Commercial food processing

establishment.

Handler Reports

1001.30 Reports of receipts and utilization.

1001.31 Payroll reports.

1001.32 Other reports.

Classification of Milk

1001.40 Classes of utilization.

1001.41 [Reserved]

1001.42 Classification of transfers and

diversions.

1001.43 General classification rules.

1001.44 Classification of producer milk.

1001.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1001.50 Class prices and component prices.

1001.51 Class I differential and price.

1001.52 Adjusted Class I differentials.

1001.53 Announcement of class prices and

component prices.

1001.54 Equivalent price.

Producer Price Differential

1001.60 Handler’s value of milk.

1001.61 Computation of producer price

differential.

1001.62 Announcement of producer prices.

Payments for Milk

1001.70 Producer-settlement fund.

1001.71 Payments to the producersettlement fund.

1001.72 Payments from the producersettlement fund.

1001.73 Payments to producers and to

cooperative associations.

1001.74 [Reserved]

1001.75 Plant location adjustments for

producer milk and nonpool milk.

1001.76 Payments by a handler operating a

partially regulated distributing plant.

1001.77 Adjustment of accounts.

1001.78 Charges on overdue accounts.

Administrative Assessment and Marketing

Service Deduction

1001.85 Assessment for order

administration.

1001.86 Deduction for marketing services.

Authority: 7 U.S.C. 601–674.

Subpart—Order Regulating Handling

General Provisions

§ 1001.1 General provisions.

The terms, definitions, and provisions

in part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1001.2 Northeast marketing area.

The marketing area means all the

territory within the bounds of the

following states and political

subdivisions, including all piers, docks

and wharves connected therewith and

all craft moored thereat, and all territory

occupied by government (municipal,

State or Federal) reservations,

installations, institutions, or other

similar establishments if any part

thereof is within any of the listed states

or political subdivisions:

Connecticut, Delaware, Massachusetts, New

Hampshire, New Jersey, Rhode Island,

Vermont and District of Columbia

All of the States of Connecticut, Delaware,

Massachusetts, New Hampshire, New Jersey,

Rhode Island, Vermont and the District of

Columbia.

Maryland Counties and City

All of the State of Maryland except the

counties of Allegany and Garrett.

New York Counties and Cities

All counties within the State of New York

except Chautauqua, Allegany (except the

township Hume) and Cattaraugus (except the

township Yorkshire).

Pennsylvania Counties

Adams, Bucks, Chester, Cumberland,

Dauphin, Delaware, Franklin, Fulton, Juniata,

Lancaster, Lebanon, Montgomery, Perry,

Philadelphia, and York.

Virginia Counties and Cities

Counties of Arlington, Fairfax, Loudoun,

and Prince William, and cities of Alexandria,

Fairfax, Falls Church, Manassas, and

Manassas Park.

§ 1001.3 Route disposition.

See § 1000.3 of this chapter.

§ 1001.4 Plant.

(a) Except as provided in paragraph

(b) of this section, plant means the land,

buildings, facilities, and equipment

constituting a single operating unit or

establishment at which milk or milk

products are received, processed, or

packaged, including a facility described

in paragraph (b)(2) of this section if the

facility receives the milk of more than

one dairy farmer.

(b) Plant shall not include:

(1) A separate building without

stationary storage tanks that is used only

as a reload point for transferring bulk

milk from one tank truck to another or

a separate building used only as a

distribution point for storing packaged

fluid milk products in transit for route

disposition; or

(2) An on-farm facility operated as

part of a single dairy farm entity for the

separation of cream and skim milk; or

(3) Bulk reload points where milk is

transferred from one tank truck to

another while en route from a dairy

farmer’s farms to a plant. If stationary

storage tanks are used for transferring

milk at the premises, the operator of the

facility shall make an advance written

request to the market administrator that

the facility shall be treated as a reload

point. The cooling of milk, collection of

samples, and washing and sanitizing of

tank trucks at the premises shall not

disqualify it as a bulk reload point.

§ 1001.5 Distributing plant.

See § 1000.5 of this chapter.

§ 1001.6 Supply plant.

See § 1000.6 of this chapter.

§ 1001.7 Pool plant.

Pool plant means a plant, unit of

plants, or a system of plants as specified

in paragraphs (a) through (f) of this

section. The pooling standards

described in paragraphs (c) and (f) of

this section are subject to modification

pursuant to paragraph (g) of this section:

(a) A distributing plant from which

during the month total route disposition

is equal to 25 percent or more of the

total quantity of bulk fluid milk

products physically received at the

plant; and route disposition in the

marketing area is at least 25 percent of

total route disposition. For purposes of

this section, packaged fluid milk

products that are transferred to a

distributing plant shall be considered as

route disposition from the transferring

plant, rather than the receiving plant,
5024 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

for the single purpose of qualifying the

transferring plant as a pool distributing

plant.

(b) A distributing plant located in the

marketing area at which the majority of

milk received is processed into

aseptically packaged fluid milk

products unless there are no sales from

the plant into any marketing area and

the plant operator in writing requests

nonpool plant status for the plant for the

month.

(c) A supply plant from which fluid

milk products are transferred or

diverted to plants described in

paragraph (a) or (b) of this section

subject to the following additional

conditions:

(1) During the months of August

through December, such shipments

must equal not less than 10 percent of

the total quantity of bulk milk that is

physically received at the plant during

the month;

(2) During the months of September

through November, such shipments

must equal not less than 20 percent of

the total quantity of bulk milk that is

physically received at the plant during

the month;

(3) A plant which meets the shipping

requirements of this paragraph during

each of the months of August through

December shall be a pool plant during

the following months of January through

July unless the milk received at the

plant fails to meet the requirements of

a duly constituted regulatory agency,

the plant fails to meet a shipping

requirement instituted pursuant to

paragraph (f) of this section, or the plant

operator requests nonpool status for the

plant. The shipping requirement for any

plant which has not met the

requirements of paragraphs (c)(1) and

(c)(2) of this section must equal not less

than 10 percent of the total quantity of

bulk milk that is physically received at

the plant during each of the months of

January through July in order for the

plant to be a pool plant in each of those

months; and

(4) If milk is delivered directly from

producers’ farms that are located

outside of the states included in the

marketing area or outside Maine or West

Virginia, such producers must be

grouped by state into units and each

such unit must independently meet the

shipping requirements of this

paragraph.

(d) [Reserved]

(e) Two or more plants operated by

the same handler and located in the

marketing area qualified for pool status

as a unit by meeting the total and inarea route distribution requirements

specified in paragraph (a) of this section

and subject to the following additional

requirements:

(1) At least one of the plants in the

unit qualifies as a pool plant pursuant

to paragraph (a) of this section;

(2) Other plants in the unit must

process only Class I or Class II products

and must be located in a pricing zone

providing the same or a lower Class I

price than the price applicable at the

distributing plant included in the unit;

and

(3) A written request to form a unit,

or to add or remove plants from a unit,

or to cancel a unit, must be filed with

the market administrator prior to the

first day of the month for which unit

formation it is to be effective.

(f) Two or more supply plants

operated by the same handler, or by one

or more cooperative associations,

qualified for pooling as a system of

supply plants by meeting the applicable

percentage requirements of paragraph

(c) of this section in the same manner

as a single plant and subject to the

following additional requirements:

(1) A written notification to the

market administrator listing the plants

to be included in the system prior to the

first day of August that a system of

supply plants will be effective for the

period of September 1 through August

31 of the following year. The listed

plants included in the system shall also

be in the sequence in which they shall

qualify for pool plant status based on

the minimum deliveries required. If the

deliveries made are insufficient to

qualify the entire system for pooling, the

last listed plant shall be excluded from

the system, followed by the plant nextto-last on the list, and continuing in this

sequence until remaining listed plants

have met the minimum shipping

requirements; and

(2) Each plant that qualifies as a pool

plant within a system shall continue

each month as a plant in the system

through the following August unless the

plant subsequently fails to qualify for

pooling, the handler submits a written

notification to the market administrator

prior to the first day of the month that

the plant be deleted from the system, or

that the system be discontinued. Any

plant that has been so deleted from the

system, or that has failed to qualify as

a pool plant in any month, will not be

part of the system for the remaining

months through August. No plant may

be added in any subsequent month

through the following August to a

system that qualifies in September.

(g) The applicable shipping

percentages of paragraphs (c) and (f) of

this section may be increased or

decreased by the market administrator if

the market administrator finds that such

adjustment is necessary to encourage

needed shipments or to prevent

uneconomic shipments. Before making

such a finding, the market administrator

shall investigate the need for adjustment

either on the market administrator’s

own initiative or at the request of

interested parties. If the investigation

shows that an adjustment of the

shipping percentages might be

appropriate, the market administrator

shall issue a notice stating that an

adjustment is being considered and

invite data, views and arguments. If the

market administrator determines that an

adjustment to the shipping percentages

is necessary, the market administrator

shall notify the industry within one day

of the effective date of such adjustment.

(h) The term pool plant shall not

apply to the following plants:

(1) A producer-handler plant;

(2) An exempt plant as defined in

§ 1000.8(e);

(3) A plant qualified pursuant to

paragraph (a) of this section that is

located within the marketing area if the

plant also meets the pooling

requirements of another Federal order

and more than 50 percent of its route

distribution has been in such other

Federal order marketing area for three

consecutive months;

(4) A plant qualified pursuant to

paragraph (a) of this section which is

not located within any Federal order

marketing area that meets the pooling

requirements of another Federal order

and has had greater sales in such other

Federal order’s marketing area for 3

consecutive months;

(5) A plant qualified pursuant to

paragraph (a) of this section that is

located in another Federal order

marketing area if the plant meets the

pooling requirements of such other

Federal order and does not have a

majority of its route distribution in this

marketing area for 3 consecutive months

or if the plant is required to be regulated

under such other Federal order without

regard to its route disposition in any

other Federal order marketing area;

(6) A plant qualified pursuant to

paragraph (c) of this section which also

meets the pooling requirements of

another Federal order and from which

greater qualifying shipments are made

to plants regulated under the other

Federal order than are made to plants

regulated under this order, or the plant

has automatic pooling status under the

other Federal order; and

(7) That portion of a pool plant

designated as a ‘‘nonpool plant’’ that is

physically separate and operated

separately from the pool portion of such

plant. The designation of a portion of a

regulated plant as a nonpool plant must
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5025

be requested in writing by the handler

and must be approved by the market

administrator.

§ 1001.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1001.9 Handler.

See § 1000.9 of this chapter.

§ 1001.10 Producer-handler.

Except as provided in paragraph (g) of

this section, producer-handler means a

person who:

(a) Operates a dairy farm and a

distributing plant from which there is

monthly route disposition in excess of

150,000 pounds during the month;

(b) Receives no fluid milk products

from sources other than own farm

production, pool handlers, and plants

fully regulated under another Federal

order.

(c) Receives at its plant or acquires for

route disposition no more than 150,000

pounds of fluid milk products from

handlers fully regulated under any

Federal order. This limitation shall not

apply if the producer-handler’s own

farm production is less than 150,000

pounds during the month.

(d) Disposes of no other source milk

as Class I milk except by increasing the

nonfat milk solids content of the fluid

milk products received from own-farm

production or pool handlers;

(e) Disposes of no fluid milk products

using the distribution system of another

handler except for direct deliveries to

retail outlets or to a pool handler’s

plant;

(f) Provides proof satisfactory to the

market administrator that the care and

management of the dairy animals and

other resources necessary to produce all

Class I milk handled (excluding receipts

from handlers fully regulated under any

Federal order) and the processing,

packaging, and distribution operations

are the producer-handler’s own

enterprise and at its own risk; and

(g) Producer-handler shall not include

any producer who also operates a

distributing plant if the producerhandler so requests that the two be

operated as separate entities with the

distributing plant regulated under

§ 1001.7(a) and the farm operated as a

producer under § 1001.12.

§ 1001.11 [Reserved]

§ 1001.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk (or components of milk) is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1001.13; or

(2) Received by a handler described in

§ 1000.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

received at an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1001.13(d);

(3) A dairy farmer whose milk is

received by diversion at a pool plant

from a handler regulated under another

Federal order if the other Federal order

designates the dairy farmer as a

producer under that order and that milk

is allocated by request to a utilization

other than Class I;

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another Federal order

with respect to that portion of the milk

so diverted that is assigned to Class I

under the provisions of such other

order; and

(5) For any month of December

through June, any dairy farmer whose

milk is received at a pool plant or by a

cooperative association handler

described in § 1000.9(c) if the pool plant

operator or the cooperative association

caused milk from the same farm to be

delivered to any plant as other than

producer milk, as defined under this

order or any other Federal milk order,

during the same month, either of the 2

preceding months, or during any of the

preceding months of July through

November; and

(6) For any month of July through

November, any dairy farmer whose milk

is received at a pool plant or by a

cooperative association handler

described in § 1000.9(c) if the pool plant

operator or the cooperative association

caused milk from the same farm to be

delivered to any plant as other than

producer milk, as defined under this

order or any other Federal milk order,

during the same month.

§ 1001.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk) and butterfat contained in

milk of a producer that is:

(a) Received by the operator of a pool

plant directly from a producer or from

a handler described in § 1000.9(c). Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of a pool plant

or a handler described in § 1000.9(c) but

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it is picked

up at the producer’s farm. All milk

received pursuant to this paragraph

shall be priced at the location of the

plant where it is first physically

received;

(b) Received by a handler described in

§ 1000.9(c) in excess of the quantity

delivered to pool plants subject to the

following conditions:

(1) The producers whose farms are

outside of the states included in the

marketing area or outside of Maine or

West Virginia shall be organized into

state units and each such unit shall be

reported separately; and

(2) For pooling purposes, each state

unit so reported must satisfy the

shipping standards specified for a

supply plant pursuant to § 1001.7(c);

(c) Diverted by a proprietary pool

plant operator to another pool plant.

Milk so diverted shall be priced at the

location of the plant to which diverted;

or

(d) Diverted by the operator of a pool

plant or by a handler described in

§ 1000.9(c) to a nonpool plant, subject to

the following conditions:

(1) Milk of a dairy farmer shall not be

eligible for diversion unless milk of

such dairy farmer was physically

received as producer milk at a pool

plant and the dairy farmer has

continuously retained producer status

since that time. If a dairy farmer loses

producer status under this order (except

as a result of a temporary loss of Grade

A approval), the dairy farmer’s milk

shall not be eligible for diversion until

milk of the dairy farmer has been

physically received as producer milk at

a pool plant;

(2) [Reserved]

(3) Diverted milk shall be priced at

the location of the plant to which

diverted; and

(4) [Reserved]

§ 1001.14 Other source milk.

See § 1000.14 of this chapter.

§ 1001.15 Fluid milk product.

See § 1000.15 of this chapter.

1001.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1001.17 [Reserved]

§ 1001.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1001.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.
5026 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Handler Reports

§ 1001.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator’s office

receives the report on or before the 9th

day after the end of the month, in the

detail and on prescribed forms, as

follows:

(a) Each pool plant operator and each

handler described in § 1000.9(c), shall

report for each of its operations the

following information:

(1) Product pounds, pounds of

butterfat, pounds of protein, pounds of

nonfat solids other than protein (other

solids), and the value of the somatic cell

adjustment contained in or represented

by:

(i) Receipts of producer milk,

including producer milk diverted by the

reporting handler; and

(ii) Receipts of milk from handlers

described in § 1000.9(c);

(2) Product pounds and pounds of

butterfat contained in:

(i) Receipts of fluid milk products and

bulk fluid cream products from other

pool plants;

(ii) Receipts of other source milk; and

(iii) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products; and

(3) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph; and

(4) Such other information with

respect to the receipts and utilization of

skim milk, butterfat, milk protein, other

nonfat solids, and somatic cell

information as the market administrator

may prescribe.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a) of this section.

Receipts of milk that would have been

producer milk if the plant had been

fully regulated shall be reported in lieu

of producer milk. The report shall show

also the quantity of any reconstituted

skim milk in route disposition in the

marketing area.

(c) Each handler not specified in

paragraphs (a) or (b) of this section shall

report with respect to its receipts and

utilization of milk and milk products in

such manner as the market

administrator may prescribe.

§ 1001.31 Payroll reports.

(a) On or before the 22nd day after the

end of each month, each handler

described in § 1000.9(a) and (c) shall

report to the market administrator its

producer payroll for the month, in detail

prescribed by the market administrator,

showing for each producer the

information specified in § 1001.73(e);

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.

§ 1001.32 Other reports.

In addition to the reports required

pursuant to §§ 1001.30 and 1001.31,

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

Classification of Milk

§ 1001.40 Classes of utilization.

See § 1000.40 of this chapter.

§ 1001.41 [Reserved]

§ 1001.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1001.43 General classification rules.

See § 1000.43 of this chapter.

§ 1001.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1001.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1001.50 Class prices and component

prices.

See § 1000.50 of this chapter.

§ 1001.51 Class I differential and price.

The Class I differential shall be the

differential established for Suffolk

County, Massachusetts, which is

reported in § 1000.52. The Class I price

shall be the price computed pursuant to

§ 1000.50(a) for Suffolk County,

Massachusetts.

§ 1001.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1001.53 Announcement of class and

component prices.

See § 1000.53 of this chapter.

§ 1001.54 Equivalent price.

See § 1000.54 of this chapter.

Producer Price Differential

§ 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 § 1000.9(c) as

follows:

(a) Class I value. (1) Multiply the

pounds of skim milk in Class I as

determined pursuant to § 1000.44(a) by

the applicable Class I skim milk price;

and

(2) Add an amount obtained by

multiplying the total pounds of butterfat

in Class I as determined pursuant to

§ 1000.44 (b) by the Class I butterfat

price.

(b) Class II value. (1) Add an amount

obtained by multiplying the

hundredweight of milk in Class II as

determined pursuant to § 1000.44(a) by

70 cents;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class II as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiplying the

resulting pounds of nonfat solids by the

nonfat solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class II as determined pursuant to

§ 1000.44(b) by the butterfat price.

(c) Class III value. (1) Add an amount

obtained by multiplying the pounds of

skim milk in Class III as determined

pursuant to § 1000.44(a) by the average

protein content of producer skim milk

received by the handler, and

multiplying the resulting pounds of

protein by the protein price;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class III as determined pursuant to

§ 1000.44(a) by the average other solids

content of producer skim milk received

by the handler, and multiplying the

resulting pounds of other solids by the

other solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class III as determined pursuant to

§ 1000.44(b) by the butterfat price.

(d) Class IV value. (1) Add an amount

obtained by multiplying the pounds of

skim milk in Class IV as determined

pursuant to § 1000.44(a) by the average

nonfat solids content of producer skim

milk received by the handler, and

multiplying the resulting pounds of

nonfat solids by the nonfat solids price;

and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class IV as determined pursuant to

§ 1000.44(b) by the butterfat price.

(e) Add an adjustment for somatic cell

content as determined by multiplying

the value reported pursuant to
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5027

§ 1001.30(a)(1) by the percentage of the

total producer milk allocated to Class II,

Class III, and Class IV pursuant to

§ 1000.44(c).

(f) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43(b)(2) by the

respective class skim milk prices and

the respective class butterfat prices

(Class I butterfat price for Class I and the

butterfat price for all other classes)

applicable at the location of the pool

plant;

(g) Add the amount obtained from

multiplying the difference between the

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);

(h) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3)(i)

through (iii) and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from a plant

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plant;

(i) Add the amount obtained from

multiplying the difference between the

Class I price and the Class III price

applicable at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§§ 1000.43(d) and 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

step of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

fluid milk products from an unregulated

supply plant to the extent that an

equivalent amount of skim milk or

butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(j) Subtract, for reconstituted milk

made from receipts of nonfluid milk

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicable at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I use pursuant to

§ 1000.43(d); and

(k) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another Federal order

under § 1000.76(a)(5) or (c).

§ 1001.61 Computation of producer price

differential.

For each month the market

administrator shall compute a producer

price differential per hundredweight. If

the unreserved balance in the producersettlement fund to be included in the

computation is less than 2 cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1001.71 for the preceding

month shall not be included in the

computation of the producer price

differential. The report of such handler

shall not be included in the

computation for succeeding months

until the handler has made full payment

of outstanding monthly obligations.

Subject to the aforementioned

conditions, the market administrator

shall compute the producer price

differential in the following manner:

(a) Combine into one total the values

computed pursuant to § 1001.60 for all

handlers required to file reports

prescribed in § 1001.30;

(b) Subtract the total of the values

obtained by multiplying each handler’s

total pounds of protein, other solids,

and butterfat contained in the milk for

which an obligation was computed

pursuant to § 1001.60 by the protein

price, other solids price, and the

butterfat price, respectively, and the

total value of the somatic cell

adjustment pursuant to § 1001.60(e);

(c) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1001.75;

(d) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(e) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(1) The total hundredweight of

producer milk; and

(2) The total hundredweight for which

a value is computed pursuant to

§ 1001.60(i); and

(f) Subtract not less than 4 cents nor

more than 5 cents from the price

computed pursuant to paragraph (e) of

this section. The result, rounded to the

nearest cent, shall be known as the

producer price differential for the

month.

§ 1001.62 Announcement of producer

prices.

On or before the 13th day after the

end of the month, the market

administrator shall announce the

following prices and information:

(a) The producer price differential;

(b) The protein price;

(c) The other solids price;

(d) The butterfat price;

(e) The somatic cell adjustment rate;

(f) The average butterfat, nonfat

solids, protein, and other solids content

of producer milk; and

(g) The statistical uniform price for

milk containing 3.5 percent butterfat.

Payments for Milk

§ 1001.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1001.71 Payments to the producersettlement fund.

The payments to the producersettlement fund specified in § 1000.71

are due no later than the 15th day after

the end of the month.

§ 1001.72 Payments from the producersettlement fund.

See § 1000.72 of this chapter.

§ 1001.73 Payments to producers and to

cooperative associations.

(a) Each pool plant operator that is not

paying a cooperative association for

producer milk shall pay each producer

as follows:

(1) Partial payment. For each

producer who has not discontinued

shipments as of the 23rd day of the

month, payment shall be made so that

it is received by the producer on or

before the 26th day of the month for

milk received during the first 15 days of

the month at not less than the lowest

announced class price for the preceding

month, less proper deductions

authorized in writing by the producer;

(2) Final payment. For milk received

during the month, payment shall be

made so that it is received by each

producer no later than the day after the

payment date required in § 1000.72 in

an amount computed as follows:

(i) Multiply the hundredweight of

producer milk received times the

producer price differential for the

month as adjusted pursuant to

§ 1001.75;
5028 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(ii) Multiply the pounds of butterfat

received times the butterfat price for the

month;

(iii) Multiply the pounds of protein

received times the protein price for the

month;

(iv) Multiply the pounds of other

solids received times the other solids

price for the month;

(v) Multiply the hundredweight of

milk received times the somatic cell

adjustment for the month;

(vi) Add the amounts computed in

paragraph (a)(2)(i) through (v) of this

section, and from that sum:

(A) Subtract the partial payment made

pursuant to paragraph (a)(1) of this

section;

(B) Subtract the deduction for

marketing services pursuant to

§ 1000.86;

(C) Add or subtract for errors made in

previous payments to the producer; and

(D) Subtract proper deductions

authorized in writing by the producer.

(b) One day before partial and final

payments are due pursuant to paragraph

(a) of this section, each pool plant

operator shall pay a cooperative

association for milk received as follows:

(1) Partial payment to a cooperative

association. For bulk milk/skimmed

milk received during the first 15 days of

the month from a cooperative

association in any capacity, except as

the operator of a pool plant, the

payment shall be equal to the

hundredweight of milk received

multiplied by the lowest announced

class price for the preceding month;

(2) Partial payment to a cooperative

association for milk transferred from its

pool plant. For bulk milk/skimmed milk

products received during the first 15

days of the month from a cooperative

association in its capacity as the

operator of a pool plant, the partial

payment shall be at the pool plant

operator’s estimated use value of the

milk using the most recent class prices

available, adjusted for butterfat value

and plant location;

(3) Final payment to a cooperative

association for milk transferred from its

pool plant. Following the classification

of bulk fluid milk products and bulk

fluid cream products received during

the month from a cooperative

association in its capacity as the

operator of a pool plant, the final

payment for such receipts shall be

determined as follows:

(i) Multiply the hundredweight of

Class I skim milk by the Class I skim

milk price for the month;

(ii) Multiply the pounds of Class I

butterfat by the Class I butterfat price for

the month;

(iii) Multiply the hundredweight of

Class II skim milk by the Class II

differential price for the month;

(iv) Multiply the pounds of nonfat

solids received in Class II and Class IV

milk times the nonfat solids price for

the month;

(v) Multiply the pounds of butterfat in

Class II, III, and IV milk times the

butterfat price for the month;

(vi) Multiply the pounds of protein

received in Class III milk times the

protein price for the month;

(vii) Multiply the pounds of other

solids received in Class III milk times

the other solids price for the month;

(viii) Multiply the hundredweight of

Class II, Class III, and Class IV milk

received times the somatic cell

adjustment;

(ix) Add together the amounts

computed in paragraph (b)(3)(i) through

(viii) of this section and from that sum

deduct any payment made pursuant to

paragraph (b)(2) of this section.

(4) Final payment to a cooperative

association for bulk milk received

directly from producers’ farms. For bulk

milk received from a cooperative

association during the month, including

the milk of producers who are not

members of such association and who

the market administrator determines

have authorized the cooperative

association to collect payment for their

milk, the final payment for such milk

shall be an amount equal to the sum of

the individual payments otherwise

payable for such milk pursuant to

paragraph (a)(2) of this section.

(c) If a handler has not received full

payment from the market administrator

pursuant to § 1001.72 by the payment

date specified in paragraph (a) or (b) of

this section, the handler may reduce

payments pursuant to paragraphs (a)

and (b) of this section, but by not more

than the amount of the underpayment.

The payments shall be completed on the

next scheduled payment date after

receipt of the balance due from the

market administrator.

(d) If a handler claims that a required

payment to a producer cannot be made

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer-settlement fund, and in the

event that the handler subsequently

locates and pays the producer or a

lawful claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or to the lawful

claimant as the case may be.

(e) In making payments to producers

pursuant to this section, each pool plant

operator shall furnish each producer,

except a producer whose milk was

received from a cooperative association

handler described in § 1000.9(a) or (c),

a supporting statement in such form that

it may be retained by the recipient

which shall show:

(1) The name, address, Grade A

identifier assigned by a duly constituted

regulatory agency, and the payroll

number of the producer;

(2) The month and dates that milk

was received from the producer,

including the daily and total pounds of

milk received;

(3) The total pounds of butterfat,

protein, and other solids contained in

the producer’s milk;

(4) The somatic cell count of the

producer’s milk;

(5) The minimum rate or rates at

which payment to the producer is

required pursuant to this order;

(6) The rate used in making payment

if the rate is other than the applicable

minimum rate;

(7) The amount, or rate per

hundredweight, or rate per pound of

component, and the nature of each

deduction claimed by the handler; and

(8) The net amount of payment to the

producer or cooperative association.

§ 1001.74 [Reserved]

§ 1001.75 Plant location adjustments for

producer milk and nonpool milk.

(a) The producer price differential for

producer milk shall be adjusted

according to the location of the plant at

which the milk was physically received

by subtracting from the price the

amount by which the Class I price

specified in § 1001.50 exceeds the Class

I price at the plant’s location. If the

Class I price at the plant location

exceeds the Class I price specified in

§ 1001.50, the difference shall be added

to the producer price differential; and

(b) The producer price differential

applicable for other source milk shall be

adjusted following the procedure

specified in paragraph (a) of this

section, except that the adjusted

producer price differential shall not be

less than zero.

§ 1001.76 Payments by a handler

operating a partially regulated distributing

plant.

See § 1000.76 of this chapter.

§ 1001.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1001.78 Charges on overdue accounts.

See § 1000.78 of this chapter.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5029

Administrative Assessment and

Marketing Service Deduction

§ 1001.85 Assessment for order

administration.

See § 1000.85 of this chapter.

§ 1001.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

PART 1005—MILK IN THE

APPALACHIAN MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1005.1 General provisions.

Definitions

1005.2 Appalachian marketing area.

1005.3 Route disposition.

1005.4 Plant.

1005.5 Distributing plant.

1005.6 Supply plant.

1005.7 Pool plant.

1005.8 Nonpool plant.

1005.9 Handler.

1005.10 Producer-handler.

1005.11 [Reserved]

1005.12 Producer.

1005.13 Producer milk.

1005.14 Other source milk.

1005.15 Fluid milk product.

1005.16 Fluid cream product.

1005.17 [Reserved]

1005.18 Cooperative association.

1005.19 Commercial food processing

establishment.

Handler Reports

1005.30 Reports of receipts and utilization.

1005.31 Payroll reports.

1005.32 Other reports.

Classification of Milk

1005.40 Classes of utilization.

1005.41 [Reserved]

1005.42 Classification of transfers and

diversions.

1005.43 General classification rules.

1005.44 Classification of producer milk.

1005.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1005.50 Class prices, component prices,

Class I differential and price.

1005.51 [Reserved]

1005.52 Adjusted Class I differentials.

1005.53 Announcement of class prices and

component prices.

1005.54 Equivalent price.

Uniform Prices

1005.60 Handler’s value of milk.

1005.61 Computation of uniform price,

uniform butterfat price and uniform skim

milk price.

1005.62 Announcement of uniform price,

uniform butterfat price and uniform skim

milk price.

Payments for Milk

1005.70 Producer-settlement fund.

1005.71 Payments to the producersettlement fund.

1005.72 Payments from the producersettlement fund.

1005.73 Payments to producers and to

cooperative associations.

1005.74 [Reserved]

1005.75 Plant location adjustments for

producer milk and nonpool milk.

1005.76 Payments by a handler operating a

partially regulated distributing plant.

1005.77 Adjustment of accounts.

1005.78 Charges on overdue accounts.

Marketwide Service Payments

1005.80 Transportation credit balancing

fund.

1005.81 Payments to the transportation

credit balancing fund.

1005.82 Payments from the transportation

credit balancing fund.

Administrative Assessment and Marketing

Service Deduction

1005.85 Assessment for order

administration.

1005.86 Deduction for marketing services.

Authority: 7 U.S.C. 601–674.

Subpart—Order Regulating Handling

General Provisions

§ 1005.1 General provisions.

The terms, definitions, and provisions

in part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1005.2 Appalachian marketing area.

The marketing area means all the

territory within the bounds of the

following states and political

subdivisions, including all piers, docks

and wharves connected therewith and

all craft moored thereat, and all territory

occupied by government (municipal,

State or Federal) reservations,

installations, institutions, or other

similar establishments if any part

thereof is within any of the listed states

or political subdivisions:

Georgia Counties

Catoosa, Chattooga, Dade, Fannin, Murray,

Walker, and Whitfield.

Indiana Counties

Clark, Crawford, Daviess, Dubois, Floyd,

Gibson, Greene, Harrison, Knox, Martin,

Orange, Perry, Pike, Posey, Scott, Spencer,

Sullivan, Vanderburgh, Warrick, and

Washington.

Kentucky Counties

Adair, Anderson, Bath, Bell, Bourbon,

Boyle, Breathitt, Breckinridge, Bullitt, Butler,

Carroll, Carter, Casey, Clark, Clay, Clinton,

Cumberland, Daviess, Edmonson, Elliott,

Estill, Fayette, Fleming, Franklin, Gallatin,

Garrard, Grayson, Green, Hancock, Hardin,

Harlan, Hart, Henderson, Henry, Hopkins,

Jackson, Jefferson, Jessamine, Knott, Knox,

Larue, Laurel, Lee, Leslie, Letcher, Lincoln,

Madison, Marion, McCreary, McLean, Meade,

Menifee, Mercer, Montgomery, Morgan,

Muhlenberg, Nelson, Nicholas, Ohio,

Oldham, Owen, Owsley, Perry, Powell,

Pulaski, Rockcastle, Rowan, Russell, Scott,

Shelby, Spencer, Taylor, Trimble, Union,

Washington, Wayne, Webster, Whitley,

Wolfe, and Woodford.

North Carolina and South Carolina

All of the States of North Carolina and

South Carolina.

Tennessee Counties

Anderson, Blount, Bradley, Campbell,

Carter, Claiborne, Cocke, Cumberland,

Grainger, Greene, Hamblen, Hamilton,

Hancock, Hawkins, Jefferson, Johnson, Knox,

Loudon, Marion, McMinn, Meigs, Monroe,

Morgan, Polk, Rhea, Roane, Scott,

Sequatchie, Sevier, Sullivan, Unicoi, Union,

and Washington.

Virginia Counties and Cities

Buchanan, Dickenson, Lee, Russell, Scott,

Tazewell, Washington, and Wise, and cities

of Bristol and Norton.

West Virginia Counties

McDowell and Mercer.

§ 1005.3 Route disposition.

See § 1000.3 of this chapter.

§ 1005.4 Plant.

See § 1000.4 of this chapter.

§ 1005.5 Distributing plant.

See § 1000.5 of this chapter.

§ 1005.6 Supply plant.

See § 1000.6 of this chapter.

§ 1005.7 Pool plant.

Pool plant means a plant specified in

paragraphs (a) through (d) of this

section, or a unit of plants as specified

in paragraph (e) of this section, but

excluding a plant specified in paragraph

(g) of this section. The pooling

standards described in paragraphs (a),

(c), and (d) of this section are subject to

modification pursuant to paragraph (f)

of this section:

(a) A distributing plant from which

during the month the total route

disposition is equal to 50 percent or

more of the total quantity of fluid milk

products physically received at such

plant and route disposition in the

marketing area is at least 10 percent of

such receipts. Packaged fluid milk

products that are transferred to a

distributing plant shall be considered as

route disposition from the transferring

plant, rather than the receiving plant,

for the purpose of determining the

transferring plant’s pool status under

this paragraph.

(b) Any distributing plant located in

the marketing area which during the

month processed a majority of its milk

receipts into aseptically packaged fluid
5030 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

milk products. If the plant had no route

disposition in the marketing area during

the month, the plant operator may

request nonpool status for the plant.

(c) A supply plant from which 50

percent of the total quantity of milk that

is physically received during the month

from dairy farmers and handlers

described in § 1000.9(c) is transferred to

pool distributing plants.

(d) A plant located within the

marketing area or in the State of Virginia

that is operated by a cooperative

association if pool plant status under

this paragraph is requested for such

plant by the cooperative association and

during the month at least 60 percent of

the producer milk of members of such

cooperative association is delivered

directly from farms to pool distributing

plants or is transferred to such plants as

a fluid milk product from the

cooperative’s plant.

(e) Two or more plants operated by

the same handler and that are located

within the marketing area may qualify

for pool status as a unit by meeting the

total and in-area route disposition

requirements specified in paragraph (a)

of this section and the following

additional requirements:

(1) At least one of the plants in the

unit must qualify as a pool plant

pursuant to paragraph (a) of this section;

(2) Other plants in the unit must

process only Class I or Class II products

and must be located in a pricing zone

providing the same or a lower Class I

price than the price applicable at the

distributing plant included in the unit

pursuant to paragraph (e)(1) of this

section; and

(3) A written request to form a unit,

or to add or remove plants from a unit,

must be filed with the market

administrator prior to the first day of the

month for which it is to be effective.

(f) The applicable percentages in

paragraphs (a), (c), and (d) of this

section may be increased or decreased

up to 10 percentage points by the

market administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested parties if the request is made

in writing at least 15 days prior to the

date for which the requested revision is

desired effective. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

(g) The term pool plant shall not

apply to the following plants:

(1) A producer-handler plant;

(2) An exempt plant as defined in

§ 1000.8(e);

(3) A plant qualified pursuant to

paragraph (a) of this section which is

not located within any Federal order

marketing area, meets the pooling

requirements of another Federal order,

and has had greater route disposition in

such other Federal order marketing area

for 3 consecutive months;

(4) A plant qualified pursuant to

paragraph (a) of this section which is

located in another Federal order

marketing area, meets the pooling

standards of the other Federal order,

and has not had a majority of its route

disposition in this marketing area for 3

consecutive months or is locked into

pool status under such other Federal

order without regard to its route

disposition in any other Federal order

marketing area;

(5) A plant qualified pursuant to

paragraph (c) of this section which also

meets the pooling requirements of

another Federal order and from which

greater qualifying shipments are made

to plants regulated under such other

order than are made to plants regulated

under this order, or such plant has

automatic pooling status under such

other order; and

(6) That portion of a pool plant

designated as a ‘‘nonpool plant’’ that is

physically separate and operated

separately from the pool portion of such

plant. The designation of a portion of a

regulated plant as a nonpool plant must

be requested in writing by the handler

and must be approved by the market

administrator.

§ 1005.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1005.9 Handler.

See § 1000.9 of this chapter.

§ 1005.10 Producer-handler.

Producer-handler means a person

who:

(a) Operates a dairy farm and a

distributing plant from which there is

monthly route disposition in excess of

150,000 pounds per month, unless the

person requests that the two be operated

as separate entities with the distributing

plant regulated under § 1005.7(a) and

the farm operated as a producer under

§ 1005.12;

(b) Receives no fluid milk products,

and acquires no fluid milk products for

route disposition, from sources other

than own farm production;

(c) Disposes of no other source milk

as Class I milk except by increasing the

nonfat milk solids content of the fluid

milk products received from own farm

production;

(d) Disposes of no fluid milk products

using the distribution system of another

handler; and

(e) Provides proof satisfactory to the

market administrator that the care and

management of the dairy animals and

other resources necessary to produce all

Class I milk handled, and the

processing, packaging, and distribution

operations, are the producer-handler’s

own enterprise and are operated at the

producer-handler’s own risk.

§ 1005.11 [Reserved]

§ 1005.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk (or components of milk) is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1005.13; or

(2) Received by a handler described in

§ 1000.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

received at an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1005.13(d);

(3) A dairy farmer whose milk is

received by diversion at a pool plant

from a handler regulated under another

Federal order if the other Federal order

designates the dairy farmer as a

producer under that order and that milk

is allocated by request to a utilization

other than Class I; and

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another order with

respect to that portion of the milk so

diverted that is assigned to Class I under

the provisions of such other order.

§ 1005.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk) and butterfat contained in

milk of a producer that is:

(a) Received by the operator of a pool

plant directly from a producer or a

handler described in § 1000.9(c). Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of a pool plant

or a handler described in § 1000.9(c) but
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5031

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it is picked

up at the producer’s farm. All milk

received pursuant to this paragraph

shall be priced at the location of the

plant where it is first physically

received;

(b) Received by a handler described in

§ 1000.9(c) in excess of the quantity

delivered to pool plants;

(c) Diverted by a pool plant operator

to another pool plant. Milk so diverted

shall be priced at the location of the

plant to which diverted; or

(d) Diverted by the operator of a pool

plant or a handler described in

§ 1000.9(c) to a nonpool plant, subject to

the following conditions:

(1) In any month of July through

December, not less than 6 days’

production of the producer whose milk

is diverted is physically received at a

pool plant during the month;

(2) In any month of January through

June, not less than 2 days’ production of

the producer whose milk is diverted is

physically received at a pool plant

during the month;

(3) The total quantity of milk so

diverted during the month by a

cooperative association shall not exceed

25 percent during the months of July

through November, January, and

February, and 40 percent during the

months of December and March through

June, of the producer milk that the

cooperative association caused to be

delivered to, and physically received at,

pool plants during the month;

(4) The operator of a pool plant that

is not a cooperative association may

divert any milk that is not under the

control of a cooperative association that

diverts milk during the month pursuant

to paragraph (d) of this section. The

total quantity of milk so diverted during

the month shall not exceed 25 percent

during the months of July through

November, January, and February, and

40 percent during the months of

December and March through June, of

the producer milk physically received at

such plant (or such unit of plants in the

case of plants that pool as a unit

pursuant to § 1005.7(d)) during the

month, excluding the quantity of

producer milk received from a handler

described in § 1000.9(c);

(5) Any milk diverted in excess of the

limits prescribed in paragraphs (d)(3)

and (4) of this section shall not be

producer milk. If the diverting handler

or cooperative association fails to

designate the dairy farmers’ deliveries

that will not be producer milk, no milk

diverted by the handler or cooperative

association shall be producer milk;

(6) Diverted milk shall be priced at

the location of the plant to which

diverted; and

(7) The delivery day requirements and

the diversion percentages in paragraphs

(d)(1) through (4) of this section may be

increased or decreased by the market

administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested persons. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

§ 1005.14 Other source milk.

See § 1000.14 of this chapter.

§ 1005.15 Fluid milk product.

See § 1000.15 of this chapter.

§ 1005.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1005.17 [Reserved]

§ 1005.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1005.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.

Handler Reports

§ 1005.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator’s office

receives the report on or before the 7th

day after the end of the month, in the

detail and on prescribed forms, as

follows:

(a) With respect to each of its pool

plants, the quantities of skim milk and

butterfat contained in or represented by:

(1) Receipts of producer milk,

including producer milk diverted by the

plant operator to other plants;

(2) Receipts of milk from handlers

described in § 1000.9(c);

(3) Receipts of fluid milk products

and bulk fluid cream products from

other pool plants;

(4) Receipts of other source milk;

(5) Receipts of bulk milk from a plant

regulated under another Federal order,

except Federal Order 1007, for which a

transportation credit is requested

pursuant to § 1005.82;

(6) Receipts of producer milk

described in § 1005.82(c)(2), including

the identity of the individual producers

whose milk is eligible for the

transportation credit pursuant to that

paragraph and the date that such milk

was received;

(7) For handlers submitting

transportation credit requests, transfers

of bulk milk to nonpool plants,

including the dates that such milk was

transferred;

(8) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products; and

(9) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a) of this section.

Receipts of milk that would have been

producer milk if the plant had been

fully regulated shall be reported in lieu

of producer milk. The report shall show

also the quantity of any reconstituted

skim milk in route disposition in the

marketing area.

(c) Each handler described in

§ 1000.9(c) shall report:

(1) The quantities of all skim milk and

butterfat contained in receipts of milk

from producers;

(2) The utilization or disposition of all

such receipts; and

(3) With respect to milk for which a

cooperative association is requesting a

transportation credit pursuant to

§ 1005.82, all of the information

required in paragraph (a)(5), (a)(6), and

(a)(7) of this section.

(d) Each handler not specified in

paragraphs (a) through (c) of this section

shall report with respect to its receipts

and utilization of milk and milk

products in such manner as the market

administrator may prescribe.

§ 1005.31 Payroll reports.

(a) On or before the 20th day after the

end of each month, each handler

described in § 1000.9(a) and (c) shall

report to the market administrator its

producer payroll for the month, in detail

prescribed by the market administrator,

showing for each producer the

information specified in § 1005.73(e).

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.
5032 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

§ 1005.32 Other reports.

(a) On or before the 20th day after the

end of each month, each handler

described in § 1000.9(a) and (c) shall

report to the market administrator any

adjustments to transportation credit

requests as reported pursuant to

§ 1005.30(a)(5), (6), and (7).

(b) In addition to the reports required

pursuant to §§ 1005.30, 31, and 32(a),

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

Classification of Milk

§ 1005.40 Classes of utilization.

See § 1000.40 of this chapter.

§ 1005.41 [Reserved]

§ 1005.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1005.43 General classification rules.

See § 1000.43 of this chapter.

§ 1005.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1005.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1005.50 Class prices, component prices,

Class I differential and price.

Class prices and component prices are

described in § 1000.50. The Class I

differential shall be the differential

established for Meklenburg County,

North Carolina, which is reported in

§ 1000.52. The Class I price shall be the

price computed pursuant to § 1000.50(a)

for Meklenburg County, North Carolina.

§ 1005.51 [Reserved]

§ 1005.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1005.53 Announcement of class prices

and component prices.

See § 1000.53 of this chapter.

§ 1005.54 Equivalent price.

See § 1000.54 of this chapter.

Uniform Price

§ 1005.60 Handler’s value of milk.

For the purpose of computing the

uniform price, 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

§ 1000.9(c) as follows:

(a) Multiply the pounds of skim milk

and butterfat in producer milk that were

classified in each class pursuant to

§ 1000.44(c) by the applicable skim milk

and butterfat prices, and add the

resulting amounts;

(b) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43(b)(2) by the

respective skim milk and butterfat

prices applicable at the location of the

pool plant;

(c) Add the amount obtained from

multiplying the difference between the

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);

(d) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3)(i)

through (iii) and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from a plant

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plants;

(e) Add the amount obtained from

multiplying the Class I price applicable

at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§ 1000.43(d) and § 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

step of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

fluid milk products from an unregulated

supply plant to the extent that an

equivalent amount of skim milk or

butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(f) Subtract, for reconstituted milk

made from receipts of nonfluid milk

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicable at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I use pursuant to

§ 1000.43(e); and

(g) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another Federal order

under § 1000.76(a)(5) or (c).

§ 1005.61 Computation of uniform price,

uniform butterfat price and uniform skim

milk price.

(a) Uniform price. For each month the

market administrator shall compute the

uniform price per hundredweight. If the

unreserved balance in the producersettlement fund to be included in the

computation is less than 2 cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1005.71 for the preceding

month shall not be included in the

computation of the uniform price. The

report of such handler shall not be

included in the computation for

succeeding months until the handler

has made full payment of outstanding

monthly obligations. Subject to the

aforementioned conditions, the market

administrator shall compute the

uniform price in the following manner:

(1) Combine into one total the values

computed pursuant to § 1005.60 for all

handlers required to file reports

prescribed in § 1005.30;

(2) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1005.75;

(3) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(4) Add or subtract, as the case may

be, to obtain an all-producer milk test of

3.5 percent butterfat, the value of the

required pounds of butterfat times the

uniform butterfat price computed in

paragraph (b) of this section;

(5) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(i) The total hundredweight of

producer milk; and

(ii) The total hundredweight for

which a value is computed pursuant to

§ 1005.60(f); and

(6) Subtract not less than 4 cents nor

more than 5 cents from the price

computed pursuant to paragraph (e) of

this section. The result, rounded to the

nearest cent, shall be known as the

‘‘uniform price’’ for the month.

(b) Uniform butterfat price. The

uniform butterfat price per pound,
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5033

rounded to the nearest one-hundredth

cent, shall be obtained by multiplying

the pounds of butterfat in producer milk

allocated to each class pursuant to

§ 1000.44(b) by the respective class

butterfat prices (Class I butterfat price

for Class I and the butterfat price for all

other classes) and dividing the sum of

such values by the total pounds of such

butterfat.

(c) Uniform skim milk price. The

uniform skim milk price per

hundredweight, rounded to the nearest

cent, shall be the uniform price for the

month pursuant to pursuant to

paragraph (a) of this section less the

uniform butterfat price for the month

pursuant to paragraph (b) of this section

multiplied by 3.5 pounds of butterfat,

with the result divided by .965.

§ 1005.62 Announcement of uniform price,

uniform butterfat price and uniform skim

milk price.

On or before the 11th day after the

end of the month, the market

administrator shall announce the

following prices and information:

(a) The uniform price pursuant to

§ 1005.61 for such month;

(b) The uniform butterfat price

pursuant to § 1005.61(b) for such month;

and

(c) The uniform skim milk price

pursuant to § 1005.61(c) for such month.

Payments for Milk

§ 1005.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1005.71 Payments to the producersettlement fund.

The payments to the producersettlement fund specified in § 1000.71

are due no later than the 12th day after

the end of the month.

§ 1005.72 Payments from the producersettlement fund.

See § 1000.72 of this chapter.

§ 1005.73 Payments to producers and to

cooperative associations.

(a) Each pool plant operator that is not

paying a cooperative association for

producer milk shall pay each producer

as follows:

(1) Partial payment. For each

producer who has not discontinued

shipments as of the 23rd day of the

month, payment shall be made so that

it is received by the producer on or

before the 26th day of the month for

milk received during the first 15 days of

the month at not less than the 90

percent of the preceding month’s

uniform price, adjusted for plant

location pursuant to § 1005.75 and

proper deductions authorized in writing

by the producer;

(2) Final payment. For milk received

during the month, payment shall be

made so that it is received by each

producer one day after the payment date

required in § 1000.72 an amount

computed as follows:

(i) Multiply the hundredweight of

producer milk received times the

uniform price for the month as adjusted

pursuant to § 1005.75;

(ii) Multiply the hundredweight of

producer skim milk received times the

uniform skim milk price for the month;

(iii) Multiply the pounds of butterfat

received times the uniform butterfat

price for the month;

(iv) Add the amounts computed in

paragraph (a)(2)(i), (ii), and (iii) of the

section, and from that sum:

(A) Subtract the partial payment made

pursuant to paragraph (a)(1) of this

section;

(B) Subtract the deduction for

marketing services pursuant to

§ 1000.86;

(C) Add or subtract for errors made in

previous payments to the producer; and

(D) Subtract proper deductions

authorized in writing by the producer.

(b) One day before partial and final

payments are due pursuant to paragraph

(a) of this section, each pool plant

operator shall pay a cooperative

association for milk received as follows:

(1) Partial payment to a cooperative

association. For bulk milk/skimmed

milk received during the first 15 days of

the month from a cooperative

association in any capacity, except as

the operator of a pool plant, the

payment shall be equal to the

hundredweight of milk received

multiplied by 90 percent of the

preceding month’s uniform price,

adjusted for plant location pursuant to

§ 1005.75;

(2) Partial payment to a cooperative

association for milk transferred from its

pool plant. For bulk fluid milk products

and bulk fluid cream products received

during the first 15 days of the month

from a cooperative association in its

capacity as the operator of a pool plant,

the partial payment shall be at the pool

plant operator’s estimated use value of

the milk using the most recent class

prices available, adjusted for butterfat

value and plant location;

(3) Final payment to a cooperative

association for milk transferred from its

pool plant. For bulk fluid milk products

and bulk fluid cream products received

during the month from a cooperative

association in its capacity as the

operator of a pool plant, the final

payment shall be the classified value of

such milk as determined by multiplying

the pounds of milk assigned to each

class pursuant to § 1000.44 by the class

prices for the month, adjusted for plant

location and butterfat value, and

subtracting from this sum the partial

payment made pursuant to paragraph

(b)(2) of this section.

(4) Final payment to a cooperative

association for bulk milk received

directly from producers’ farms. For bulk

milk received from a cooperative

association during the month, including

the milk of producers who are not

members of such association and who

the market administrator determines

have authorized the cooperative

association to collect payment for their

milk, the final payment for such milk

shall be an amount equal to the sum of

the individual payments otherwise

payable for such milk pursuant to

paragraph (a)(2) of this section.

(c) If a handler has not received full

payment from the market administrator

pursuant to § 1005.72 by the payment

date specified in paragraph (a) or (b) of

this section, the handler may reduce

payments pursuant to paragraphs (a)

and (b) of this section, but by not more

than the amount of the underpayment.

The payments shall be completed on the

next scheduled payment date after

receipt of the balance due from the

market administrator.

(d) If a handler claims that a required

payment to a producer cannot be made

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer-settlement fund, and in the

event that the handler subsequently

locates and pays the producer or a

lawful claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or to the lawful

claimant as the case may be.

(e) In making payments to producers

pursuant to this section, each pool plant

operator shall furnish each producer,

except a producer whose milk was

received from a handler described in

§ 1000.9(a) or (c), a supporting statement

in such form that it may be retained by

the recipient which shall show:

(1) The name, address, Grade A

identifier assigned by a duly constituted

regulatory agency, and the payroll

number of the producer;

(2) The month and dates that milk

was received from the producer,

including the daily and total pounds of

milk received;

(3) The total pounds of butterfat in the

producer’s milk;
5034 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(4) The minimum rate at which

payment to the producer is required

pursuant to this order;

(5) The rate used in making payment

if the rate is other than the applicable

minimum rate;

(6) The amount, or rate per

hundredweight, and nature of each

deduction claimed by the handler; and

(7) The net amount of payment to the

producer or cooperative association.

§ 1005.74 [Reserved]

§ 1005.75 Plant location adjustments for

producer milk and nonpool milk.

(a) The uniform price for producer

milk shall be adjusted according to the

location of the plant at which the milk

was physically received by subtracting

from the price the amount by which the

Class I price specified in § 1005.50

exceeds the Class I price at the plant’s

location. If the Class I price at the plant

location exceeds the Class I price

specified in § 1005.50, the difference

shall be added to the uniform price; and

(b) The uniform price applicable for

other source milk shall be adjusted

following the procedure specified in

paragraph (a) of this section, except that

the adjusted uniform price shall not be

less than the lowest announced class

price.

§ 1005.76 Payments by a handler

operating a partially regulated distributing

plant.

See § 1000.76 of this chapter.

§ 1005.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1005.78 Charges on overdue accounts.

See § 1000.78 of this chapter.

Marketwide Service Payments

§ 1005.80 Transportation credit balancing

fund.

The market administrator shall

maintain a separate fund known as the

Transportation Credit Balancing Fund

into which shall be deposited the

payments made by handlers pursuant to

§ 1005.81 and out of which shall be

made the payments due handlers

pursuant to § 1005.82. Payments due a

handler shall be offset against payments

due from the handler.

§ 1005.81 Payments to the transportation

credit balancing fund.

(a) On or before the 12th day after the

end of the month, each handler

operating a pool plant and each handler

specified in § 1000.9(a) and (c) shall pay

to the market administrator a

transportation credit balancing fund

assessment determined by multiplying

the pounds of Class I producer milk

assigned pursuant to § 1005.44 by

$0.065 per hundredweight or such

lesser amount as the market

administrator deems necessary to

maintain a balance in the fund equal to

the total transportation credits

disbursed during the prior June-January

period. In the event that during any

month of the June-January period the

fund balance is insufficient to cover the

amount of credits that are due, the

assessment should be based upon the

amount of credits that would have been

disbursed had the fund balance been

sufficient.

(b) The market administrator shall

announce publicly on or before the 5th

day of the month the assessment

pursuant to paragraph (a) of this section

for the following month.

§ 1005.82 Payments from the

transportation credit balancing fund.

(a) Payments from the transportation

credit balancing fund to handlers and

cooperative associations requesting

transportation credits shall be made as

follows:

(1) On or before the 13th day after the

end of each of the months of July

through December and any other month

in which transportation credits are in

effect pursuant to paragraph (b) of this

section, the market administrator shall

pay to each handler that received, and

reported pursuant to § 1005.30(a)(5),

bulk milk transferred from a plant fully

regulated under another Federal order

as described in paragraph (c)(1) of this

section or that received, and reported

pursuant to § 1005.30(a)(6), milk

directly from producers’ farms as

specified in paragraph (c)(2) of this

section, a preliminary amount

determined pursuant to paragraph (d) of

this section to the extent that funds are

available in the transportation credit

balancing fund. If an insufficient

balance exists to pay all of the credits

computed pursuant to this section, the

market administrator shall distribute the

balance available in the transportation

credit balancing fund by reducing

payments prorata using the percentage

derived by dividing the balance in the

fund by the total credits that are due for

the month. The amount of credits

resulting from this initial proration shall

be subject to audit adjustment pursuant

to paragraph (a)(2) of this section;

(2) The market administrator shall

accept adjusted requests for

transportation credits on or before the

20th day of the month following the

month for which such credits were

requested pursuant to § 1005.32(a). After

such date, a preliminary audit will be

conducted by the market administrator,

who will recalculate any necessary

proration of transportation credit

payments for the preceding month

pursuant to paragraph (a) of this section.

Handlers will be promptly notified of an

overpayment of credits based upon this

final computation and remedial

payments to or from the transportation

credit balancing fund will be made on

or before the next payment date for the

following month;

(3) Transportation credits paid

pursuant to paragraph (a)(1) and (2) of

this section shall be subject to final

verification by the market administrator

pursuant to § 1000.77. Adjusted

payments to or from the transportation

credit balancing fund will remain

subject to the final proration established

pursuant to paragraph (a)(2) of this

section; and

(4) In the event that a qualified

cooperative association is the

responsible party for whose account

such milk is received and written

documentation of this fact is provided

to the market administrator pursuant to

§ 1005.30(c)(3) prior to the date payment

is due, the transportation credits for

such milk computed pursuant to this

section shall be made to such

cooperative association rather than to

the operator of the pool plant at which

the milk was received.

(b) The market administrator may

extend the period during which

transportation credits are in effect (i.e.,

the transportation credit period) to the

months of January and June if a written

request to do so is received 15 days

prior to the beginning of the month for

which the request is made and, after

conducting an independent

investigation, finds that such extension

is necessary to assure the market of an

adequate supply of milk for fluid use.

Before making such a finding, the

market administrator shall notify the

Director of the Dairy Division and all

handlers in the market that an extension

is being considered and invite written

data, views, and arguments. Any

decision to extend the transportation

credit period must be issued in writing

prior to the first day of the month for

which the extension is to be effective.

(c) Transportation credits shall apply

to the following milk:

(1) Bulk milk received from a plant

regulated under another Federal order,

except Federal Orders 1007, and

allocated to Class I milk pursuant to

§ 1000.44(a)(12); and

(2) Bulk milk received directly from

the farms of dairy farmers at pool

distributing plants subject to the

following conditions:

(i) The quantity of such milk that

shall be eligible for the transportation

credit shall be determined by
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5035

multiplying the total pounds of milk

received from producers meeting the

conditions of this paragraph by the

lower of:

(A) The marketwide estimated Class I

utilization of all handlers for the month

pursuant to § 1000.45(a); or

(B) The Class I utilization of all

producer milk of the pool plant operator

receiving the milk after the

computations described in § 1000.44;

(ii) The dairy farmer was not a

‘‘producer’’ under this order during

more than 2 of the immediately

preceding months of January through

June and not more than 50 percent of

the production of the dairy farmer

during those 2 months, in aggregate, was

received as producer milk under this

order during those 2 months. However,

if January and/or June are months in

which transportation credits are

disbursed pursuant to paragraph (a) of

this section, these months shall not be

included in the 2-month limit provided

in this paragraph; and

(iii) The farm on which the milk was

produced is not located within the

specified marketing area of this order or

the marketing area of Federal Order

1007.

(d) Transportation credits shall be

computed as follows:

(1) The market administrator shall

subtract from the pounds of milk

described in paragraphs (c)(1) and (2) of

this section the pounds of bulk milk

transferred from the pool plant receiving

the supplemental milk if milk was

transferred to a nonpool plant on the

same calendar day that the

supplemental milk was received. For

this purpose, the transferred milk shall

be subtracted from the most distant load

of supplemental milk received, and then

in sequence with the next most distant

load until all of the transfers have been

offset;

(2) With respect to the pounds of milk

described in paragraph (c)(1) of this

section that remain after the

computations described in paragraph

(d)(1) of this section, the market

administrator shall:

(i) Determine the shortest hard-surface

highway distance between the shipping

plant and the receiving plant;

(ii) Multiply the number of miles so

determined by 0.35 cent;

(iii) Subtract the other order’s Class I

price applicable at the shipping plant’s

location from the Class I price

applicable at the receiving plant as

specified in § 1005.53;

(iv) Subtract any positive difference

computed in paragraph (d)(2)(iii) of this

section from the amount computed in

paragraph (d)(2)(ii) of this section; and

(v) Multiply the remainder computed

in paragraph (d)(2)(iv) of this section by

the hundredweight of milk described in

paragraph (d)(2) of this section.

(3) For the remaining milk described

in paragraph (c)(2) of this section after

computations described in paragraph

(d)(1) of this section, the market

administrator shall:

(i) Determine an origination point for

each load of milk by locating the nearest

city to the last producer’s farm from

which milk was picked up for delivery

to the receiving pool plant.

Alternatively, the milk hauler that is

transporting the milk of producers

described in paragraph (c)(2) of this

section may establish an origination

point following the last farm pickup by

stopping at the nearest independentlyoperated truck stop with a certified

truck scale and obtaining a weight

certificate indicating the weight of the

truck and its contents, the date and time

of weighing, and the location of the

truck stop;

(ii) Determine the shortest hardsurface highway distance between the

receiving pool plant and the truck stop

or city, as the case may be;

(iii) Subtract 85 miles from the

mileage so determined;

(iv) Multiply the remaining miles so

computed by 0.35 cent;

(v) If the origination point determined

pursuant to paragraph (d)(3)(i) of this

section is in a Federal order marketing

area, subtract the Class I price

applicable at the origination point

pursuant to the provisions of such other

order (as if the origination point were a

plant location) from the Class I price

applicable at the distributing plant

receiving the milk. If the origination

point is not in any Federal order

marketing area, determine the Class I

price at the origination point based

upon the provisions of this order and

subtract this price from the Class I price

applicable at the distributing plant

receiving the milk;

(vi) Subtract any positive difference

computed in paragraph (d)(3)(v) of this

section from the amount computed in

paragraph (d)(3)(iv) of this section; and

(vii) Multiply the remainder

computed in paragraph (d)(3)(vi) by the

hundredweight of milk described in

paragraph (d)(3) of this section.

Administrative Assessment and

Marketing Service Deduction

§ 1005.85 Assessment for order

administration.

See § 1000.85 of this chapter.

§ 1005.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

PART 1006—MILK IN THE FLORIDA

MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1006.1 General provisions.

Definitions

1006.2 Florida marketing area.

1006.3 Route disposition.

1006.4 Plant.

1006.5 Distributing plant.

1006.6 Supply plant.

1006.7 Pool plant.

1006.8 Nonpool plant.

1006.9 Handler.

1006.10 Producer-handler.

1006.11 [Reserved]

1006.12 Producer.

1006.13 Producer milk.

1006.14 Other source milk.

1006.15 Fluid milk product.

1006.16 Fluid cream product.

1006.17 [Reserved]

1006.18 Cooperative association.

1006.19 Commercial food processing

establishment.

Handler Reports

1006.30 Reports of receipts and utilization.

1006.31 Payroll reports.

1006.32 Other reports.

Classification of Milk

1006.40 Classes of utilization.

1006.41 [Reserved]

1006.42 Classification of transfers and

diversions.

1006.43 General classification rules.

1006.44 Classification of producer milk.

1006.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1006.50 Class prices, component prices,

Class I differential and price.

1006.51 [Reserved]

1006.52 Adjusted Class I differentials.

1006.53 Announcement of class prices and

component prices.

1006.54 Equivalent price.

Uniform Prices

1006.60 Handler’s value of milk.

1006.61 Computation of uniform price,

uniform butterfat price, and uniform

skim milk price.

1006.62 Announcement of uniform price,

uniform butterfat price, and uniform

skim milk price.

Payments for Milk

1006.70 Producer-settlement fund.

1006.71 Payments to the producersettlement fund.

1006.72 Payments from the producersettlement fund.

1006.73 Payments to producers and to

cooperative associations.

1006.74 [Reserved]

1006.75 Plant location adjustments for

producer milk and nonpool milk.

1006.76 Payments by a handler operating a

partially regulated distributing plant.
5036 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

1006.77 Adjustment of accounts.

1006.78 Charges on overdue accounts.

Administrative Assessment and Marketing

Service Deduction

1006.85 Assessment for order

administration.

1006.86 Deduction for marketing services.

Authority: 7 U.S.C. 601–674.

Subpart—Order Regulating Handling

General Provisions

§ 1006.1 General provisions.

The terms, definitions, and provisions

in part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1006.2 Florida marketing area.

The marketing area means all the

territory within the State of Florida,

except the counties of Escambia,

Okaloosa, Santa Rosa, and Walton.,

including all piers, docks and wharves

connected therewith and all craft

moored thereat, and all territory

occupied by government (municipal,

State or Federal) reservations,

installations, institutions, or other

similar establishments if any part

thereof is within any of the listed states

or political subdivisions.

§ 1006.3 Route disposition.

See § 1000.3 of this chapter.

§ 1006.4 Plant.

See § 1000.4 of this chapter.

§ 1006.5 Distributing plant.

See § 1000.5 of this chapter.

§ 1006.6 Supply plant.

See § 1000.6 of this chapter.

§ 1006.7 Pool plant.

Pool plant means a plant specified in

paragraphs (a) through (d) of this

section, or a unit of plants as specified

in paragraph (e) of this section, but

excluding a plant specified in paragraph

(g) of this section. The pooling

standards described in paragraphs (a),

(c), and (d) of this section are subject to

modification pursuant to paragraph (f)

of this section:

(a) A distributing plant from which

during the month the total route

disposition is equal to 50 percent or

more of the total quantity of fluid milk

products physically received at such

plant and route disposition in the

marketing area is at least 10 percent of

such receipts. Packaged fluid milk

products that are transferred to a

distributing plant shall be considered as

route disposition from the transferring

plant, rather than the receiving plant,

for the purpose of determining the

transferring plant’s pool status under

this paragraph.

(b) Any distributing plant located in

the marketing area which during the

month processed a majority of its milk

receipts into aseptically packaged fluid

milk products. If the plant had no route

disposition in the marketing area during

the month, the plant operator may

request nonpool status for the plant.

(c) A supply plant from which 60

percent of the total quantity of milk that

is physically received during the month

from dairy farmers and handlers

described in § 1000.9(c) is transferred to

pool distributing plants.

(d) A plant located within the

marketing area that is operated by a

cooperative association if pool plant

status under this paragraph is requested

for such plant by the cooperative

association and during the month 60

percent of the producer milk of

members of such cooperative

association is delivered directly from

farms to pool distributing plants or is

transferred to such plants as a fluid milk

product from the cooperative’s plant.

(e) Two or more plants operated by

the same handler and that are located

within the marketing area may qualify

for pool status as a unit by meeting the

total and in-area route disposition

requirements specified in paragraph (a)

of this section and the following

additional requirements:

(1) At least one of the plants in the

unit must qualify as a pool plant

pursuant to paragraph (a) of this section;

(2) Other plants in the unit must

process only Class I or Class II products

and must be located in a pricing zone

providing the same or a lower Class I

price than the price applicable at the

distributing plant included in the unit

pursuant to paragraph (e)(1) of this

section; and

(3) A written request to form a unit,

or to add or remove plants from a unit,

must be filed with the market

administrator prior to the first day of the

month for which it is to be effective.

(f) The applicable percentages in

paragraphs (a), (c), and (d) of this

section may be increased or decreased

up to 10 percentage points by the

market administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested parties if the request is made

in writing at least 15 days prior to the

date for which the requested revision is

desired effective. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

(g) The term pool plant shall not

apply to the following plants:

(1) A producer-handler plant;

(2) An exempt plant as defined in

§ 1000.8(e);

(3) A plant qualified pursuant to

paragraph (a) of this section which is

not located within any Federal order

marketing area, meets the pooling

requirements of another Federal order,

and has had greater route disposition in

such other Federal order marketing area

for 3 consecutive months;

(4) A plant qualified pursuant to

paragraph (a) of this section which is

located in another Federal order

marketing area, meets the pooling

standards of the other Federal order,

and has not had a majority of its route

disposition in this marketing area for 3

consecutive months or is locked into

pool status under such other Federal

order without regard to its route

disposition in any other Federal order

marketing area; and

(5) A plant qualified pursuant to

paragraph (c) of this section which also

meets the pooling requirements of

another Federal order and from which

greater qualifying shipments are made

to plants regulated under such other

order than are made to plants regulated

under this order, or such plant has

automatic pooling status under such

other order.

§ 1006.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1006.9 Handler.

See § 1000.9 of this chapter.

§ 1006.10 Producer-handler.

Producer-handler means a person

who:

(a) Operates a dairy farm and a

distributing plant from which there is

monthly route disposition in excess of

150,000 pounds per month, unless the

person requests that the two be operated

as separate entities with the distributing

plant regulated under § 1006.7(a) and

the farm operated as a producer under

§ 1006.12;

(b) Receives no fluid milk products,

and acquires no fluid milk products for

route disposition, from sources other

than own farm production;

(c) Disposes of no other source milk

as Class I milk except by increasing the
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5037

nonfat milk solids content of the fluid

milk products received from own farm

production;

(d) Disposes of no fluid milk products

using the distribution system of another

handler; and

(e) Provides proof satisfactory to the

market administrator that the care and

management of the dairy animals and

other resources necessary to produce all

Class I milk handled, and the

processing, packaging, and distribution

operations, are the producer-handler’s

own enterprise and are operated at the

producer-handler’s own risk.

§ 1006.11 [Reserved]

§ 1006.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk (or components of milk) is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1006.13; or

(2) Received by a handler described in

§ 1000.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

received at an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1006.13(d);

(3) A dairy farmer whose milk is

received by diversion at a pool plant

from a handler regulated under another

Federal order if the other Federal order

designates the dairy farmer as a

producer under that order and that milk

is allocated by request to a utilization

other than Class I; and

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another Federal order

with respect to that portion of the milk

so diverted that is assigned to Class I

under the provisions of such other

order.

§ 1006.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk) and butterfat contained in

milk of a producer that is:

(a) Received by the operator of a pool

plant directly from a producer or a

handler described in § 1000.9(c). Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of a pool plant

or a handler described in § 1000.9(c) but

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it is picked

up at the producer’s farm. All milk

received pursuant to this paragraph

shall be priced at the location of the

plant where it is first physically

received;

(b) Received by a handler described in

§ 1000.9(c) in excess of the quantity

delivered to pool plants;

(c) Diverted by a pool plant operator

to another pool plant. Milk so diverted

shall be priced at the location of the

plant to which diverted; or

(d) Diverted by the operator of a pool

plant or a handler described in

§ 1000.9(c) to a nonpool plant, subject to

the following conditions:

(1) In any month, not less than 10

days’ production of the producer whose

milk is diverted is physically received at

a pool plant during the month;

(2) The total quantity of milk so

diverted during the month by a

cooperative association shall not exceed

20 percent during the months of July

through November, 25 percent during

the months of December through

February, and 40 percent during all

other months, of the producer milk that

the cooperative association caused to be

delivered to, and physically received at,

pool plants during the month;

(3) The operator of a pool plant that

is not a cooperative association may

divert any milk that is not under the

control of a cooperative association that

diverts milk during the month pursuant

to paragraph (d) of this section. The

total quantity of milk so diverted during

the month shall not exceed 20 percent

during the months of July through

November, 25 percent during the

months of December through February,

and 40 percent during all other months,

of the producer milk physically received

at such plant (or such unit of plants in

the case of plants that pool as a unit

pursuant to § 1006.7(d)) during the

month, excluding the quantity of

producer milk received from a handler

described in § 1000.9(c);

(4) Any milk diverted in excess of the

limits prescribed in paragraphs (d)(3)

and (4) of this section shall not be

producer milk. If the diverting handler

or cooperative association fails to

designate the dairy farmers’ deliveries

that will not be producer milk, no milk

diverted by the handler or cooperative

association shall be producer milk;

(5) Diverted milk shall be priced at

the location of the plant to which

diverted; and

(6) The delivery day requirements and

the diversion percentages in paragraphs

(d)(1) through (3) of this section may be

increased or decreased by the market

administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested persons. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

§ 1006.14 Other source milk.

See § 1000.14 of this chapter.

§ 1006.15 Fluid milk product.

See § 1000.15 of this chapter.

§ 1006.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1006.17 [Reserved]

§ 1006.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1006.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.

Handler Reports

§ 1006.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator’s office

receives the report on or before the 7th

day after the end of the month, in the

detail and on prescribed forms, as

follows:

(a) With respect to each of its pool

plants, the quantities of skim milk and

butterfat contained in or represented by:

(1) Receipts of producer milk,

including producer milk diverted by the

plant operator to other plants;

(2) Receipts of milk from handlers

described in § 1000.9(c);

(3) Receipts of fluid milk products

and bulk fluid cream products from

other pool plants;

(4) Receipts of other source milk;

(5) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products; and

(6) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a) of this section.

Receipts of milk that would have been

producer milk if the plant had been
5038 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

fully regulated shall be reported in lieu

of producer milk. The report shall show

also the quantity of any reconstituted

skim milk in route disposition in the

marketing area.

(c) Each handler described in

§ 1000.9(c) shall report:

(1) The quantities of all skim milk and

butterfat contained in receipts of milk

from producers; and

(2) The utilization or disposition of all

such receipts.

(d) Each handler not specified in

paragraphs (a) through (c) of this section

shall report with respect to its receipts

and utilization of milk and milk

products in such manner as the market

administrator may prescribe.

§ 1006.31 Payroll reports.

(a) On or before the 20th day after the

end of each month, each handler

described in § 1000.9 (a) and (c) shall

report to the market administrator its

producer payroll for the month, in detail

prescribed by the market administrator,

showing for each producer the

information specified in § 1006.73(e).

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.

§ 1006.32 Other reports.

(a) In addition to the reports required

pursuant to §§ 1006.30 and 1006.31,

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

(b) [Reserved]

Classification of Milk

§ 1006.40 Classes of utilization.

See § 1000.40 of this chapter.

§ 1006.41 [Reserved]

§ 1006.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1006.43 General classification rules.

See § 1000.43 of this chapter.

§ 1006.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1006.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1006.50 Class prices, component prices,

Class I differential and price.

Class prices and component prices are

described in § 1000.50.

The Class I differential shall be the

differential established for Hillsborough

County, Florida, which is reported in

§ 1000.52. The Class I price shall be the

price computed pursuant to § 1000.50(a)

for Hillsborough County, Florida.

§ 1006.51 [Reserved]

§ 1006.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1006.53 Announcement of class prices

and component prices.

See § 1000.53 of this chapter.

§ 1006.54 Equivalent price.

See § 1000.54 of this chapter.

Uniform Price

§ 1006.60 Handler’s value of milk.

For the purpose of computing the

uniform price, 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

§ 1000.9(c) as follows:

(a) Multiply the pounds of skim milk

and butterfat in producer milk that were

classified in each class pursuant to

§ 1000.44(c) by the applicable skim milk

and butterfat prices, and add the resulting

amounts;

(b) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43 (b)(2) by the

respective skim milk and butterfat

prices applicable at the location of the

pool plant;

(c) Add the amount obtained from

multiplying the difference between the

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);

(d) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3) (i)

through (iii) and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from a plant

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plants;

(e) Add the amount obtained from

multiplying the Class I price applicable

at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§ 1000.43(d) and § 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

step of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

fluid milk products from an unregulated

supply plant to the extent that an

equivalent amount of skim milk or

butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(f) Subtract, for reconstituted milk

made from receipts of nonfluid milk

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicable at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I use pursuant to

§ 1000.43(e); and

(g) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another Federal order

under § 1000.76(a)(5) or (c).

§ 1006.61 Computation of uniform price,

uniform butterfat price and uniform skim

milk price.

(a) Uniform price. For each month the

market administrator shall compute the

uniform price per hundredweight. If the

unreserved balance in the producersettlement fund to be included in the

computation is less than 2 cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1006.71 for the preceding

month shall not be included in the

computation of the uniform price. The

report of such handler shall not be

included in the computation for

succeeding months until the handler

has made full payment of outstanding

monthly obligations. Subject to the

aforementioned conditions, the market
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administrator shall compute the

uniform price in the following manner:

(1) Combine into one total the values

computed pursuant to § 1006.60 for all

handlers required to file reports

prescribed in § 1006.30;

(2) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1006.75;

(3) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(4) Add or subtract, as the case may

be, to obtain an all-producer milk test of

3.5 percent butterfat, the value of the

required pounds of butterfat times the

uniform butterfat price computed in

paragraph (b) of this section;

(5) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(i) The total hundredweight of

producer milk; and

(ii) The total hundredweight for

which a value is computed pursuant to

§ 1006.60(f); and

(6) Subtract not less than 4 cents not

more than 5 cents from the price

computed pursuant to paragraph (e) of

this section. The result, rounded to the

nearest cent, shall be known as the

‘‘uniform price’’ for the month.

(b) Uniform butterfat price. The

uniform butterfat price per pound,

rounded to the nearest one-hundredth

cent, shall be obtained by multiplying

the pounds of butterfat in producer milk

allocated to each class pursuant to

§ 1000.44(b) by the respective class

butterfat prices (Class I butterfat price

for Class I and the butterfat price for all

other classes) and dividing the sum of

such values by the total pounds of such

butterfat.

(c) Uniform skim milk price. The

uniform skim milk price per

hundredweight, rounded to the nearest

cent, shall be the uniform price for the

month pursuant to pursuant to

paragraph (a) of this section less the

uniform butterfat price for the month

pursuant to paragraph (b) of this section

multiplied by 3.5 pounds of butterfat,

with the result divided by .965.

§ 1006.62 Announcement of uniform price,

uniform butterfat price and uniform skim

milk price.

On or before the 11th day after the

end of the month, the market

administrator shall announce the

following prices and information:

(a) The uniform price pursuant to

§ 1006.61 for such month;

(b) The uniform butterfat price

pursuant to § 1006.61(b) for such month;

and

(c) The uniform skim milk price

pursuant to § 1006.61(c) for such month.

Payments for Milk

§ 1006.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1006.71 Payments to the producersettlement fund.

The payments to the producersettlement fund specified in § 1000.71

are due no later than the 12th day after

the end of the month.

§ 1006.72 Payments from the producersettlement fund.

See § 1000.72 of this chapter.

§ 1006.73 Payments to producers and to

cooperative associations.

(a) Each pool plant operator that is not

paying a cooperative association for

producer milk shall pay each producer

as follows:

(1) Partial payments. (i) For each

producer who has not discontinued

shipments as of the 15th day of the

month, payment shall be made so that

it is received by the producer on or

before the 20th day of the month for

milk received during the first 15 days of

the month at not less than the 85

percent of the preceding month’s

uniform price, adjusted for plant

location pursuant to § 1006.75 and

proper deductions authorized in writing

by the producer; and

(ii) For each producer who has not

discontinued shipments as of the last

day of the month, payment shall be

made so that it is received by the

producer on or before the 5th day of the

following month for milk received from

the 16th to the last day of the month at

not less than the 85 percent of the

preceding month’s uniform price,

adjusted for plant location pursuant to

1006.75 and proper deductions

authorized in writing by the producer.

(2) Final payment. For milk received

during the month, payment shall be

made so that it is received by each

producer one day after the payment date

required in § 1000.72 an amount

computed as follows:

(i) Multiply the hundredweight of

producer milk received times the

uniform price for the month as adjusted

pursuant to § 1006.75;

(ii) Multiply the hundredweight of

producer skim milk received times the

uniform skim milk price for the month;

(iii) Multiply the pounds of butterfat

received times the uniform butterfat

price for the month;

(iv) Add the amounts computed in

paragraph (a)(2)(i), (ii), and (iii) of the

section, and from that sum:

(A) Subtract the partial payment made

pursuant to paragraph (a)(1) of this

section;

(B) Subtract the deduction for

marketing services pursuant to

§ 1000.86;

(C) Add or subtract for errors made in

previous payments to the producer; and

(D) Subtract proper deductions

authorized in writing by the producer.

(b) One day before partial and final

payments are due pursuant to paragraph

(a) of this section, each pool plant

operator shall pay a cooperative

association for milk received as follows:

(1) Partial payment to a cooperative

association. For bulk milk/skimmed

milk received during the first 15 days of

the month from a cooperative

association in any capacity, except as

the operator of a pool plant, the

payment shall be equal to the

hundredweight of milk received

multiplied by 90 percent of the

preceding month’s uniform price,

adjusted for plant location pursuant to

§ 1006.75;

(2) Partial payment to a cooperative

association for milk transferred from its

pool plant. For bulk fluid milk products

and bulk fluid cream products received

during the first 15 days of the month

from a cooperative association in its

capacity as the operator of a pool plant,

the partial payment shall be at the pool

plant operator’s estimated use value of

the milk using the most recent class

prices available, adjusted for butterfat

value and plant location;

(3) Final payment to a cooperative

association for milk transferred from its

pool plant. For bulk fluid milk products

and bulk fluid cream products received

during the month from a cooperative

association in its capacity as the

operator of a pool plant, the final

payment shall be the classified value of

such milk as determined by multiplying

the pounds of milk assigned to each

class pursuant to § 1000.44 by the class

prices for the month, adjusted for plant

location and butterfat value, and

subtracting from this sum the partial

payment made pursuant to paragraph

(b)(2) of this section.

(4) Final payment to a cooperative

association for bulk milk received

directly from producers’ farms. For bulk

milk received from a cooperative

association during the month, including

the milk of producers who are not

members of such association and who

the market administrator determines

have authorized the cooperative

association to collect payment for their

milk, the final payment for such milk

shall be an amount equal to the sum of

the individual payments otherwise

payable for such milk pursuant to

paragraph (a)(2) of this section.

(c) If a handler has not received full

payment from the market administrator
5040 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

pursuant to § 1006.72 by the payment

date specified in paragraph (a) or (b) of

this section, the handler may reduce

payments pursuant to paragraphs (a)

and (b) of this section, but by not more

than the amount of the underpayment.

The payments shall be completed on the

next scheduled payment date after

receipt of the balance due from the

market administrator.

(d) If a handler claims that a required

payment to a producer cannot be made

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer-settlement fund, and in the

event that the handler subsequently

locates and pays the producer or a

lawful claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or to the lawful

claimant as the case may be.

(e) In making payments to producers

pursuant to this section, each pool plant

operator shall furnish each producer,

except a producer whose milk was

received from a handler described in

§ 1000.9(a) or (c), a supporting statement

in such form that it may be retained by

the recipient which shall show:

(1) The name, address, Grade A

identifier assigned by a duly constituted

regulatory agency, and the payroll

number of the producer;

(2) The month and dates that milk

was received from the producer,

including the daily and total pounds of

milk received;

(3) The total pounds of butterfat in the

producer’s milk;

(4) The minimum rate at which

payment to the producer is required

pursuant to this order;

(5) The rate used in making payment

if the rate is other than the applicable

minimum rate;

(6) The amount, or rate per

hundredweight, and nature of each

deduction claimed by the handler; and

(7) The net amount of payment to the

producer or cooperative association.

§ 1006.74 [Reserved]

§ 1006.75 Plant location adjustments for

producer milk and nonpool milk.

(a) The uniform price for producer

milk shall be adjusted according to the

location of the plant at which the milk

was physically received by subtracting

from the price the amount by which the

Class I price specified in § 1006.50

exceeds the Class I price at the plant’s

location. If the Class I price at the plant

location exceeds the Class I price

specified in § 1006.50, the difference

shall be added to the uniform price; and

(b) The uniform price applicable for

other source milk shall be adjusted

following the procedure specified in

paragraph (a) of this section, except that

the adjusted uniform price shall not be

less than the lowest announced class

price.

§ 1006.76 Payments by a handler

operating a partially regulated distributing

plant.

See § 1000.76 of this chapter.

§ 1006.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1006.78 Charges on overdue accounts.

See § 1000.78 of this chapter.

Adminstrative Assessment and

Marketing Service Deduction

§ 1006.85 Assessment for order

administration.

See § 1000.85 of this chapter.

§ 1006.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

PART 1007—MILK IN THE SOUTHEAST

MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1007.1 General provisions.

Definitions

1007.2 Southeast marketing area.

1007.3 Route disposition.

1007.4 Plant.

1007.5 Distributing plant.

1007.6 Supply plant.

1007.7 Pool plant.

1007.8 Nonpool plant.

1007.9 Handler.

1007.10 Producer-handler.

1007.11 [Reserved]

1007.12 Producer.

1007.13 Producer milk.

1007.14 Other source milk.

1007.15 Fluid milk product.

1007.16 Fluid cream product.

1007.17 [Reserved]

1007.18 Cooperative association.

1007.19 Commercial food processing

establishment.

Handler Reports

1007.30 Reports of receipts and utilization.

1007.31 Payroll reports.

1007.32 Other reports.

Classification of Milk

1007.40 Classes of utilization.

1007.41 [Reserved]

1007.42 Classification of transfers and

diversions.

1007.43 General classification rules.

1007.44 Classification of producer milk.

1007.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1007.50 Class prices, component prices,

Class I differential and price.

1007.51 [Reserved]

1007.52 Adjusted Class I differentials.

1007.53 Announcement of class and

component prices.

1007.54 Equivalent price.

Uniform Price

1007.60 Handler’s value of milk.

1007.61 Computation of uniform price,

uniform butterfat price, and uniform

skim milk price.

1007.62 Announcement of uniform price,

uniform butterfat price, and uniform

skim milk price.

Payments for Milk

1007.70 Producer-settlement fund.

1007.71 Payments to the producersettlement fund.

1007.72 Payments from the producersettlement fund.

1007.73 Payments to producers and to

cooperative associations.

1007.74 [Reserved]

1007.75 Plant location adjustments for

producer milk and nonpool milk.

1007.76 Payments by a handler operating a

partially regulated distributing plant.

1007.77 Adjustment of accounts.

1007.78 Charges on overdue accounts.

Marketwide Service Payments

1007.80 Transportation credit balancing

fund.

1007.81 Payments to the transportation

credit balancing fund.

1007.82 Payments from the transportation

credit balancing fund.

Administrative Assessment and Marketing

Service Deduction

1007.85 Assessment for order

administration.

1007.86 Deduction for marketing services.

Authority: 7 U.S.C. 601–674.

Subpart—Order Regulating Handling

General Provisions

§ 1007.1 General provisions.

The terms, definitions, and provisions

in part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1007.2 Southeast marketing area.

The marketing area means all territory

within the bounds of the following

states and political subdivisions,

including all piers, docks and wharves

connected therewith and all craft

moored thereat, and all territory

occupied by government (municipal,

State or Federal) reservations,

installations, institutions, or other

similar establishments if any part
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thereof is within any of the listed states

or political subdivisions:

Alabama, Arkansas, Louisiana, and

Mississippi

All of the States of Alabama, Arkansas,

Louisiana, and Mississippi.

Florida Counties

Escambia, Okaloosa, Santa Rosa, and

Walton.

Georgia Counties

All of the State of Georgia except for the

counties of Catoosa, Chattooga, Dade, Fannin,

Murray, Walker, and Whitfield.

Kentucky Counties

Allen, Ballard, Barren, Caldwell, Calloway,

Carlisle, Christian, Crittenden, Fulton,

Graves, Hickman, Livingston, Logan, Lyon,

Marshall, McCracken, Metcalfe, Monroe,

Simpson, Todd, Trigg, and Warren.

Missouri Counties

Barry, Barton, Bollinger, Butler, Cape

Girardeau, Carter, Cedar, Christian, Crawford,

Dade, Dallas, Dent, Douglas, Dunklin,

Greene, Howell, Iron, Jasper, Laclede,

Lawrence, Madsion, McDonald, Mississippi,

New Madrid, Newton, Oregon, Ozark,

Pemiscot, Perry, Polk, Pulaski, Reynolds,

Ripley, Scott, Shannon, St. Francois,

Stoddard, Stone, Taney, Texas, Vernon,

Washington, Wayne, Webster, and Wright.

Tennessee Counties

All of the State of Tennessee except for the

counties of Anderson, Blount, Bradley,

Campbell, Carter, Claiborne, Cocke,

Cumberland, Grainger, Greene, Hamblen,

Hamilton, Hancock, Hawkins, Jefferson,

Johnson, Knox, Loudon, Marion, McMinn,

Meigs, Monroe, Morgan, Polk, Rhea, Roane,

Scott, Sequatchie, Sevier, Sullivan, Unicoi,

Union, and Washington.

§ 1007.3 Route disposition.

See § 1000.3 of this chapter.

§ 1007.4 Plant.

See § 1000.4 of this chapter.

§ 1007.5 Distributing plant.

See § 1000.5 of this chapter.

§ 1007.6 Supply plant.

See § 1000.6 of this chapter.

§ 1007.7 Pool plant.

Pool plant means a plant specified in

paragraphs (a) through (d) of this

section, or a unit of plants as specified

in paragraph (e) of this section, but

excluding a plant specified in paragraph

(g) of this section. The pooling

standards described in paragraphs (a),

(c), and (d) of this section are subject to

modification pursuant to paragraph (f)

of this section:

(a) A distributing plant from which

during the month the total route

disposition is equal to 50 percent or

more of the total quantity of fluid milk

products physically received at such

plant and route disposition in the

marketing area is at least 10 percent of

such receipts. Packaged fluid milk

products that are transferred to a

distributing plant shall be considered as

route disposition from the transferring

plant, rather than the receiving plant,

for the purpose of determining the

transferring plant’s pool status under

this paragraph.

(b) Any distributing plant located in

the marketing area which during the

month processed a majority of its milk

receipts into aseptically packaged fluid

milk products. If the plant had no route

disposition in the marketing area during

the month, the plant operator may

request nonpool status for the plant.

(c) A supply plant from which 50

percent of the total quantity of milk that

is physically received during the month

from dairy farmers and handlers

described in § 1000.9(c) is transferred to

pool distributing plants.

(d) A plant located within the

marketing area that is operated by a

cooperative association if pool plant

status under this paragraph is requested

for such plant by the cooperative

association and during the month at

least 60 percent of the producer milk of

members of such cooperative

association is delivered directly from

farms to pool distributing plants or is

transferred to such plants as a fluid milk

product from the cooperative’s plant.

(e) Two or more plants operated by

the same handler and located within the

marketing area may qualify for pool

status as a unit by meeting the total and

in-area route disposition requirements

specified in paragraph (a) of this section

and the following additional

requirements:

(1) At least one of the plants in the

unit must qualify as a pool plant

pursuant to paragraph (a) of this section;

(2) Other plants in the unit must

process only Class I or Class II products

and must be located in a pricing zone

providing the same or a lower Class I

price than the price applicable at the

distributing plant included in the unit

pursuant to paragraph (e)(1) of this

section; and

(3) A written request to form a unit,

or to add or remove plants from a unit,

must be filed with the market

administrator prior to the first day of the

month for which it is to be effective.

(f) The applicable percentages in

paragraphs (a), (c), and (d) of this

section may be increased or decreased

up to 10 percentage points by the

market administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested parties if the request is made

in writing at least 15 days prior to the

date for which the requested revision is

desired effective. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

(g) The term pool plant shall not

apply to the following plants:

(1) A producer-handler plant;

(2) An exempt plant as defined in

§ 1000.8(e);

(3) A plant qualified pursuant to

paragraph (a) of this section which is

not located within any Federal order

marketing area, meets the pooling

requirements of another Federal order,

and has had greater route disposition in

such other Federal order marketing area

for 3 consecutive months;

(4) A plant qualified pursuant to

paragraph (a) of this section which is

located in another Federal order

marketing area, meets the pooling

standards of the other Federal order,

and has not had a majority of its route

disposition in this marketing area for 3

consecutive months or is locked into

pool status under such other Federal

order without regard to its route

disposition in any other Federal order

marketing area; and

(5) A plant qualified pursuant to

paragraph (c) of this section which also

meets the pooling requirements of

another Federal order and from which

greater qualifying shipments are made

to plants regulated under such other

order than are made to plants regulated

under this order, or such plant has

automatic pooling status under such

other order.

§ 1007.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1007.9 Handler.

See § 1000.9 of this chapter.

§ 1007.10 Producer-handler.

Producer-handler means a person

who:

(a) Operates a dairy farm and a

distributing plant from which there is

monthly route disposition in excess of

150,000 pounds per month, unless the

person requests that the two be operated

as separate entities with the distributing

plant regulated under § 1007.7(a) and
5042 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

the farm operated as a producer under

§ 1007.12;

(b) Receives no fluid milk products,

and acquires no fluid milk products for

route disposition, from sources other

than own farm production;

(c) Disposes of no other source milk

as Class I milk except by increasing the

nonfat milk solids content of the fluid

milk products received from own farm

production;

(d) Disposes of no fluid milk products

using the distribution system of another

handler; and

(e) Provides proof satisfactory to the

market administrator that the care and

management of the dairy animals and

other resources necessary to produce all

Class I milk handled, and the

processing, packaging, and distribution

operations, are the producer-handler’s

own enterprise and are operated at the

producer-handler’s own risk.

§ 1007.11 [Reserved]

§ 1007.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk (or components of milk) is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1007.13; or

(2) Received by a handler described in

§ 1000.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

received at an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1007.13(d);

(3) A dairy farmer whose milk is

received by diversion at a pool plant

from a handler regulated under another

Federal order if the other Federal order

designates the dairy farmer as a

producer under that order and that milk

is allocated by request to a utilization

other than Class I; and

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another Federal order

with respect to that portion of the milk

so diverted that is assigned to Class I

under the provisions of such other

order.

§ 1007.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk) and butterfat contained in

milk of a producer that is:

(a) Received by the operator of a pool

plant directly from a producer or a

handler described in § 1000.9(c). Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of a pool plant

or a handler described in § 1000.9(c) but

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it is picked

up at the producer’s farm. All milk

received pursuant to this paragraph

shall be priced at the location of the

plant where it is first physically

received;

(b) Received by a handler described in

§ 1000.9(c) in excess of the quantity

delivered to pool plants;

(c) Diverted by a pool plant operator

to another pool plant. Milk so diverted

shall be priced at the location of the

plant to which diverted; or

(d) Diverted by the operator of a pool

plant or a handler described in

§ 1000.9(c) to a nonpool plant, subject to

the following conditions:

(1) In any month of January through

June, not less than 4 days’ production of

the producer whose milk is diverted is

physically received at a pool plant

during the month;

(2) In any month of July through

December, not less than 10 days’

production of the producer whose milk

is diverted is physically received at a

pool plant during the month;

(3) The total quantity of milk so

diverted during the month by a

cooperative association shall not exceed

33 percent during the months of July

through December, and 50 percent

during the months of January through

June, of the producer milk that the

cooperative association caused to be

delivered to, and physically received at,

pool plants during the month;

(4) The operator of a pool plant that

is not a cooperative association may

divert any milk that is not under the

control of a cooperative association that

diverts milk during the month pursuant

to paragraph (d) of this section. The

total quantity of milk so diverted during

the month shall not exceed 33 percent

during the months of July through

December, or 50 percent during the

months of January through June, of the

producer milk physically received at

such plant (or such unit of plants in the

case of plants that pool as a unit

pursuant to § 1007.7(e)) during the

month, excluding the quantity of

producer milk received from a handler

described in § 1000.9(c);

(5) Any milk diverted in excess of the

limits prescribed in paragraphs (d)(3)

and (4) of this section shall not be

producer milk. If the diverting handler

or cooperative association fails to

designate the dairy farmers’ deliveries

that will not be producer milk, no milk

diverted by the handler or cooperative

association shall be producer milk;

(6) Diverted milk shall be priced at

the location of the plant to which

diverted; and

(7) The delivery day requirements and

the diversion percentages in paragraphs

(d)(1) through (4) of this section may be

increased or decreased by the market

administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested persons. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

§ 1007.14 Other source milk.

See § 1000.14 of this chapter.

§ 1007.15 Fluid milk product.

See § 1000.15 of this chapter.

§ 1007.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1007.17 [Reserved]

§ 1007.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1007.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.

Handler Reports

§ 1007.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator’s office

receives the report on or before the 7th

day after the end of the month, in the

detail and on prescribed forms, as

follows:

(a) With respect to each of its pool

plants, the quantities of skim milk and

butterfat contained in or represented by:

(1) Receipts of producer milk,

including producer milk diverted by the

plant operator to other plants;

(2) Receipts of milk from handlers

described in § 1000.9(c);

(3) Receipts of fluid milk products

and bulk fluid cream products from

other pool plants;

(4) Receipts of other source milk;

(5) Receipts of bulk milk from a plant

regulated under another Federal order,
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except Federal Order 1005, for which a

transportation credit is requested

pursuant to § 1007.82;

(6) Receipts of producer milk

described in § 1007.82(c)(2), including

the identity of the individual producers

whose milk is eligible for the

transportation credit pursuant to that

paragraph and the date that such milk

was received;

(7) For handlers submitting

transportation credit requests, transfers

of bulk milk to nonpool plants,

including the dates that such milk was

transferred;

(8) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products; and

(9) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a)(1), (a)(2),

(a)(3), (a)(4), and (a)(8) of this section.

Receipts of milk that would have been

producer milk if the plant had been

fully regulated shall be reported in lieu

of producer milk. The report shall show

also the quantity of any reconstituted

skim milk in route disposition in the

marketing area.

(c) Each handler described in

§ 1000.9(c) shall report:

(1) The quantities of all skim milk and

butterfat contained in receipts of milk

from producers;

(2) The utilization or disposition of all

such receipts; and

(3) With respect to milk for which a

cooperative association is requesting a

transportation credit pursuant to

§ 1007.82, all of the information

required in paragraph (a)(5), (a)(6), and

(a)(7) of this section.

(d) Each handler not specified in

paragraphs (a) through (c) of this section

shall report with respect to its receipts

and utilization of milk and milk

products in such manner as the market

administrator may prescribe.

§ 1007.31 Payroll reports.

(a) On or before the 20th day after the

end of each month, each handler

described in § 1000.9(a) and (c) shall

report to the market administrator its

producer payroll for the month, in detail

prescribed by the market administrator,

showing for each producer the

information specified in § 1007.73(e).

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.

§ 1007.32 Other reports.

(a) On or before the 20th day after the

end of each month, each handler

described in § 1000.9(a) and (c) shall

report to the market administrator any

adjustments to transportation credit

requests as reported pursuant to

§ 1007.30(a)(5), (6), and (7).

(b) In addition to the reports required

pursuant to §§ 1007.30, 31, and 32(a),

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

Classification of Milk

§ 1007.40 Classes of utilization.

See § 1000.40 of this chapter.

§ 1007.41 [Reserved]

§ 1007.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1007.43 General classification rules.

See § 1000.43 of this chapter.

§ 1007.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1007.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1007.50 Class prices, component prices,

Class I differential and price.

Class prices and component prices are

described in § 1000.50. The Class I

differential shall be the differential

established for Fulton County, Georgia,

which is reported in § 1000.52. The

Class I price shall be the price computed

pursuant to § 1000.50(a) for Fulton

County, Georgia.

§ 1007.51 [Reserved]

§ 1007.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1007.53 Announcement of class prices

and component prices.

See § 1000.53 of this chapter.

§ 1007.54 Equivalent price.

See § 1000.54 of this chapter.

Uniform Price

§ 1007.60 Handler’s value of milk.

For the purpose of computing the

uniform price, 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

§ 1000.9(c) as follows:

(a) Multiply the pounds of skim milk

and butterfat in producer milk that were

classified in each class pursuant to

§ 1000.44(c) by the applicable skim milk

and butterfat prices, and add the

resulting amounts;

(b) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43(b)(2) by the

respective skim milk and butterfat

prices applicable at the location of the

pool plant;

(c) Add the amount obtained from

multiplying the difference between the

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);

(d) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3)(i)

through (iii) and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from a plant

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plants;

(e) Add the amount obtained from

multiplying the Class I price applicable

at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§ 1000.43(d) and § 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

step of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

fluid milk products from an unregulated

supply plant to the extent that an

equivalent amount of skim milk or

butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(f) Subtract, for reconstituted milk

made from receipts of nonfluid milk
5044 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicable at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I use pursuant to

§ 1000.43(e); and

(g) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another Federal order

under § 1000.76(a)(5) or (c).

§ 1007.61 Computation of uniform price,

uniform butterfat price and uniform skim

milk price.

(a) Uniform price. For each month the

market administrator shall compute the

uniform price per hundredweight. If the

unreserved balance in the producersettlement fund to be included in the

computation is less than 2 cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1007.71 for the preceding

month shall not be included in the

computation of the uniform price. The

report of such handler shall not be

included in the computation for

succeeding months until the handler

has made full payment of outstanding

monthly obligations. Subject to the

aforementioned conditions, the market

administrator shall compute the

uniform price in the following manner:

(1) Combine into one total the values

computed pursuant to § 1007.60 for all

handlers required to file reports

prescribed in § 1007.30;

(2) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1007.75;

(3) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(4) Add or subtract, as the case may

be, to obtain an all-producer milk test of

3.5 percent butterfat, the value of the

required pounds of butterfat times the

uniform butterfat price computed in

paragraph (b) of this section;

(5) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(i) The total hundredweight of

producer milk; and

(ii) The total hundredweight for

which a value is computed pursuant to

§ 1007.60(f); and

(6) Subtract not less than 4 cents not

more than 5 cents from the price

computed pursuant to paragraph (e) of

this section. The result, rounded to the

nearest cent, shall be known as the

‘‘uniform price’’ for the month.

(b) Uniform butterfat price. The

uniform butterfat price per pound,

rounded to the nearest one-hundredth

cent, shall be obtained by multiplying

the pounds of butterfat in producer milk

allocated to each class pursuant to

§ 1000.44(b) by the respective class

butterfat prices (Class I butterfat price

for Class I and the butterfat price for all

other classes) and dividing the sum of

such values by the total pounds of such

butterfat.

(c) Uniform skim milk price. The

uniform skim milk price per

hundredweight, rounded to the nearest

cent, shall be the uniform price for the

month pursuant to paragraph (a) of this

section less the uniform butterfat price

for the month pursuant to paragraph (b)

of this section multiplied by 3.5 pounds

of butterfat, with the result divided by

.965.

§ 1007.62 Announcement of uniform price,

uniform butterfat price and uniform skim

milk price.

On or before the 11th day after the

end of the month, the market

administrator shall announce the

following prices and information:

(a) The uniform price pursuant to

§ 1007.61 for such month;

(b) The uniform butterfat price

pursuant to § 1007.61(b) for such month;

and

(c) The uniform skim milk price

pursuant to § 1007.61(c) for such month.

Payments for Milk

§ 1007.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1007.71 Payments to the producersettlement fund.

The payments to the producersettlement fund specified in § 1000.71

are due no later than the 12th day after

the end of the month.

§ 1007.72 Payments from the producersettlement fund.

See § 1000.72 of this chapter.

§ 1007.73 Payments to producers and to

cooperative associations.

(a) Each pool plant operator that is not

paying a cooperative association for

producer milk shall pay each producer

as follows:

(1) Partial payment. For each

producer who has not discontinued

shipments as of the 23rd day of the

month, payment shall be made so that

it is received by the producer on or

before the 26th day of the month for

milk received during the first 15 days of

the month at not less than the 90

percent of the preceding month’s

uniform price, adjusted for plant

location pursuant to § 1007.75 and

proper deductions authorized in writing

by the producer;

(2) Final payment. For milk received

during the month, payment shall be

made so that it is received by each

producer one day after the payment date

required in § 1000.72 an amount

computed as follows:

(i) Multiply the hundredweight of

producer milk received times the

uniform price for the month as adjusted

pursuant to § 1007.75;

(ii) Multiply the hundredweight of

producer skim milk received times the

uniform skim milk price for the month;

(iii) Multiply the pounds of butterfat

received times the uniform butterfat

price for the month;

(iv) Add the amounts computed in

paragraph (a)(2)(i), (ii), and (iii) of the

section, and from that sum:

(A) Subtract the partial payment made

pursuant to paragraph (a)(1) of this

section;

(B) Subtract the deduction for

marketing services pursuant to

§ 1000.86;

(C) Add or subtract for errors made in

previous payments to the producer; and

(D) Subtract proper deductions

authorized in writing by the producer.

(b) One day before partial and final

payments are due pursuant to paragraph

(a) of this section, each pool plant

operator shall pay a cooperative

association for milk received as follows:

(1) Partial payment to a cooperative

association. For bulk milk/skimmed

milk received during the first 15 days of

the month from a cooperative

association in any capacity, except as

the operator of a pool plant, the

payment shall be equal to the

hundredweight of milk received

multiplied by 90 percent of the

preceding month’s uniform price,

adjusted for plant location pursuant to

§ 1007.75;

(2) Partial payment to a cooperative

association for milk transferred from its

pool plant. For bulk fluid milk products

and bulk fluid cream products received

during the first 15 days of the month

from a cooperative association in its

capacity as the operator of a pool plant,

the partial payment shall be at the pool

plant operator’s estimated use value of

the milk using the most recent class

prices available, adjusted for butterfat

value and plant location;

(3) Final payment to a cooperative

association for milk transferred from its

pool plant. For bulk fluid milk products

and bulk fluid cream products received

during the month from a cooperative

association in its capacity as the

operator of a pool plant, the final
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5045

payment shall be the classified value of

such milk as determined by multiplying

the pounds of milk assigned to each

class pursuant to § 1000.44 by the class

prices for the month, adjusted for plant

location and butterfat value, and

subtracting from this sum the partial

payment made pursuant to paragraph

(b)(2) of this section.

(4) Final payment to a cooperative

association for bulk milk received

directly from producers’ farms. For bulk

milk received from a cooperative

association during the month, including

the milk of producers who are not

members of such association and who

the market administrator determines

have authorized the cooperative

association to collect payment for their

milk, the final payment for such milk

shall be an amount equal to the sum of

the individual payments otherwise

payable for such milk pursuant to

paragraph (a)(2) of this section.

(c) If a handler has not received full

payment from the market administrator

pursuant to § 1007.72 by the payment

date specified in paragraph (a) or (b) of

this section, the handler may reduce

payments pursuant to paragraphs (a)

and (b) of this section, but by not more

than the amount of the underpayment.

The payments shall be completed on the

next scheduled payment date after

receipt of the balance due from the

market administrator.

(d) If a handler claims that a required

payment to a producer cannot be made

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer-settlement fund, and in the

event that the handler subsequently

locates and pays the producer or a

lawful claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or to the lawful

claimant as the case may be.

(e) In making payments to producers

pursuant to this section, each pool plant

operator shall furnish each producer,

except a producer whose milk was

received from a handler described in

§ 1000.9 (a) or (c), a supporting

statement in such form that it may be

retained by the recipient which shall

show:

(1) The name, address, Grade A

identifier assigned by a duly constituted

regulatory agency, and the payroll

number of the producer;

(2) The month and dates that milk

was received from the producer,

including the daily and total pounds of

milk received;

(3) The total pounds of butterfat in the

producer’s milk;

(4) The minimum rate at which

payment to the producer is required

pursuant to this order;

(5) The rate used in making payment

if the rate is other than the applicable

minimum rate;

(6) The amount, or rate per

hundredweight, and nature of each

deduction claimed by the handler; and

(7) The net amount of payment to the

producer or cooperative association.

§ 1007.74 [Reserved]

§ 1007.75 Plant location adjustments for

producer milk and nonpool milk.

(a) The uniform price for producer

milk shall be adjusted according to the

location of the plant at which the milk

was physically received by subtracting

from the price the amount by which the

Class I price specified in § 1007.50

exceeds the Class I price at the plant’s

location. If the Class I price at the plant

location exceeds the Class I price

specified in § 1007.50, the difference

shall be added to the uniform price; and

(b) The uniform price applicable for

other source milk shall be adjusted

following the procedure specified in

paragraph (a) of this section, except that

the adjusted uniform price shall not be

less than the lowest announced class

price.

§ 1007.76 Payments by a handler

operating a partially regulated distributing

plant.

See § 1000.76 of this chapter.

§ 1007.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1007.78 Charges on overdue accounts.

See § 1000.78 of this chapter.

Marketwide Service Payments

§ 1007.80 Transportation credit balancing

fund.

The market administrator shall

maintain a separate fund known as the

Transportation Credit Balancing Fund

into which shall be deposited the

payments made by handlers pursuant to

§ 1007.81 and out of which shall be

made the payments due handlers

pursuant to § 1007.82. Payments due a

handler shall be offset against payments

due from the handler.

§ 1007.81 Payments to the transportation

credit balancing fund.

(a) On or before the 12th day after the

end of the month, each handler

operating a pool plant and each handler

specified in § 1000.9 (a) and (c) shall

pay to the market administrator a

transportation credit balancing fund

assessment determined by multiplying

the pounds of Class I producer milk

assigned pursuant to § 1000.44 by $0.07

per hundredweight or such lesser

amount as the market administrator

deems necessary to maintain a balance

in the fund equal to the total

transportation credits disbursed during

the prior June–January period. In the

event that during any month of the

June–January period the fund balance is

insufficient to cover the amount of

credits that are due, the assessment

should be based upon the amount of

credits that would have been disbursed

had the fund balance been sufficient.

(b) The market administrator shall

announce publicly on or before the 5th

day of the month the assessment

pursuant to paragraph (a) of this section

for the following month.

§ 1007.82 Payments from the

transportation credit balancing fund.

(a) Payments from the transportation

credit balancing fund to handlers and

cooperative associations requesting

transportation credits shall be made as

follows:

(1) On or before the 13th day after the

end of each of the months of July

through December and any other month

in which transportation credits are in

effect pursuant to paragraph (b) of this

section, the market administrator shall

pay to each handler that received, and

reported pursuant to § 1007.30(a)(5),

bulk milk transferred from a plant fully

regulated under another Federal order

as described in paragraph (c)(1) of this

section or that received, and reported

pursuant to § 1007.30(a)(6), milk

directly from producers’ farms as

specified in paragraph (c)(2) of this

section, a preliminary amount

determined pursuant to paragraph (d) of

this section to the extent that funds are

available in the transportation credit

balancing fund. If an insufficient

balance exists to pay all of the credits

computed pursuant to this section, the

market administrator shall distribute the

balance available in the transportation

credit balancing fund by reducing

payments prorata using the percentage

derived by dividing the balance in the

fund by the total credits that are due for

the month. The amount of credits

resulting from this initial proration shall

be subject to audit adjustment pursuant

to paragraph (a)(2) of this section;

(2) The market administrator shall

accept adjusted requests for

transportation credits on or before the

20th day of the month following the

month for which such credits were

requested pursuant to § 1007.32(a). After
5046 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

such date, a preliminary audit will be

conducted by the market administrator,

who will recalculate any necessary

proration of transportation credit

payments for the preceding month

pursuant to paragraph (a) of this section.

Handlers will be promptly notified of an

overpayment of credits based upon this

final computation and remedial

payments to or from the transportation

credit balancing fund will be made on

or before the next payment date for the

following month;

(3) Transportation credits paid

pursuant to paragraphs (a)(1) and (2) of

this section shall be subject to final

verification by the market administrator

pursuant to § 1000.77. Adjusted

payments to or from the transportation

credit balancing fund will remain

subject to the final proration established

pursuant to paragraph (a)(2) of this

section; and

(4) In the event that a qualified

cooperative association is the

responsible party for whose account

such milk is received and written

documentation of this fact is provided

to the market administrator pursuant to

§ 1007.30(c)(3) prior to the date payment

is due, the transportation credits for

such milk computed pursuant to this

section shall be made to such

cooperative association rather than to

the operator of the pool plant at which

the milk was received.

(b) The market administrator may

extend the period during which

transportation credits are in effect (i.e.,

the transportation credit period) to the

months of January and June if a written

request to do so is received 15 days

prior to the beginning of the month for

which the request is made and, after

conducting an independent

investigation, finds that such extension

is necessary to assure the market of an

adequate supply of milk for fluid use.

Before making such a finding, the

market administrator shall notify the

Director of the Dairy Division and all

handlers in the market that an extension

is being considered and invite written

data, views, and arguments. Any

decision to extend the transportation

credit period must be issued in writing

prior to the first day of the month for

which the extension is to be effective.

(c) Transportation credits shall apply

to the following milk:

(1) Bulk milk received from a plant

regulated under another Federal order,

except Federal Orders 1005, and

allocated to Class I milk pursuant to

§ 1000.44(a)(12); and

(2) Bulk milk received directly from

the farms of dairy farmers at pool

distributing plants subject to the

following conditions:

(i) The quantity of such milk that

shall be eligible for the transportation

credit shall be determined by

multiplying the total pounds of milk

received from producers meeting the

conditions of this paragraph by the

lower of:

(A) The marketwide estimated Class I

utilization of all handlers for the month

pursuant to § 1000.45(a); or

(B) The Class I utilization of all

producer milk of the pool plant operator

receiving the milk after the

computations described in § 1000.44;

(ii) The dairy farmer was not a

‘‘producer’’ under this order during

more than 2 of the immediately

preceding months of January through

June and not more than 50 percent of

the production of the dairy farmer

during those 2 months, in aggregate, was

received as producer milk under this

order during those 2 months. However,

if January and/or June are months in

which transportation credits are

disbursed pursuant to paragraph (a) of

this section, these months shall not be

included in the 2-month limit provided

in this paragraph; and

(iii) The farm on which the milk was

produced is not located within the

specified marketing area of this order or

the marketing area of Federal Order

1005.

(d) Transportation credits shall be

computed as follows:

(1) The market administrator shall

subtract from the pounds of milk

described in paragraphs (c)(1) and (2) of

this section the pounds of bulk milk

transferred from the pool plant receiving

the supplemental milk if milk was

transferred to a nonpool plant on the

same calendar day that the

supplemental milk was received. For

this purpose, the transferred milk shall

be subtracted from the most distant load

of supplemental milk received, and then

in sequence with the next most distant

load until all of the transfers have been

offset;

(2) With respect to the pounds of milk

described in paragraph (c)(1) of this

section that remain after the

computations described in paragraph

(d)(1) of this section, the market

administrator shall:

(i) Determine the shortest hard-surface

highway distance between the shipping

plant and the receiving plant;

(ii) Multiply the number of miles so

determined by 0.35 cent;

(iii) Subtract the other order’s Class I

price applicable at the shipping plant’s

location from the Class I price

applicable at the receiving plant as

specified in § 1007.53;

(iv) Subtract any positive difference

computed in paragraph (d)(2)(iii) of this

section from the amount computed in

paragraph (d)(2)(ii) of this section; and

(v) Multiply the remainder computed

in paragraph (d)(2)(iv) of this section by

the hundredweight of milk described in

paragraph (d)(2) of this section.

(3) For the remaining milk described

in paragraph (c)(2) of this section after

computations described in paragraph

(d)(1) of this section, the market

administrator shall:

(i) Determine an origination point for

each load of milk by locating the nearest

city to the last producer’s farm from

which milk was picked up for delivery

to the receiving pool plant.

Alternatively, the milk hauler that is

transporting the milk of producers

described in paragraph (c)(2) of this

section may establish an origination

point following the last farm pickup by

stopping at the nearest independentlyoperated truck stop with a certified

truck scale and obtaining a weight

certificate indicating the weight of the

truck and its contents, the date and time

of weighing, and the location of the

truck stop;

(ii) Determine the shortest hardsurface highway distance between the

receiving pool plant and the truck stop

or city, as the case may be;

(iii) Subtract 85 miles from the

mileage so determined;

(iv) Multiply the remaining miles so

computed by 0.35 cent;

(v) If the origination point determined

pursuant to paragraph (d)(3)(i) of this

section is in a Federal order marketing

area, subtract the Class I price

applicable at the origination point

pursuant to the provisions of such other

order (as if the origination point were a

plant location) from the Class I price

applicable at the distributing plant

receiving the milk. If the origination

point is not in any Federal order

marketing area, determine the Class I

price at the origination point based

upon the provisions of this order and

subtract this price from the Class I price

applicable at the distributing plant

receiving the milk;

(vi) Subtract any positive difference

computed in paragraph (d)(3)(v) of this

section from the amount computed in

paragraph (d)(3)(iv) of this section; and

(vii) Multiply the remainder

computed in paragraph (d)(3)(vi) by the

hundredweight of milk described in

paragraph (d)(3) of this section.

Administrative Assessment and

Marketing Service Deduction

§ 1007.85 Assessment for order

administration.

See § 1000.85 of this chapter.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5047

§ 1007.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

PART 1030—MILK IN THE UPPER

MIDWEST MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1030.1 General provisions.

Definitions

1030.2 Upper Midwest marketing area.

1030.3 Route disposition.

1030.4 Plant.

1030.5 Distributing plant.

1030.6 Supply plant.

1030.7 Pool plant.

1030.8 Nonpool plant.

1030.9 Handler.

1030.10 Producer-handler.

1030.11 [Reserved]

1030.12 Producer.

1030.13 Producer milk.

1030.14 Other source milk.

1030.15 Fluid milk product.

1030.16 Fluid cream product.

1030.17 [Reserved]

1030.18 Cooperative association.

1030.19 Commercial food processing

establishment.

Handler Reports

1030.30 Reports of receipts and utilization.

1030.31 Payroll reports.

1030.32 Other reports.

Classification of Milk

1030.40 Classes of utilization.

1030.41 [Reserved]

1030.42 Classification of transfers and

diversions.

1030.43 General classification rules.

1030.44 Classification of producer milk.

1030.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1030.50 Class and component prices.

1030.51 Class I differential and price.

1030.52 Adjusted Class I differentials.

1030.53 Announcement of class prices and

component prices.

1030.54 Equivalent price.

1030.55 Transfer credits and assembly

credits.

Producer Price Differential

1030.60 Handler’s value of milk.

1030.61 Computation of producer price

differential.

1030.62 Announcement of producer prices.

Payments for Milk

1030.70 Producer-settlement fund.

1030.71 Payments to the producersettlement fund.

1030.72 Payments from the producersettlement fund.

1030.73 Payments to producers and to

cooperative associations.

1030.74 [Reserved]

1030.75 Plant location adjustments for

producer milk and nonpool milk.

1030.76 Payments by a handler operating a

partially regulated distributing plant.

1030.77 Adjustment of accounts.

1030.78 Charges on overdue accounts.

Administrative Assessment and Marketing

Service Deduction

1030.85 Assessment for order

administration.

1030.86 Deduction for marketing services.

Authority: 7 U.S.C. 601–674.

Subpart—Order Regulating Handling

General Provisions

§ 1030.1 General provisions.

The terms, definitions, and provisions

in Part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1030.2 Upper Midwest marketing area.

The marketing area means all territory

within the bounds of the following

states and political subdivisions,

including all piers, docks, and wharves

connected therewith and all craft

moored thereat, and all territory

occupied by government (municipal,

State, or Federal) reservations,

installations, institutions, or other

similar establishments if any part

thereof is within any of the listed states

or political subdivisions:

Illinois Counties

Boone, Carroll, Cook, De Kalb, Du Page, Jo

Daviess (except the city of East Dubuque),

Kane, Kendall, Lake, Lee, McHenry, Ogle,

Stephenson, Whiteside (the townships of

Caloma, Hahnaman, Hopkins, Hume, Jordan,

Montmorency, Sterling, and Tampico only),

Will, and Winnebago.

Iowa Counties

Howard, Kossuth, Mitchell (except the city

of Osage), Winnebago, Winneshiek, and

Worth.

Michigan Counties

Delta, Dickinson, Gogebic, Iron,

Menominee, and Ontonagon.

Minnesota

All counties except Lincoln, Nobles,

Pipestone, and Rock.

North Dakota Counties

Barnes, Cass, Cavalier, Dickey, Grand

Forks, Griggs, La Moure, Nelson, Pembina,

Ramsey, Ransom, Richland, Sargent, Steele,

Traill, and Walsh.

South Dakota Counties

Brown, Day, Edmunds, Grant, Marshall,

McPherson, Roberts, and Walworth.

Wisconsin Counties

All counties except Crawford and Grant.

§ 1030.3 Route disposition.

See § 1000.3 of this chapter.

§ 1030.4 Plant.

See § 1000.4 of this chapter.

§ 1030.5 Distributing plant.

See § 1000.5 of this chapter.

§ 1000.6 Supply plant.

See § 1000.6 of this chapter.

§ 1030.7 Pool plant.

Pool plant means a plant, unit of

plants, or a system of plants as specified

in paragraphs (a) through (f) of this

section. The pooling standards

described in paragraphs (a), (c), (d), (e),

and (f) of this section are subject to

modification pursuant to paragraph (g)

of this section:

(a) A distributing plant from which

during the month:

(1) Total route disposition is equal to

15 percent of more of the total quantity

of bulk fluid milk products physically

received at the plant;

(2) Route disposition in the marketing

area is at least 15 percent of total route

disposition; and

(3) For purposes of this section,

packaged fluid milk products that are

transferred to a distributing plant shall

be considered as route disposition from

the transferring plant, rather than the

receiving plant, for the single purpose of

qualifying the transferring plant as a

pool distributing plant.

(b) A distributing plant located in the

marketing area at which the majority of

milk received is processed into

aseptically packaged fluid milk

products unless there are no sales from

the plant into any marketing area and

the plant operator in writing requests

nonpool plant status for the plant for the

month.

(c) A supply plant from which the

quantity of bulk fluid milk products

shipped to, received at, and physically

unloaded into plants described in

paragraph (a) or (b) of this section as a

percent of the Grade A milk received at

the plant from dairy farmers (except

dairy farmers described in § 1030.12(b))

and handlers described in § 1000.9(c), as

reported in § 1030.30(a), is not less than

10 percent of the milk received from

dairy farmers, including milk diverted

pursuant to § 1030.13, subject to the

following conditions:

(1) Qualifying shipments pursuant to

this paragraph may be made to the

following plants, except whenever the

authority provided in paragraph (g) of

this section is applied to increase the

shipping requirements specified in this

section, only shipments to pool plants

described in § 1030.7(a) and (b), and

units described in § 1030.7(e) shall

count as qualifying shipments for the

purpose of meeting the increased

shipments:
5048 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(i) Pool plants described in

§ 1030.7(a), (b) and (e);

(ii) Plants of producer-handlers;

(iii) Partially regulated distributing

plants, except that credit for such

shipments shall be limited to the

amount of such milk classified as Class

I at the transferee plant; and

(iv) Distributing plants fully regulated

under other Federal orders, except that

credit for shipments to such plants shall

be limited to the quantity shipped to

pool distributing plants during the

month and credits for shipments to

other order plants shall not include any

such shipments made on the basis of

agreed-upon Class II, Class III, or Class

IV utilization.

(2) The operator of a supply plant may

include as qualifying shipments

deliveries to pool distributing plants

and deliveries to plants described in

§ 1030.7(e) directly from farms of

producers pursuant to § 1030.13(c).

(d) [Reserved]

(e) Two or more plants operated by

the same handler and located in the

marketing area may qualify for pool

status as a unit by meeting the total and

in-area route disposition requirements

of a pool distributing plant specified in

paragraph (a) of this section and subject

to the following additional

requirements:

(1) At least one of the plants in the

unit must qualify as a pool plant

pursuant to paragraph (a) of this section;

(2) Other plants in the unit must

process Class I or Class II products,

using 50 percent or more of the total

Grade A fluid milk products received in

bulk form at such plant or diverted

therefrom by the plant operator in Class

I or Class II products; and

(3) The operator of the unit has filed

a written request with the market

administrator prior to the first day of the

month for which such status is desired

to be effective. The unit shall continue

from month-to-month thereafter without

further notification. The handler shall

notify the market administrator in

writing prior to the first day of any

month for which termination or any

change of the unit is desired.

(f) A system of supply plants may be

qualified for pooling by the association

of two or more supply plants operated

by one or more handlers by meeting the

applicable percentage requirements of

paragraph (c) of this section in the same

manner as a single plant and subject to

the following additional requirements:

(1) Each plant in the system is located

within the marketing area, or was a pool

supply plant pursuant to § 1068.7(b) for

each of the three months immediately

preceding the effective date of this

paragraph so long as it continues to

maintain pool status. Cooperative

associations may not use shipments

pursuant to § 1000.9(c) to qualify plants

located outside the marketing area;

(2) The handler(s) establishing the

system submits a written request to the

market administrator on or before July

15 requesting that such plants qualify as

a system for the period of August

through July of the following year. Such

request will contain a list of the plants

participating in the system in the order,

beginning with the last plant, in which

the plants will be dropped from the

system if the system fails to qualify.

Each plant that qualifies as a pool plant

within a system shall continue each

month as a plant in the system through

the following July unless the handler(s)

establishing the system submits a

written request to the market

administrator that the plant be deleted

from the system or that the system be

discontinued. Any plant that has been

so deleted from a system, or that has

failed to qualify in any month, will not

be part of any system for the remaining

months through July. The handler(s)

that established a system may add a

plant operated by such handler(s) to a

system, if such plant has been a pool

plant each of the six prior months and

would otherwise be eligible to be in a

system, upon written request to the

market administrator no later than the

15th day of the prior month. In the

event of an ownership change or

business failure of a handler that is a

participant in a system, the system may

be reorganized to reflect such changes

by submitting a written request to file a

new marketing agreement with the

market administrator; and

(3) If a system fails to qualify under

the requirements of this paragraph, the

handler responsible for qualifying the

system shall notify the market

administrator which plant or plants will

be deleted from the system so that the

remaining plants may be pooled as a

system. If the handler fails to do so, the

market administrator shall exclude one

or more plants, beginning at the bottom

of the list of plants in the system and

continuing up the list as necessary until

the deliveries are sufficient to qualify

the remaining plants in the system.

(g) The performance standards of

paragraphs (a), (c), (d), (e) and (f) of this

section may be increased or decreased,

for part or all of the marketing area, by

the market administrator if found

necessary to obtain needed shipments or

to prevent uneconomic shipments.

Before making a finding that a change is

necessary the market administrator shall

investigate the need for revision, either

on such person’s own initiative or at the

request of interested persons. If such

investigation shows that a revision

might be appropriate, a notice shall be

issued stating that a revision is being

considered and inviting data, views, and

arguments. If the market administrator

determines that an adjustment to the

shipping percentages is necessary, the

market administrator shall notify the

industry within one day of the effective

date of such adjustment.

(h) The term pool plant shall not

apply to the following plants:

(1) A producer-handler as defined

under any Federal order;

(2) An exempt plant as defined in

§ 1000.8(e);

(3) A plant located within the

marketing area and qualified pursuant

to paragraph (a) or (e) of this section

which meets the pooling requirements

of another Federal order, and from

which more than 50 percent of its route

disposition has been in the other

Federal order marketing area for three

consecutive months;

(4) A plant located outside the

marketing area and qualified pursuant

to paragraph (a) of this section that

meets the pooling requirements of

another Federal order and has had

greater sales in such other Federal

order’s marketing area for 3 consecutive

months;

(5) A plant located in another Federal

order marketing area and qualified

pursuant to paragraph (a) of this section

that meets the pooling requirements of

such other Federal order and does not

have a majority of its route distribution

in this marketing area for 3 consecutive

months or if the plant is required to be

regulated under such other Federal

order without regard to its route

disposition in any other Federal order

marketing area;

(6) A plant qualified pursuant to

paragraph (c) of this section which also

meets the pooling requirements of

another Federal order and from which

greater qualifying shipments are made

to plants regulated under the other

Federal order than are made to plants

regulated under this order, or the plant

has automatic pooling status under the

other Federal order; and

(7) That portion of a regulated plant

designated as a nonpool plant that is

physically separate and operated

separately from the pool portion of such

plant. The designation of a portion of a

regulated plant as a nonpool plant must

be requested in advance and in writing

by the handler and must be approved by

the market administrator.

(i) Any plant that qualifies as a pool

plant in each of the immediately

preceding three months pursuant to

paragraph (a) of this section or the

shipping percentages in paragraph (c) of
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5049

this section that is unable to meet such

performance standards for the current

month because of unavoidable

circumstances determined by the market

administrator to be beyond the control

of the handler operating the plant, such

as a natural disaster (ice storm, wind

storm, flood), fire, breakdown of

equipment, or work stoppage, shall be

considered to have met the minimum

performance standards during the

period of such unavoidable

circumstances, but such relief shall not

be granted for more than two

consecutive months.

§ 1030.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1030.9 Handler.

See § 1000.9 of this chapter.

§ 1030.10 Producer-handler.

Except as provided in paragraph (g) of

this section, producer-handler means a

person who:

(a) Operates a dairy farm and a

distributing plant from which there is

monthly route disposition in excess of

150,000 pounds during the month;

(b) Receives no fluid milk products

from sources other than own farm

production, pool handlers, and plants

fully regulated under another Federal

order;

(c) Receives at its plant or acquires for

route disposition no more than 150,000

pounds of fluid milk products from

handlers fully regulated under any

Federal order. This limitation shall not

apply if the producer-handler’s own

farm production is less than 150,000

pounds during the month.

(d) Disposes of no other source milk

as Class I milk except by increasing the

nonfat milk solids content of the fluid

milk products received from own farm

production or pool handlers;

(e) Disposes of no fluid milk products

using the distribution system of another

handler except for direct deliveries to

retail outlets or to a pool handler’s

plant;

(f) Provides proof satisfactory to the

market administrator that the care and

management of the dairy animals and

other resources necessary to produce all

Class I milk handled (excluding receipts

from handlers fully regulated under any

Federal order) and the processing,

packaging, and distribution operations

are the producer-handler’s own

enterprise and at its own risk; and

(g) Producer-handler shall not include

any producer who also operates a

distributing plant if the producerhandler so requests that the two be

operated as separate entities with the

distributing plant regulated under

§ 1030.7(a) and the farm operated as a

producer under § 1030.12.

§ 1030.11 [Reserved]

§ 1030.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1030.13; or

(2) Received by a handler described in

§ 1000.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

received at an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1030.13(d);

(3) A dairy farmer whose milk is

received by diversion at a pool plant

from a handler regulated under another

Federal order if the other Federal order

designates the dairy farmer as a

producer under that order and that milk

is allocated by request to a utilization

other than Class I; and

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another Federal order

with respect to that portion of the milk

so diverted that is assigned to Class I

under the provisions of such other

order.

§ 1030.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk), including nonfat

components, and butterfat in milk of a

producer that is:

(a) Received by the operator of a pool

plant directly from a producer or a

handler described in § 1000.9(c). Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of a pool plant

or a handler described in § 1000.9(c) but

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it is picked

up at the producer’s farm. All milk

received pursuant to this paragraph

shall be priced at the location of the

plant where it is first physically

received;

(b) Received by a handler described in

§ 1000.9(c) in excess of the quantity

delivered to pool plants;

(c) Diverted by a pool plant operator

to another pool plant. Milk so diverted

shall be priced at the location of the

plant to which diverted; or

(d) Diverted by the operator of a pool

plant or a cooperative association

described in § 1000.9(c) to a nonpool

plant, subject to the following

conditions:

(1) Milk of a dairy farmer shall not be

eligible for diversion unless at least one

day’s production of such dairy farmer is

physically received as producer milk at

a pool plant during the first month the

dairy farmer is a producer. If a dairy

farmer loses producer status under this

order (except as a result of a temporary

loss of Grade A approval or as a result

of the handler of the dairy farmer’s milk

failing to pool the milk under any

order), the dairy farmer’s milk shall not

be eligible for diversion unless at least

one day’s production of the dairy farmer

has been physically received as

producer milk at a pool plant during the

first month the dairy farmer is reassociated with the market;

(2) The quantity of milk delivered to

plants described in § 1030.7(c)(1) as a

percentage of the total milk accounted

for by the cooperative association

described in § 1000.9(c) must be at least

10 percent, subject to § 1030.7(g);

(3) Diverted milk shall be priced at

the location of the plant to which

diverted.

§ 1030.14 Other source milk.

See § 1000.14 of this chapter.

§ 1030.15 Fluid milk product.

See § 1000.15 of this chapter.

§ 1030.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1030.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1030.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.

Handler Reports

§ 1030.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator’s office

receives the report on or before the 9th

day after the end of the month, in the

detail and on the prescribed forms, as

follows:

(a) Each handler that operates a pool

plant pursuant to § 1030.7 and each

handler described in § 1000.9(c) shall

report for each of its operations the

following information:

(1) Product pounds, pounds of

butterfat, pounds of protein, pounds of

solids-not-fat other than protein (other

solids), and the value of the somatic cell

adjustment pursuant to § 1000.50(p),

contained in or represented by:
5050 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(i) Receipts of producer milk,

including producer milk diverted by the

handler; and

(ii) Receipts of milk from handlers

described in § 1000.9(c);

(2) Product pounds and pounds of

butterfat contained in:

(i) Receipts of fluid milk products and

bulk fluid cream products from other

pool plants;

(ii) Receipts of other source milk; and

(iii) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products;

(3) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph; and

(4) Such other information with

respect to the receipts and utilization of

skim milk, butterfat, milk protein, other

nonfat solids, and somatic cell

information, as the market administrator

may prescribe.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a) of this section.

Receipts of milk that would have been

producer milk if the plant had been

fully regulated shall be reported in lieu

of producer milk. The report shall show

also the quantity of any reconstituted

skim milk in route disposition in the

marketing area.

(c) Each handler not specified in

paragraphs (a) and (b) of this section

shall report with respect to its receipts

and utilization of milk and milk

products in such manner as the market

administrator may prescribe.

§ 1030.31 Payroll reports.

(a) On or before the 22nd day after the

end of each month, each handler that

operates a pool plant pursuant to

§ 1030.7 and each handler described in

§ 1000.9(c) shall report to the market

administrator its producer payroll for

the month, in the detail prescribed by

the market administrator, showing for

each producer the information

described in § 1030.73(f).

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.

§ 1030.32 Other reports.

In addition to the reports required

pursuant to §§ 1030.30 and 1030.31,

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

Classification of Milk

§ 1030.40 Classes of utilization.

See § 1000.40 of this chapter.

§ 1030.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1000.43 General classification rules.

See § 1000.43 of this chapter.

§ 1000.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1000.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1030.50 Class prices and component

prices.

See § 1000.50 of this chapter.

§ 1030.51 Class I differential and price.

The Class I differential shall be the

differential established for Cook County,

Illinois, which is reported in § 1000.52.

The Class I price shall be the price

computed pursuant to § 1000.50(a) for

Cook County, Illinois.

§ 1030.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1030.53 Announcement of class prices

and component prices.

See § 1000.53 of this chapter.

§ 1030.54 Equivalent price.

See § 1000.54 of this chapter.

§ 1030.55 Transfer credits and assembly

credits on Class I milk.

(a) For bulk milk transferred from a

pool plant to a pool distributing plant,

and which is classified as Class I milk,

the shipping handler shall receive a

transportation credit computed by

multiplying the pounds of Class I milk

by the product of .0028 times the

number of miles between the transferor

plant and the transferee plant.

(b) For each handler who transfers or

diverts bulk fluid milk from a pool plant

to a pool distributing plant a

procurement credit shall be determined

by multiplying the hundredweight of

milk classified as Class I at the pool

plant by 8 cents.

(c) For each handler described in

§ 1000.9(c), a procurement credit for

bulk fluid milk received as producer

milk at a pool distributing plant shall be

determined by prorating the producer

milk classified as Class I at the pool

distributing plant, and multiplying by 8

cents per hundredweight.

(d) For each handler operating a pool

distributing plant pursuant to

§ 1030.7(a) or (b), a procurement credit

for bulk fluid milk received shall be

calculated by multiplying the producer

milk classified as Class I at the pool

distributing plant by 8 cents per

hundredweight.

(e) For purposes of this section, the

distances to be computed shall be

determined by the market administrator

using the shortest available state and/or

Federal highway mileage. Mileage

determinations are subject to

redetermination at all times. In the

event a handler requests a

redetermination of the mileage

pertaining to any plant, the market

administrator shall notify the handler of

such redetermination within 30 days

after the receipt of such request. Any

financial obligations resulting from a

change in mileage shall not be

retroactive for any periods prior to the

redetermination by the market

administrator.

Producer Price Differential

§ 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 its pool plants, and of each

handler described in § 1000.9(c) as

follows:

(a) Class I value.

(1) Multiply the hundredweight of

skim milk in Class I as determined

pursuant to § 1000.44(a) by the Class I

skim milk price applicable at the

handler’s location; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class I as determined pursuant to

§ 1000.44(b) by the Class I butterfat

price applicable at the handler’s

location.

(b) Add the Class II value, computed

as follows:

(1) Multiply the hundredweight of

skim milk in Class II as determined

pursuant to § 1000.44(a) by 70 cents;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class II as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price;

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class II as determined pursuant to

§ 1000.44(b) by the butterfat price;

(c) Add the Class III value computed

as follows:
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5051

(1) Multiply the pounds of skim milk

in Class III as determined pursuant to

§ 1000.44(a) by the average protein

content of producer skim milk received

by the handler, and multiply the

resulting pounds of protein by the

protein price;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class III as determined pursuant to

§ 1000.44(a) by the average other solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of other solids by the

other solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class III as determined pursuant to

§ 1000.44(b) by the butterfat price;

(d) Add the Class IV value computed

as follows:

(1) Multiply the pounds of skim milk

in Class IV as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class IV as determined pursuant to

§ 1000.44(b) by the butterfat price;

(e) Add an adjustment for somatic cell

content of producer milk determined by

multiplying the value reported pursuant

to § 1030.30(a)(1) by the percentage of

the total producer milk allocated to

Class II, Class III, and Class IV pursuant

to § 1000.44(c);

(f) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43(b)(2) by the

respective skim milk and butterfat

prices applicable at the location of the

pool plant;

(g) Add the amount obtained from

multiplying the difference between the

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);

(h) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3)(i)

through (iii) and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from a plant

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plants;

(i) Add the amount obtained from

multiplying the difference between the

Class I price and the Class III price

applicable at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§ 1000.43(d) and § 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

step of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

bulk fluid milk products from an

unregulated supply plant to the extent

that an equivalent amount of skim milk

or butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(j) Subtract an amount equal to any

credits applicable pursuant to § 1030.55;

(k) Subtract, for reconstituted milk

made from receipts of nonfluid milk

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicable at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I pursuant to

§ 1000.43(d); and

(l) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another order under

§ 1000.76(a)(5) or (c).

§ 1030.61 Computation of producer price

differential.

For each month the market

administrator shall compute a producer

price differential per hundredweight. If

the unreserved balance in the producersettlement fund to be included in the

computation is less than 2 cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1030.71 for the preceding

month shall not be included in the

computation of the producer price

differential. The report of such handler

shall not be included in the

computation for succeeding months

until the handler has made full payment

of outstanding monthly obligations.

Subject to the aforementioned

conditions, the market administrator

shall compute the producer price

differential in the following manner:

(a) Combine into one total the values

computed pursuant to § 1030.60 for all

handlers required to file reports

prescribed in § 1030.30;

(b) Subtract the total values obtained

by multiplying each handler’s total

pounds of protein, other solids, and

butterfat contained in the milk for

which an obligation was computed

pursuant to § 1030.60 by the protein

price, the other solids price, and the

butterfat price, respectively, and the

total value of the somatic cell

adjustment pursuant to § 1030.30(a)(1);

(c) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1030.75;

(d) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(e) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(1) The total hundredweight of

producer milk; and

(2) The total hundredweight for which

a value is computed pursuant to

§ 1030.60(i); and

(f) Subtract not less than 4 cents nor

more than 5 cents from the price

computed pursuant to paragraph (e) of

this section. The result shall be known

as the producer price differential for the

month.

§ 1030.62 Announcement of producer

prices.

On or before the 13th day after the

end of each month, the market

administrator shall announce publicly

the following prices and information:

(a) The producer price differential;

(b) The protein price;

(c) The other solids price;

(d) The butterfat price;

(e) The somatic cell adjustment rate;

(f) The average butterfat, protein and

other solids content of producer milk;

and

(g) The statistical uniform price for

milk containing 3.5 percent butterfat,

computed by combining the Class III

price and the producer price

differential.

Payments for Milk

§ 1030.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1030.71 Payments to the producersettlement fund.

Each handler shall make payment to

the producer-settlement fund in a

manner that provides receipt of the
5052 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

funds by the market administrator no

later than the 15th day after the end of

the month. Payment shall be the

amount, if any, by which the amount

specified in (a) of this section exceeds

the amount specified in (b) of this

section:

(a) The total value of milk to the

handler for the month as determined

pursuant to § 1030.60.

(b) The sum of:

(1) An amount obtained by

multiplying the total hundredweight of

producer milk as determined pursuant

to § 1000.44(c) by the producer price

differential as adjusted pursuant to

§ 1030.75;

(2) An amount obtained by

multiplying the total pounds of protein,

other solids, and butterfat contained in

producer milk by the protein, other

solids, and butterfat prices respectively;

(3) The total value of the somatic cell

adjustment to producer milk; and

(4) An amount obtained by

multiplying the pounds of skim milk

and butterfat for which a value was

computed pursuant to § 1030.60(i) by

the producer price differential as

adjusted pursuant to § 1030.75 for the

location of the plant from which

received.

§ 1030.72 Payments from the producersettlement fund.

No later than the 16th day after the

end of each month, the market

administrator shall pay to each handler

the amount, if any, by which the

amount computed pursuant to

§ 1030.71(b) exceeds the amount

computed pursuant to § 1030.71(a). If, at

such time, the balance in the producersettlement fund is insufficient to make

all payments pursuant to this section,

the market administrator shall reduce

uniformly such payments and shall

complete the payments as soon as the

funds are available.

§ 1030.73 Payments to producers and to

cooperative associations.

(a) Each handler shall pay each

producer for producer milk for which

payment is not made to a cooperative

association pursuant to paragraph (b) of

this section, as follows:

(1) Partial payment. For each

producer who has not discontinued

shipments as of the date of this partial

payment, payment shall be made so that

it is received by each producer on or

before the 26th day of the month for

milk received during the first 15 days of

the month from the producer at not less

than the lowest announced class price

for the preceding month, less proper

deductions authorized in writing by the

producer; and

(2) Final payment. For milk received

during the month, payment shall be

made so that it is received by each

producer no later than the 17th day after

the end of the month in an amount

equal to not less than the sum of:

(i) The hundredweight of producer

milk received times the producer price

differential for the month as adjusted

pursuant to § 1030.75;

(ii) The pounds of butterfat received

times the butterfat price for the month;

(iii) The pounds of protein received

times the protein price for the month;

(iv) The pounds of other solids

received times the other solids price for

the month;

(v) The hundredweight of milk

received times the somatic cell

adjustment for the month;

(vi) Less any payment made pursuant

to paragraph (a)(1) of this section;

(vii) Less proper deductions

authorized in writing by such producer

and plus or minus adjustments for

errors in previous payments to such

producer; and

(viii) Less deductions for marketing

services pursuant to § 1000.86.

(b) Payments for milk received from

cooperative association members. On or

before the day prior to the dates

specified in paragraphs (a)(1) and (a)(2)

of this section, each handler shall pay

to a cooperative association for milk

from producers who market their milk

through the cooperative association and

who have authorized the cooperative to

collect such payments on their behalf an

amount equal to the sum of the

individual payments otherwise payable

for such producer milk pursuant to

paragraphs (a)(1) and (a)(2) of this

section.

(c) Payment for milk received from

cooperative association pool plants or

from cooperatives as handlers pursuant

to § 1000.9(c). On or before the day prior

to the dates specified in paragraph (a)(1)

and (a)(2) of this section, each handler

who receives fluid milk products at its

plant from a cooperative association in

its capacity as the operator of a pool

plant or who receives milk from a

cooperative association in its capacity as

a handler pursuant to § 1000.9(c),

including the milk of producers who are

not members of such association and

who the market administrator

determines have authorized the

cooperative association to collect

payment for their milk, shall pay the

cooperative for such milk as follows:

(1) For bulk fluid milk products and

bulk fluid cream products received from

a cooperative association in its capacity

as the operator of a pool plant and for

milk received from a cooperative

association in its capacity as a handler

pursuant to § 1000.9(c) during the first

15 days of the month, at not less than

the lowest announced class price per

hundredweight for the preceding

month;

(2) For the total quantity of bulk fluid

milk products and bulk fluid cream

products received from a cooperative

association in its capacity as the

operator of a pool plant, at not less than

the total value of such products received

from the association’s pool plants, as

determined by multiplying the

respective quantities assigned to each

class under § 1000.44, as follows:

(i) The hundredweight of Class I skim

milk times the Class I skim milk price

for the month plus the pounds of Class

I butterfat times the Class I butterfat

price for the month. The Class I price to

be used shall be that price effective at

the location of the shipping plant;

(ii) The hundredweight of Class II

skim milk times $ .70;

(iii) The pounds of nonfat solids

received in Class II and Class IV milk

times the nonfat solids price for the

month;

(iv) The pounds of butterfat received

in Class II, Class III, and Class IV milk

times the butterfat price for the month;

(v) The pounds of protein received in

Class III milk times the protein price for

the month;

(vi) The pounds of other solids

received in Class III milk times the other

solids price for the month;

(vii) The hundredweight of Class II,

Class III, and Class IV milk received

times the somatic cell adjustment; and

(viii) Add together the amounts

computed in paragraphs (c)(2)(i)

through (vii) of this section and from

that sum deduct any payment made

pursuant to paragraph (c)(1) of this

section.

(3) For the total quantity of milk

received during the month from a

cooperative association in its capacity as

a handler under § 1000.9(c) as follows:

(i) The hundredweight of producer

milk received times the producer price

differential as adjusted pursuant to

§ 1030.75;

(ii) The pounds of butterfat received

times the butterfat price for the month;

(iii) The pounds of protein received

times the protein price for the month;

(iv) The pounds of other solids

received times the other solids price for

the month;

(v) The hundredweight of milk

received times the somatic cell

adjustment for the month; and

(vi) Add together the amounts

computed in paragraphs (c)(3)(i)

through (v) of this section and from that

sum deduct any payment made

pursuant to paragraph (c)(1) of this

section.
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(d) If a handler has not received full

payment from the market administrator

pursuant to § 1030.72 by the payment

date specified in paragraph (a), (b) or

(c)(2) of this section, the handler may

reduce pro rata its payments to

producers or to the cooperative

association (with respect to receipts

described in paragraph (b), prorating the

underpayment to the volume of milk

received from the cooperative

association in proportion to the total

milk received from producers by the

handler), but not by more than the

amount of the underpayment. The

payments shall be completed on the

next scheduled payment date after

receipt of the balance due from the

market administrator.

(e) If a handler claims that a required

payment to a producer cannot be made

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer-settlement fund, and in the

event that the handler subsequently

locates and pays the producer or a

lawful claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or to the lawful

claimant, as the case may be.

(f) In making payments to producers

pursuant to this section, each handler

shall furnish each producer, except a

producer whose milk was received from

a cooperative association handler

described in § 1000.9(a) or (c), a

supporting statement in a form that may

be retained by the recipient which shall

show:

(1) The name, address, Grade A

identifier assigned by a duly constituted

regulatory agency, and payroll number

of the producer;

(2) The daily and total pounds, and

the month and dates such milk was

received from that producer;

(3) The total pounds of butterfat,

protein, and other solids contained in

the producer’s milk;

(4) The somatic cell count of the

producer’s milk;

(5) The minimum rate or rates at

which payment to the producer is

required pursuant to this order;

(6) The rate used in making payment

if the rate is other than the applicable

minimum rate;

(7) The amount, or rate per

hundredweight, or rate per pound of

component, and the nature of each

deduction claimed by the handler; and

(8) The net amount of payment to the

producer or cooperative association.

§ 1030.74 [Reserved]

§ 1030.75 Plant location adjustments for

producer milk and nonpool milk.

(a) The producer price differential for

producer milk shall be adjusted

according to the location of the plant at

which the milk was physically received

by subtracting from the price differential

the amount by which the Class I price

specified in § 1030.51 exceeds the Class

I price at the plant’s location. If the

Class I price at the plant location

exceeds the Class I price specified in

§ 1030.51, the difference shall be added

to the producer price differential price;

and

(b) The producer price differential

applicable to other source milk shall be

adjusted following the procedure

specified in paragraph (a) of this

section, except that the adjusted

producer price differential shall not be

less than zero.

§ 1030.76 Payments by a handler

operating a partially regulated distributing

plant.

See § 1000.76 of this chapter.

§ 1030.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1030.78 Charges on overdue accounts.

See § 1000.78 of this chapter.

Administrative Assessment and

Marketing Service Deduction

§ 1030.85 Assessment for order

administration.

See § 1000.85 of this chapter.

§ 1030.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

PART 1032—MILK IN THE CENTRAL

MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1032.1 General provisions.

Definitions

1032.2 Central marketing area.

1032.3 Route disposition.

1032.4 Plant.

1032.5 Distributing plant.

1032.6 Supply plant.

1032.7 Pool plant.

1032.8 Nonpool plant.

1032.9 Handler.

1032.10 Producer-handler.

1032.11 [Reserved]

1032.12 Producer.

1032.13 Producer milk.

1032.14 Other source milk.

1032.15 Fluid milk product.

1032.16 Fluid cream product.

1032.17 [Reserved]

1032.18 Cooperative association.

1032.19 Commercial food processing

establishment.

Handler Reports

1032.30 Reports of receipts and utilization.

1032.31 Payroll reports.

1032.32 Other reports.

Classification of Milk

1032.40 Classes of utilization.

1032.41 [Reserved]

1032.42 Classification of transfers and

diversions.

1032.43 General classification rules.

1032.44 Classification of producer milk.

1032.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1032.50 Class prices and component prices.

1032.51 Class I differential and price.

1032.52 Adjusted Class I differentials.

1032.53 Announcement of class prices and

component prices.

1032.54 Equivalent price.

Producer Price Differential

1032.60 Handler’s value of milk.

1032.61 Computation of producer price

differential.

1032.62 Announcement of producer prices.

Payments for Milk

1032.70 Producer-settlement fund.

1032.71 Payments to the producersettlement fund.

1032.72 Payments from the producersettlement fund.

1032.73 Payments to producers and to

cooperative associations.

1032.74 [Reserved]

1032.75 Plant location adjustments for

producer milk and nonpool milk.

1032.76 Payments by a handler operating a

partially regulated distributing plant.

1032.77 Adjustment of accounts.

1032.78 Charges on overdue accounts.

Administrative Assessment and Marketing

Service Deduction

1032.85 Assessment for order

administration.

1032.86 Deduction for marketing services.

Authority: 7 U.S.C. 601–674.

Subpart—Order Regulating Handling

General Provisions

§ 1032.1 General provisions.

The terms, definitions, and provisions

in Part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1032.2 Central marketing area.

The marketing area means all territory

within the bounds of the following

states and political subdivisions,

including all piers, docks, and wharves

connected therewith and all craft

moored thereat, and all territory

occupied by government (municipal,

State, or Federal) reservations,
5054 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

installations, institutions, or other

similar establishments if any part

thereof is within any of the listed states

or political subdivisions:

(a) In the State of Colorado, the

counties of: Adams, Arapahoe, Baca,

Bent, Boulder, Clear Creek, Cheyenne,

Crowley, Custer, Denver, Douglas, El

Paso, Elbert, Gilpin, Huerfano, Jefferson,

Kiowa, Kit Carson, Larimer, Las

Animas, Lincoln, Logan, Morgan, Otero,

Park, Phillips, Prowers, Pueblo,

Sedgwick, Teller, Washington, Weld,

and Yuma.

(b) In the State of Illinois, the counties

of:

(1) Adams, Alexander, Bond, Brown,

Bureau, Calhoun, Cass, Champaign,

Christian, Clark, Clay, Clinton, Coles,

Crawford, Cumberland, De Witt,

Douglas, Edgar, Edwards, Effingham,

Fayette, Ford, Franklin, Fulton, Gallatin,

Greene, Grundy, Hamilton, Hancock,

Hardin, Henderson, Henry, Iroquois,

Jackson, Jasper, Jefferson, Jersey,

Johnson, Kankakee, Knox, La Salle,

Lawrence, Livingston, Logan,

McDonough, McLean, Macon,

Macoupin, Madison, Marion, Marshall,

Mason, Massac, Menard, Mercer,

Monroe, Montgomery, Morgan,

Moultrie, Peoria, Perry, Piatt, Pike,

Pope, Pulaski, Putnam, Randolph,

Richland, Rock Island, Saline,

Sangamon, Schuyler, Scott, Shelby, St.

Clair, Stark, Tazewell, Union,

Vermilion, Wabash, Warren,

Washington, Wayne, White,

Williamson, and Woodford;

(2) In Jo Daviess County, the city of

East Dubuque; and

(3) In Whiteside County, the

townships of Fulton, Ustick, Clyde,

Genesee, Mount Pleasant, Union Grove,

Garden Plain, Lyndon, Fenton, Newton,

Prophetstown, Portland, and Erie.

(c) In the State of Iowa:

(1) All of the counties except:

Howard, Kossuth, Mitchell (except the

city of Osage), Winnebago, Winneshiek,

and Worth; and

(2) In Mitchell County the city of

Osage.

(d) All of the State of Kansas.

(e) In the State of Minnesota, the

counties of: Lincoln, Nobles, Pipestone,

and Rock.

(f) In the State of Missouri: (1) The

counties of:

Andrew, Atchison, Bates, Buchanan,

Caldwell, Carroll, Cass, Clark, Clay,

Clinton, Daviess, De Kalb, Franklin,

Gentry, Grundy, Harrison, Henry,

Hickory, Holt, Jackson, Jefferson,

Johnson, Knox, Lafayette, Lewis,

Lincoln, Livingston, Marion, Mercer,

Nodaway, Pettis, Platte, Putnam, Ray,

Saline, Schuyler, Scotland, Shelby, St.

Charles, St. Clair, Ste. Genevieve, St.

Louis, Sullivan, Warren, and Worth; and

(2) The city of St. Louis.

(g) In the State of Nebraska, the

counties of: Adams, Antelope, Boone,

Buffalo, Burt, Butler, Cass, Cedar, Chase,

Clay, Colfax, Cuming, Custer, Dakota,

Dawson, Dixon, Dodge, Douglas, Dundy,

Fillmore, Franklin, Frontier, Furnas,

Gage, Gosper, Greeley, Hall, Hamilton,

Harlan, Hayes, Hitchcock, Howard,

Jefferson, Johnson, Kearney, Keith,

Knox, Lancaster, Lincoln, Madison,

Merrick, Nance, Nemaha, Nuckolls,

Otoe, Pawnee, Perkins, Phelps, Pierce,

Platte, Polk, Red Willow, Richardson,

Saline, Sarpy, Saunders, Seward,

Sherman, Stanton, Thayer, Thurston,

Valley, Washington, Wayne, Webster,

and York.

(h) All of the State of Oklahoma.

(i) In the State of South Dakota, the

counties of: Aurora, Beadle, Bon

Homme, Brookings, Clark, Clay,

Codington, Davison, Deuel, Douglas,

Hamlin, Hanson, Hutchinson, Jerauld,

Kingsbury, Lake, Lincoln, McCook,

Miner, Minnehaha, Moody, Sanborn,

Spink, Turner, Union, and Yankton.

(j) In the State of Wisconsin, the

counties of: Crawford and Grant.

§ 1032.3 Route disposition.

See § 1000.3 of this chapter.

§ 1032.4 Plant.

See § 1000.4 of this chapter.

§ 1032.5 Distributing plant.

§ 1000.5 of this chapter.

§ 1032.6 Supply plant.

§ 1000.6 of this chapter.

§ 1032.7 Pool plant.

Pool plant means a plant, unit of

plants, or a system of plants as specified

in paragraphs (a) through (f) of this

section. The pooling standards

described in paragraphs (a), (c), (d), (e),

and (f) of this section are subject to

modification pursuant to paragraph (g)

of this section:

(a) A distributing plant from which

during the month:

(1) Total route disposition is equal to

25 percent of more of the total quantity

of bulk fluid milk products physically

received at the plant; and

(2) Route disposition in the marketing

area is at least 15 percent of total route

disposition.

(3) For purposes of this section,

packaged fluid milk products that are

transferred to a distributing plant shall

be considered as route disposition from

the transferring plant, rather than the

receiving plant, for the single purpose of

qualifying the transferring plant as a

pool distributing plant.

(b) A distributing plant located in the

marketing area at which the majority of

milk received is processed into

aseptically packaged fluid milk

products unless there are no sales from

the plant into any marketing area and

the plant operator in writing requests

nonpool plant status for the plant for the

month.

(c) A supply plant from which the

quantity of bulk fluid milk products

transferred or diverted to plants

described in paragraph (a) or (b) of this

section during each of the months of

September through November and

January is 35 percent or more of the

total Grade A milk received at the plant

from dairy farmers (except dairy farmers

described in § 1032.12(b)) and handlers

described in § 1000.9(c), including milk

diverted by the plant operator, and 25

percent for all other months, subject to

the following conditions:

(1) A supply plant that has qualified

as a pool plant during each of the

immediately preceding months of

August through April shall continue to

so qualify in each of the following

months of May through July, unless the

plant operator files a written request

with the market administrator that such

plant not be a pool plant, such nonpool

status to be effective the first month

following such request and thereafter

until the plant qualifies as a pool plant

on the basis of milk shipments;

(2) A pool plant operator may include

as qualifying shipments milk diverted to

pool distributing plants pursuant to

§ 1032.13(c);

(3) The operator of a supply plant may

include as qualifying shipments

transfers of fluid milk products to

distributing plants regulated under any

other Federal order, except that credit

for such transfers shall be limited to the

amount of milk, including milk shipped

directly from producers’ farms,

delivered to distributing plants qualified

as pool plants pursuant to paragraphs

(a) or (b) of this section;

(4) No plant may qualify as a pool

plant due to a reduction in the shipping

percentage pursuant to paragraph (g) of

this section unless it has been a pool

supply plant during each of the

immediately preceding three months.

(d) A plant located in the marketing

area and operated by a cooperative

association if, during the month or the

immediately preceding 12-month

period, 35 percent or more of the

producer milk of members of the

association (and any producer milk of

nonmembers and members of another

cooperative association which may be

marketed by the cooperative

association) is physically received in the

form of bulk fluid milk products at
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5055

plants specified in paragraph (a) or (b)

of this section either directly from farms

or by transfer from supply plants

operated by the cooperative association

and from plants of the cooperative

association for which pool plant status

has been requested under this paragraph

subject to the following conditions:

(1) The plant does not qualify as a

pool plant under paragraph (a), (b) or (c)

of this section or under comparable

provisions of another Federal order; and

(2) The plant is approved by a duly

constituted regulatory agency for the

handling of milk approved for fluid

consumption in the marketing area.

(e) Two or more plants operated by

the same handler and located in the

marketing area may qualify for pool

status as a unit by meeting the total and

in-area route disposition requirements

of a pool distributing plant specified in

paragraph (a) of this section and subject

to the following additional

requirements:

(1) At least one of the plants in the

unit must qualify as a pool plant

pursuant to paragraph (a) of this section;

(2) Other plants in the unit must

process Class I or Class II products,

using 50 percent or more of the total

Grade A fluid milk products received in

bulk form at such plant or diverted

therefrom by the plant operator in Class

I or Class II products, and must be

located in a pricing zone providing the

same or a lower Class I price than the

price applicable at the distributing plant

included in the unit pursuant to

paragraph (e)(1) of this section; and

(3) The operator of the unit has filed

a written request with the market

administrator prior to the first day of the

month for which such status is desired

to be effective. The unit shall continue

from month to month thereafter without

further notification. The handler shall

notify the market administrator in

writing prior to the first day of any

month for which termination or any

change of the unit is desired.

(f) A system of supply plants may be

qualified for pooling by the association

of two or more supply plants operated

by one or more handlers by meeting the

applicable percentage requirements of

paragraph (c) of this section in the same

manner as a single plant, subject to the

following additional requirements:

(1) Each plant in the system is located

within the marketing area;

(2) The handler(s) establishing the

system submits a written request to the

market administrator on or before

September 1 requesting that such plants

qualify as a system for the period of

September through August of the

following year. Such request will

contain a list of the plants participating

in the system.

(3) Each plant included within a pool

supply plant system shall continue each

month as a plant in the system through

the following August unless the

handler(s) establishing the system

submits a written request to the market

administrator that the plant be deleted

from the system or that the system be

discontinued. Any plant that has been

so deleted from a system, or that has

failed to qualify in any month, will not

be part of any system for the remaining

months through August. No plant may

be added in any subsequent month

through the following August to a

system that qualifies in September.

(4) If a system fails to qualify under

the requirements of this paragraph, the

handler responsible for qualifying the

system shall notify the market

administrator which plant or plants will

be deleted from the system so that the

remaining plants may be pooled as a

system. If the handler fails to do so, the

market administrator shall exclude one

or more plants, beginning at the bottom

of the list of plants in the system and

continuing up the list as necessary until

the deliveries are sufficient to qualify

the remaining plants in the system;

(g) The applicable shipping

percentages of paragraphs (a), (c), (d),

and (f) of this section may be increased

or decreased by the market

administrator if found necessary to

obtain needed shipments or to prevent

uneconomic shipments. Before making a

finding that a change is necessary the

market administrator shall investigate

the need for revision, either on the

market administrator’s own initiative or

at the request of interested persons. If

such investigation shows that a revision

might be appropriate, a notice shall be

issued stating that a revision is being

considered and inviting data, views, and

arguments. If the market administrator

determines that an adjustment to the

shipping percentages is necessary, the

market administrator shall notify the

industry within one day of the effective

date of such adjustment.

(h) The term pool plant shall not

apply to the following plants:

(1) A producer-handler as defined

under any Federal order;

(2) An exempt plant as defined in

§ 1000.8(e);

(3) A plant located within the

marketing area and qualified pursuant

to paragraph (a) or (e) of this section

which meets the pooling requirements

of another Federal order, and from

which more than 50 percent of its route

disposition has been in the other

Federal order marketing area for three

consecutive months. On the basis of a

written application made by the plant

operator at least 15 days prior to the

date for which a determination of the

market administrator is to be effective,

the market administrator may determine

that the route disposition in the

respective marketing areas to be used for

purposes of this paragraph shall exclude

(for a specified period of time) route

disposition made under limited term

contracts to governmental bases and

institutions;

(4) A plant located outside the

marketing area and qualified pursuant

to paragraph (a) of this section that

meets the pooling requirements of

another Federal order and has had

greater sales in such other Federal

order’s marketing area for 3 consecutive

months;

(5) A plant located in another Federal

order marketing area and qualified

pursuant to paragraph (a) of this section

that meets the pooling requirements of

such other Federal order and does not

have a majority of its route distribution

in this marketing area for 3 consecutive

months or if the plant is required to be

regulated under such other Federal

order without regard to its route

disposition in any other Federal order

marketing area;

(6) A plant qualified pursuant to

paragraph (c) of this section which also

meets the pooling requirements of

another Federal order and from which

greater qualifying shipments are made

to plants regulated under the other

Federal order than are made to plants

regulated under this order, or the plant

has automatic pooling status under the

other Federal order; and

(7) That portion of a regulated plant

designated as a nonpool plant that is

physically separate and operated

separately from the pool portion of such

plant. The designation of a portion of a

regulated plant as a nonpool plant must

be requested in advance and in writing

by the handler and must be approved by

the market administrator.

§ 1032.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1032.9 Handler.

See § 1000.9 of this chapter.

§ 1032.10 Producer-handler.

Except as provided in paragraph (g) of

this section, producer-handler means a

person who:

(a) Operates a dairy farm and a

distributing plant from which there is

monthly route disposition in excess of

150,000 pounds during the month;

(b) Receives no fluid milk products

from sources other than own farm

production, pool handlers, and plants
5056 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

fully regulated under another Federal

order;

(c) Receives at its plant or acquires for

route disposition no more than 150,000

pounds of fluid milk products from

handlers fully regulated under any

Federal order. This limitation shall not

apply if the producer-handler’s own

farm production is less than 150,000

pounds during the month.

(d) Disposes of no other source milk

as Class I milk except by increasing the

nonfat milk solids content of the fluid

milk products received from own farm

production or pool handlers;

(e) Disposes of no fluid milk products

using the distribution system of another

handler except for direct deliveries to

retail outlets or to a pool handler’s

plant;

(f) Provides proof satisfactory to the

market administrator that the care and

management of the dairy animals and

other resources necessary to produce all

Class I milk handled (excluding receipts

from handlers fully regulated under any

Federal order) and the processing,

packaging, and distribution operations

are the producer-handler’s own

enterprise and at its own risk; and

(g) Producer-handler shall not include

any producer who also operates a

distributing plant if the producerhandler so requests that the two be

operated as separate entities with the

distributing plant regulated under

§ 1032.7(a) and the farm operated as a

producer under § 1032.12.

§ 1032.11 [Reserved]

§ 1032.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk (or components of milk) is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1032.13; or

(2) Received by a handler described in

§ 1000.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

received at an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1032.13(d);

(3) A dairy farmer whose milk is

received by diversion at a pool plant

from a handler regulated under another

Federal order if the other Federal order

designates the dairy farmer as a

producer under that order and that milk

is allocated by request to a utilization

other than Class I; and

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another Federal order

with respect to that portion of the milk

so diverted that is assigned to Class I

under the provisions of such other

order.

§ 1032.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk), including nonfat

components, and butterfat in milk of a

producer that is:

(a) Received by the operator of a pool

plant directly from a producer or a

handler described in § 1000.9(c). Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of a pool plant

or a handler described in § 1000.9(c) but

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it is picked

up at the producer’s farm. All milk

received pursuant to this paragraph

shall be priced at the location of the

plant where it is first physically

received;

(b) Received by a handler described in

§ 1000.9(c) in excess of the quantity

delivered to pool plants;

(c) Diverted by a pool plant operator

to another pool plant. Milk so diverted

shall be priced at the location of the

plant to which diverted; or

(d) Diverted by the operator of a pool

plant or a cooperative association

described in § 1000.9(c) to a nonpool

plant, subject to the following

conditions:

(1) Milk of a dairy farmer shall not be

eligible for diversion unless at least one

day’s production of such dairy farmer

has been physically received as

producer milk at a pool plant and the

dairy farmer has continuously retained

producer status since that time. If a

dairy farmer loses producer status under

this order (except as a result of a

temporary loss of Grade A approval), the

dairy farmer’s milk shall not be eligible

for diversion until milk of the dairy

farmer has been physically received as

producer milk at a pool plant;

(2) Of the quantity of producer milk

received during the month (including

diversions, but excluding the quantity of

producer milk received from a handler

described in § 1000.9(c)) the handler

diverts to nonpool plants not more than

65 percent during the months of

September through November and

January, and not more than 75 percent

during the months of February through

August and December;

(3) Diverted milk shall be priced at

the location of the plant to which

diverted;

(4) Any milk diverted in excess of the

limits prescribed in (d)(2) of this section

shall not be producer milk. If the

diverting handler or cooperative

association fails to designate the dairy

farmers’ deliveries that are not to be

producer milk, no milk diverted by the

handler or cooperative association

during the month to a nonpool plant

shall be producer milk; and

(5) The applicable diversion limits in

paragraph (d)(2) of this section may be

increased or decreased by the market

administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested persons. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

§ 1032.14 Other source milk.

See § 1000.14 of this chapter.

§ 1032.15 Fluid milk product.

See § 1000.15 of this chapter.

§ 1032.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1032.17 [Reserved]

§ 1032.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1032.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.

Handler Reports

§ 1032.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator’s office

receives the report on or before the 7th

day after the end of the month, in the

detail and on the prescribed forms, as

follows:

(a) Each handler that operates a pool

plant pursuant to § 1032.7 and each

handler described in § 1000.9(c) shall

report for each of its operations the

following information:

(1) Product pounds, pounds of

butterfat, pounds of protein, pounds of
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5057

solids-not-fat other than protein (other

solids), and the value of the somatic cell

adjustment pursuant to § 1000.50(p),

contained in or represented by:

(i) Receipts of producer milk,

including producer milk diverted by the

handler; and

(ii) Receipts of milk from handlers

described in § 1000.9(c);

(2) Product pounds and pounds of

butterfat contained in:

(i) Receipts of fluid milk products and

bulk fluid cream products from other

pool plants;

(ii) Receipts of other source milk; and

(iii) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products;

(3) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph; and

(4) Such other information with

respect to the receipts and utilization of

skim milk, butterfat, milk protein, other

nonfat solids, and somatic cell

information, as the market administrator

may prescribe.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a) of this section.

Receipts of milk that would have been

producer milk if the plant had been

fully regulated shall be reported in lieu

of producer milk. The report shall show

also the quantity of any reconstituted

skim milk in route disposition in the

marketing area.

(c) Each handler not specified in

paragraphs (a) and (b) of this section

shall report with respect to its receipts

and utilization of milk and milk

products in such manner as the market

administrator may prescribe.

§ 1032.31 Payroll reports.

(a) On or before the 20th day after the

end of each month, each handler that

operates a pool plant pursuant to

§ 1032.7 and each handler described in

§ 1000.9(c) shall report to the market

administrator its producer payroll for

the month, in the detail prescribed by

the market administrator, showing for

each producer the information

described in § 1032.73(f).

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.

§ 1032.32 Other reports.

In addition to the reports required

pursuant to §§ 1032.30 and 1032.31,

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

Classification of Milk

§ 1032.40 Classes of utilization.

See § 1000.40 of this chapter.

§ 1032.41 [Reserved]

§ 1032.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1032.43 General classification rules.

See § 1000.43 of this chapter.

§ 1032.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1032.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1032.50 Class prices and component

prices.

See § 1000.50 of this chapter.

§ 1032.51 Class I differential and price.

The Class I differential shall be the

differential established for Jackson

County, Missouri, which is reported in

§ 1000.52. The Class I price shall be the

price computed pursuant to § 1000.50(a)

for Jackson County, Missouri.

§ 1032.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1032.53 Announcement of class prices

and component prices.

See § 1000.53 of this chapter.

§ 1032.54 Equivalent price.

See § 1000.54 of this chapter.

Producer Price Differential

§ 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 its pool plants, and of each

handler described in § 1000.9(c) as

follows:

(a) Class I value.

(1) Multiply the hundredweight of

skim milk in Class I as determined

pursuant to § 1000.44(a) by the Class I

skim milk price applicable at the

handler’s location; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class I as determined pursuant to

§ 1000.44(b) by the Class I butterfat

price applicable at the handler’s

location.

(b) Add the Class II value, computed

as follows:

(1) Multiply the hundredweight of

skim milk in Class II as determined

pursuant to § 1000.44(a) by 70 cents;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class II as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class II as determined pursuant to

§ 1000.44(b) by the butterfat price;

(c) Add the Class III value computed

as follows:

(1) Multiply the pounds of skim milk

in Class III as determined pursuant to

§ 1000.44(a) by the average protein

content of producer skim milk received

by the handler, and multiply the

resulting pounds of protein by the

protein price;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class III as determined pursuant to

§ 1000.44(a) by the average other solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of other solids by the

other solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class III as determined pursuant to

§ 1000.44(b) by the butterfat price;

(d) Add the Class IV value computed

as follows:

(1) Multiply the pounds of skim milk

in Class IV as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class IV as determined pursuant to

§ 1000.44(b) by the butterfat price;

(e) Add an adjustment for somatic cell

content of producer milk determined by

multiplying the value reported pursuant

to § 1032.30(a)(1) by the percentage of

the total producer milk allocated to

Class II, Class III, and Class IV pursuant

to § 1000.44(c);

(f) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43(b)(2) by the

respective skim milk and butterfat

prices applicable at the location of the

pool plant;

(g) Add the amount obtained from

multiplying the difference between the
5058 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);

(h) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3)(i)

through (iii) and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from a plant

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plants;

(i) Add the amount obtained from

multiplying the difference between the

Class I price and the Class III price

applicable at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§ 1000.43(d) and § 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

step of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

bulk fluid milk products from an

unregulated supply plant to the extent

that an equivalent amount of skim milk

or butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(j) Subtract, for reconstituted milk

made from receipts of nonfluid milk

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicable at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I pursuant to

§ 1000.43(d); and

(k) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another order under

§ 1000.76(a)(5) or (c).

§ 1032.61 Computation of producer price

differential.

For each month the market

administrator shall compute a producer

price differential per hundredweight. If

the unreserved balance in the producersettlement fund to be included in the

computation is less than 2 cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1032.71 for the preceding

month shall not be included in the

computation of the producer price

differential. The report of such handler

shall not be included in the

computation for succeeding months

until the handler has made full payment

of outstanding monthly obligations.

Subject to the aforementioned

conditions, the market administrator

shall compute the producer price

differential in the following manner:

(a) Combine into one total the values

computed pursuant to § 1032.60 for all

handlers required to file reports

prescribed in § 1032.30;

(b) Subtract the total values obtained

by multiplying each handler’s total

pounds of protein, other solids, and

butterfat contained in the milk for

which an obligation was computed

pursuant to § 1032.60 by the protein

price, the other solids price, and the

butterfat price, respectively, and the

total value of the somatic cell

adjustment pursuant to § 1032.30(a)(1);

(c) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1032.75;

(d) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(e) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(1) The total hundredweight of

producer milk; and

(2) The total hundredweight for which

a value is computed pursuant to

§ 1032.60(i); and

(f) Subtract not less than 4 cents nor

more than 5 cents from the price

computed pursuant to paragraph (e) of

this section. The result shall be known

as the producer price differential for the

month.

§ 1032.62 Announcement of producer

prices.

On or before the 11th day after the

end of each month, the market

administrator shall announce publicly

the following prices and information:

(a) The producer price differential;

(b) The protein price;

(c) The other solids price;

(d) The butterfat price;

(e) The somatic cell adjustment rate;

(f) The average butterfat, protein and

other solids content of producer milk;

and

(g) The statistical uniform price for

milk containing 3.5 percent butterfat,

computed by combining the Class III

price and the producer price

differential.

Payments for Milk

§ 1032.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1032.71 Payments to the producersettlement fund.

Each handler shall make payment to

the producer-settlement fund in a

manner that provides receipt of the

funds by the market administrator no

later than the 14th day after the end of

the month. Payment shall be the

amount, if any, by which the amount

specified in (a) of this section exceeds

the amount specified in (b) of this

section:

(a) The total value of milk to the

handler for the month as determined

pursuant to § 1032.60.

(b) The sum of:

(1) An amount obtained by

multiplying the total hundredweight of

producer milk as determined pursuant

to § 1000.44(c) by the producer price

differential as adjusted pursuant to

§ 1032.75;

(2) An amount obtained by

multiplying the total pounds of protein,

other solids, and butterfat contained in

producer milk by the protein, other

solids, and butterfat prices respectively;

(3) The total value of the somatic cell

adjustment to producer milk; and

(4) An amount obtained by

multiplying the pounds of skim milk

and butterfat for which a value was

computed pursuant to § 1032.60(i) by

the producer price differential as

adjusted pursuant to § 1032.75 for the

location of the plant from which

received.

§ 1032.72 Payments from the producersettlement fund.

No later than the 15th day after the

end of each month, the market

administrator shall pay to each handler

the amount, if any, by which the

amount computed pursuant to

§ 1032.71(b) exceeds the amount

computed pursuant to § 1032.71(a). If, at

such time, the balance in the producersettlement fund is insufficient to make

all payments pursuant to this section,

the market administrator shall reduce

uniformly such payments and shall

complete the payments as soon as the

funds are available.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5059

§ 1032.73 Payments to producers and to

cooperative associations.

(a) Each handler shall pay each

producer for producer milk for which

payment is not made to a cooperative

association pursuant to paragraph (b) of

this section, as follows:

(1) Partial payment. For each

producer who has not discontinued

shipments as of the date of this partial

payment, payment shall be made so that

it is received by each producer on or

before the 26th day of the month for

milk received during the first 15 days of

the month from the producer at not less

than the lowest announced class price

for the preceding month, less proper

deductions authorized in writing by the

producer; and

(2) Final payment. For milk received

during the month, payment shall be

made so that it is received by each

producer no later than the 17th day after

the end of the month in an amount

equal to not less than the sum of:

(i) The hundredweight of producer

milk received times the producer price

differential for the month as adjusted

pursuant to § 1032.75;

(ii) The pounds of butterfat received

times the butterfat price for the month;

(iii) The pounds of protein received

times the protein price for the month;

(iv) The pounds of other solids

received times the other solids price for

the month;

(v) The hundredweight of milk

received times the somatic cell

adjustment for the month;

(vi) Less any payment made pursuant

to paragraph (a)(1) of this section;

(vii) Less proper deductions

authorized in writing by such producer

and plus or minus adjustments for

errors in previous payments to such

producer; and

(viii) Less deductions for marketing

services pursuant to § 1000.86.

(b) Payments for milk received from

cooperative association members. On or

before the day prior to the dates

specified in paragraphs (a)(1) and (a)(2)

of this section, each handler shall pay

to a cooperative association for milk

from producers who market their milk

through the cooperative association and

who have authorized the cooperative to

collect such payments on their behalf an

amount equal to the sum of the

individual payments otherwise payable

for such producer milk pursuant to

paragraphs (a)(1) and (a)(2) of this

section.

(c) Payment for milk received from

cooperative association pool plants or

from cooperatives as handlers pursuant

to § 1000.9(c). On or before the day prior

to the dates specified in paragraph (a)(1)

and (a)(2) of this section, each handler

who receives fluid milk products at its

plant from a cooperative association in

its capacity as the operator of a pool

plant or who receives milk from a

cooperative association in its capacity as

a handler pursuant to § 1000.9(c),

including the milk of producers who are

not members of such association and

who the market administrator

determines have authorized the

cooperative association to collect

payment for their milk, shall pay the

cooperative for such milk as follows:

(1) For bulk fluid milk products and

bulk fluid cream products received from

a cooperative association in its capacity

as the operator of a pool plant and for

milk received from a cooperative

association in its capacity as a handler

pursuant to § 1000.9(c) during the first

15 days of the month, at not less than

the lowest announced class price per

hundredweight for the preceding

month;

(2) For the total quantity of bulk fluid

milk products and bulk fluid cream

products received from a cooperative

association in its capacity as the

operator of a pool plant, at not less than

the total value of such products received

from the association’s pool plants, as

determined by multiplying the

respective quantities assigned to each

class under § 1000.44, as follows:

(i) The hundredweight of Class I skim

milk times the Class I skim milk price

for the month plus the pounds of Class

I butterfat times the Class I butterfat

price for the month. The Class I price to

be used shall be that price effective at

the location of the shipping plant;

(ii) The hundredweight of Class II

skim milk times $.70;

(iii) The pounds of nonfat solids

received in Class II and Class IV milk

times the nonfat solids price for the

month;

(iv) The pounds of butterfat received

in Class II, Class III, and Class IV milk

times the butterfat price for the month;

(v) The pounds of protein received in

Class III milk times the protein price for

the month;

(vi) The pounds of other solids

received in Class III milk times the other

solids price for the month;

(vii) The hundredweight of Class II,

Class III, and Class IV milk received

times the somatic cell adjustment; and

(viii) Add together the amounts

computed in paragraphs (c)(2)(i)

through (vii) of this section and from

that sum deduct any payment made

pursuant to paragraph (c)(1) of this

section.

(3) For the total quantity of milk

received during the month from a

cooperative association in its capacity as

a handler under § 1000.9(c) as follows:

(i) The hundredweight of producer

milk received times the producer price

differential as adjusted pursuant to

§ 1032.75;

(ii) The pounds of butterfat received

times the butterfat price for the month;

(iii) The pounds of protein received

times the protein price for the month;

(iv) The pounds of other solids

received times the other solids price for

the month;

(v) The hundredweight of milk

received times the somatic cell

adjustment for the month; and

(vi) Add together the amounts

computed in paragraphs (c)(3)(i)

through (v) of this section and from that

sum deduct any payment made

pursuant to paragraph (c)(1) of this

section.

(d) If a handler has not received full

payment from the market administrator

pursuant to § 1032.72 by the payment

date specified in paragraph (a), (b) or (c)

of this section, the handler may reduce

pro rata its payments to producers or to

the cooperative association (with

respect to receipts described in

paragraph (b), prorating the

underpayment to the volume of milk

received from the cooperative

association in proportion to the total

milk received from producers by the

handler), but not by more than the

amount of the underpayment. The

payments shall be completed on the

next scheduled payment date after

receipt of the balance due from the

market administrator.

(e) If a handler claims that a required

payment to a producer cannot be made

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer-settlement fund, and in the

event that the handler subsequently

locates and pays the producer or a

lawful claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or to the lawful

claimant, as the case may be.

(f) In making payments to producers

pursuant to this section, each handler

shall furnish each producer, except a

producer whose milk was received from

a cooperative association handler

described in § 1000.9(a) or (c), a

supporting statement in a form that may

be retained by the recipient which shall

show:

(1) The name, address, Grade A

identifier assigned by a duly constituted

regulatory agency, and payroll number

of the producer;
5060 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(2) The daily and total pounds, and

the month and dates such milk was

received from that producer;

(3) The total pounds of butterfat,

protein, and other solids contained in

the producer’s milk;

(4) The somatic cell count of the

producer’s milk;

(5) The minimum rate or rates at

which payment to the producer is

required pursuant to this order;

(6) The rate used in making payment

if the rate is other than the applicable

minimum rate;

(7) The amount, or rate per

hundredweight, or rate per pound of

component, and the nature of each

deduction claimed by the handler; and

(8) The net amount of payment to the

producer or cooperative association.

§ 1032.74 [Reserved]

§ 1032.75 Plant location adjustments for

producer milk and nonpool milk.

(a) The producer price differential for

producer milk shall be adjusted

according to the location of the plant at

which the milk was physically received

by subtracting from the price differential

the amount by which the Class I price

specified in § 1032.51 exceeds the Class

I price at the plant’s location. If the

Class I price at the plant location

exceeds the Class I price specified in

§ 1032.51, the difference shall be added

to the producer price differential; and

(b) The producer price differential

applicable to other source milk shall be

adjusted following the procedure

specified in paragraph (a) of this

section, except that the adjusted

producer price differential shall not be

less than zero.

§ 1032.76 Payments by a handler

operating a partially regulated distributing

plant.

See § 1000.76 of this chapter.

§ 1032.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1032.78 Charges on overdue accounts.

See § 1000.78 of this chapter.

Administrative Assessment and

Marketing Service Deduction

§ 1032.85 Assessment for order

administration.

See § 1000.85 of this chapter.

§ 1032.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

PART 1033—MILK IN THE MIDEAST

MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1033.1 General provisions.

Definitions

1033.2 Mideast marketing area.

1033.3 Route disposition.

1033.4 Plant.

1033.5 Distributing plant.

1033.6 Supply plant.

1033.7 Pool plant.

1033.8 Nonpool plant.

1033.9 Handler.

1033.10 Producer-handler.

1033.11 [Reserved]

1033.12 Producer.

1033.13 Producer milk.

1033.14 Other source milk.

1033.15 Fluid milk product.

1033.16 Fluid cream product.

1033.17 [Reserved]

1033.18 Cooperative association.

1033.19 Commercial food processing

establishment.

Handler Reports

1033.30 Reports of receipts and utilization.

1033.31 Payroll reports.

1033.32 Other reports.

Classification of Milk

1033.40 Classes of utilization.

1033.41 [Reserved]

1033.42 Classification of transfers and

diversions.

1033.43 General classification rules.

1033.44 Classification of producer milk.

1033.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1033.50 Class prices and component prices.

1033.51 Class I differential and price.

1033.52 Adjusted Class I differentials.

1033.53 Announcement of class prices and

component prices.

1033.54 Equivalent price.

Producer Price Differential

1033.60 Handler’s value of milk.

1033.61 Computation of producer price

differential.

1033.62 Announcement of producer prices.

Payments for Milk

1033.70 Producer-settlement fund.

1033.71 Payments to the producersettlement fund.

1033.72 Payments from the producersettlement fund.

1033.73 Payments to producers and to

cooperative associations.

1033.74 [Reserved]

1033.75 Plant location adjustments for

producer milk and nonpool milk.

1033.76 Payments by a handler operating a

partially regulated distributing plant.

1033.77 Adjustment of accounts.

1033.78 Charges on overdue accounts.

Administrative Assessment and Marketing

Service Deduction

1033.85 Assessment for order

administration.

1033.86 Deduction for marketing services.

Authority: 7 U.S.C. 601–674.

Subpart—Order Regulating Handling

General Provisions

§ 1033.1 General provisions.

The terms, definitions, and provisions

in Part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1033.2 Mideast marketing area.

The marketing area means all territory

within the bounds of the following

states and political subdivisions,

including all piers, docks, and wharves

connected therewith and all craft

moored thereat, and all territory

occupied by government (municipal,

State, or Federal) reservations,

installations, institutions, or other

similar establishments if any part

thereof is within any of the listed states

or political subdivisions:

Ohio

All of the State of Ohio.

Indiana Counties

Adams, Allen, Bartholomew, Benton,

Blackford, Boone, Brown, Carroll, Cass, Clay,

Clinton, Dearborn, Decatur, De Kalb,

Delaware, Elkhart, Fayette, Fountain,

Franklin, Fulton, Grant, Hamilton, Hancock,

Hendricks, Henry, Howard, Huntington,

Jackson, Jasper, Jay, Jefferson, Jennings,

Johnson, Kosciusko, Lagrange, Lake, La Porte,

Lawrence, Madison, Marion, Marshall,

Miami, Monroe, Montgomery, Morgan,

Newton, Noble, Ohio, Owen, Parke, Porter,

Pulaski, Putnam, Randolph, Ripley, Rush,

Shelby, St. Joseph, Starke, Steuben,

Switzerland, Tippecanoe, Tipton, Union,

Vermillion, Vigo, Wabash, Warren, Wayne,

Wells, White, and Whitley.

Kentucky Counties

Boone, Boyd, Bracken, Campbell, Floyd,

Grant, Greenup, Harrison, Johnson, Kenton,

Lawrence, Lewis, Magoffin, Martin, Mason,

Pendleton, Pike, and Robertson.

Michigan Counties

All counties except Delta, Dickinson,

Gogebic, Iron, Menominee, and Ontonagon.

Pennsylvania Counties

Allegheny, Armstrong, Beaver, Butler,

Crawford, Erie, Fayette, Greene, Lawrence,

Mercer, Venango, and Washington.

In Clarion County only the townships of

Ashland, Beaver, Licking, Madison, Perry,

Piney, Richland, Salem, and Toby.

All of Westmoreland County except the

townships of Cook, Donegal, Fairfield,

Ligonier, and St. Clair, and the boroughs of

Bolivar, Donegal, Ligonier, New Florence,

and Seward.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5061

West Virginia Counties

Barbour, Boone, Brooke, Cabell, Calhoun,

Doddridge, Fayette, Gilmer, Hancock,

Harrison, Jackson, Kanawha, Lewis, Lincoln,

Logan, Marion, Marshall, Mason, Mingo,

Monongalia, Ohio, Pleasants, Preston,

Putnam, Raleigh, Randolph, Ritchie, Roane,

Taylor, Tucker, Tyler, Upshur, Wayne,

Wetzel, Wirt, Wood, and Wyoming.

§ 1033.3 Route disposition.

See § 1000.3 of this chapter.

§ 1033.4 Plant.

See § 1000.4 of this chapter.

§ 1033.5 Distributing plant.

See § 1000.5 of this chapter.

§ 1033.6 Supply plant.

See § 1000.6 of this chapter.

§ 1033.7 Pool plant.

Pool plant means a plant, unit of

plants, or a system of plants as specified

in paragraphs (a) through (f) of this

section. The pooling standards

described in paragraphs (a), (c), (d), (e),

and (f) of this section are subject to

modification pursuant to paragraph (g)

of this section:

(a) A distributing plant from which

during the month:

(1) Total route disposition is equal to

30 percent or more of the total quantity

of bulk fluid milk products physically

received at the plant;

(2) Route disposition in the marketing

area is at least 30 percent of total route

disposition.

(3) For purposes of this section,

packaged fluid milk products that are

transferred to a distributing plant shall

be considered as route disposition from

the transferring plant, rather than the

receiving plant, for the single purpose of

qualifying the transferring plant as a

pool distributing plant.

(b) A distributing plant located in the

marketing area at which the majority of

milk received is processed into

aseptically packaged fluid milk

products unless there are no sales from

the plant into any marketing area and

the plant operator in writing requests

nonpool plant status for the plant for the

month.

(c) A supply plant from which the

quantity of bulk fluid milk products

shipped to, received at, and physically

unloaded into plants described in

paragraph (a) or (b) of this section as a

percent of the Grade A milk received at

the plant from dairy farmers (except

dairy farmers described in § 1033.12(b))

and handlers described in § 1033.9(c), as

reported in § 1033.30(a), is not less than

30 percent of the milk received from

dairy farmers, including milk diverted

pursuant to § 1033.13, subject to the

following conditions:

(1) Qualifying shipments pursuant to

this paragraph may be made to the

following plants, except whenever the

authority provided in paragraph (g) of

this section is applied to increase the

shipping requirements specified in this

section, only shipments to pool plants

described in § 1033.7(a) and (b), and

units described in § 1033.7(e) shall

count as qualifying shipments for the

purpose of meeting the increased

shipments:

(i) Pool plants described in

§ 1033.7(a), (b) and (e);

(ii) Plants of producer-handlers;

(iii) Partially regulated distributing

plants, except that credit for such

shipments shall be limited to the

amount of such milk classified as Class

I at the transferee plant; and

(iv) Distributing plants fully regulated

under other Federal orders, except that

credit for transfers to such plants shall

be limited to the quantity shipped to

pool distributing plants during the

month. Qualifying transfers to other

order plants shall not include transfers

made on the basis of agreed-upon Class

II, Class III, or Class IV utilization.

(2) The operator of a supply plant may

include deliveries to pool distributing

plants directly from farms of producers

pursuant to § 1033.13(c) as up to 90

percent of the supply plant’s qualifying

shipments;

(3) A supply plant that meets the

shipping requirements of this paragraph

during each of the immediately

preceding months of September through

February shall be a pool plant during

the following months of March through

August unless the milk received at the

plant fails to meet the requirements of

a duly constituted regulatory agency,

the plant fails to meet a shipping

requirement instituted pursuant to

paragraph (f) of this section, or the plant

operator requests nonpool status for the

plant. Such nonpool status shall be

effective on the first day of the month

following the receipts of such request

and thereafter until the plant again

qualifies as a pool plant on the basis of

its deliveries to a pool distributing

plant(s).

The automatic pool qualification of a

plant can be waived if the handler or

cooperative requests in writing to the

market administrator the nonpool status

of such plant. The request must be made

prior to the beginning of any month

during the March through August

period. The plant shall be a nonpool

plant for such month and thereafter

until it requalifies under paragraph (c)

of this section on the basis of actual

shipments therefrom. To requalify as a

pool plant under paragraph (d), (e) or (f)

of this section, such plant must first

have met the percentage shipping

requirements of paragraph (c) of this

section for 6 consecutive months; and

(4) A supply plant that does not meet

the minimum delivery requirements

specified in this paragraph to qualify for

pool status in the current month

because a distributing plant to which

the supply plant delivered its fluid milk

products during such month failed to

qualify as a pool plant pursuant to

paragraph (a) or (b) of this section shall

continue to be a pool plant for the

current month if such supply plant

qualified as a pool plant in the three

immediately preceding months.

(d) A plant operated by a cooperative

association if, during the month, 35

percent or more of the producer milk of

members of the association is delivered

to a distributing pool plant(s) or to a

nonpool plant(s), and classification

other than Class I is not requested.

Deliveries for qualification purposes

may be made directly from the farm or

by transfer from such association’s

plant, subject to the following

conditions:

(1) The cooperative requests pool

status for such plant;

(2) The 35-percent delivery

requirement may be met for the current

month or it may be met on the basis of

deliveries during the preceding 12-

month period ending with the current

month;

(3) The plant is approved by a duly

constituted regulatory authority to

handle milk for fluid consumption; and

(4) The plant does not qualify as a

pool plant under (a), (b), or (c) of this

section or under the similar provisions

of another Federal order applicable to a

distributing plant or supply plant.

(e) A plant located inside the

marketing area which has been a pool

plant under this order or its predecessor

orders for twelve consecutive months,

but is not otherwise qualified under this

paragraph, if it has a marketing

agreement with a cooperative

association and it fulfills the following

conditions:

(1) The aggregate monthly quantity

supplied by all parties to such an

agreement as a percentage of the

producer milk receipts included in the

unit during the month is not less than

35 percent; and

(2) Shipments for qualification

purposes shall include both transfers

from supply plants to plants described

in paragraph (c)(1) of this section, and

deliveries made direct from the farm to

plants qualified under paragraph (a) of

this section.

(f) A system of supply plants may be

qualified for pooling by the association

of two or more supply plants operated
5062 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

by one or more handlers by meeting the

applicable percentage requirements of

paragraph (c) of this section in the same

manner as a single plant and subject to

the following additional requirements:

(1) Each plant in the system is located

within the marketing area, or was a pool

supply plant for each of the three

months immediately preceding the

effective date of this paragraph so long

as it continues to maintain pool status.

Cooperative associations may not use

shipments pursuant to § 1033.9(c) to

qualify plants located outside the

marketing area;

(2) A written notification to the

market administrator listing the plants

to be included in the system and the

handler that is responsible for meeting

the performance requirements of this

paragraph under a marketing agreement

certified to the market administrator by

the designated handler and any others

included in the system, and the period

during which such consideration shall

apply. Such notice, and notice of any

change in designation, shall be

furnished on or before the fifth working

day following the month to which the

notice applies. The listed plants

included in the system shall also be in

the sequence in which they shall qualify

for pool plant status based on the

minimum deliveries required. If the

deliveries made are insufficient to

qualify the entire system for pooling, the

last listed plant shall be excluded from

the system, followed by the plant nextto-last on the list, and continuing in this

sequence until remaining listed plants

have met the minimum shipping

requirements; and

(3) Each plant that qualifies as a pool

plant within a system shall continue

each month as a plant in the system

unless the plant subsequently fails to

qualify for pooling, or the responsible

handler submits a written notification to

the market administrator prior to the

first day of the month that the plant is

to be deleted from the system, or that

the system is to be discontinued. In any

month of March through August, a

system shall not contain any plant

which was not qualified under this

paragraph, either individually or as a

member of a system, during the

previous September through February.

(g) The performance standards of

paragraphs (a), (c), (d), (e) and (f) of this

section may be increased or decreased

by the market administrator if the

market administrator finds that such

adjustment is necessary to obtain

needed shipments or to prevent

uneconomic shipments. Before making

such a finding, the market administrator

shall investigate the need for revision,

either on the market administrator’s

own initiative or at the request of

interested persons. If such investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that a

revision is being considered and

inviting data, views, and arguments. If

the market administrator determines

that an adjustment to the shipping

percentages is necessary, the market

administrator shall notify the industry

within one day of the effective date of

such adjustment.

(h) The term pool plant shall not

apply to the following plants:

(1) A producer-handler as defined

under any Federal order;

(2) An exempt plant as defined in

§ 1000.8(e);

(3) A plant located within the

marketing area and qualified pursuant

to paragraph (a) of this section that

meets the pooling requirements of

another Federal order, and from which

more than 50 percent of its route

disposition has been in the other

Federal order marketing area for three

consecutive months;

(4) A plant located outside any

Federal order marketing area and

qualified pursuant to paragraph (a) of

this section that meets the pooling

requirements of another Federal order

and has had greater sales in such other

Federal order’s marketing area for 3

consecutive months;

(5) A plant located in another Federal

order marketing area and qualified

pursuant to paragraph (a) of this section

that meets the pooling requirements of

such other Federal order and does not

have a majority of its route distribution

in this marketing area for 3 consecutive

months or if the plant is required to be

regulated under such other Federal

order without regard to its route

disposition in any other Federal order

marketing area;

(6) A plant qualified pursuant to

paragraph (c) or (d) of this section that

also meets the pooling requirements of

another Federal order and from which

greater qualifying shipments are made

to plants regulated under the other

Federal order than are made to plants

regulated under this order, or the plant

has automatic pooling status under the

other Federal order; and

(7) That portion of a regulated plant

designated as a nonpool plant that is

physically separate and operated

separately from the pool portion of such

plant. The designation of a portion of a

regulated plant as a nonpool plant must

be requested in advance and in writing

by the handler and must be approved by

the market administrator.

(i) Any plant that qualifies as a pool

plant in each of the immediately

preceding three months pursuant to

paragraph (a) of this section or the

shipping percentages in paragraph (c) of

this section that is unable to meet such

performance standards for the current

month because of unavoidable

circumstances determined by the market

administrator to be beyond the control

of the handler operating the plant, such

as a natural disaster (ice storm, wind

storm, flood), fire, breakdown of

equipment, or work stoppage, shall be

considered to have met the minimum

performance standards during the

period of such unavoidable

circumstances, but such relief shall not

be granted for more than two

consecutive months.

§ 1033.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1033.9 Handler.

See § 1000.9 of this chapter.

§ 1033.10 Producer-handler.

Except as provided in paragraph (g) of

this section, producer-handler means a

person who:

(a) Operates a dairy farm and a

distributing plant from which there is

monthly route disposition in excess of

150,000 pounds during the month;

(b) Receives no fluid milk products

from sources other than own farm

production, pool handlers, and plants

fully regulated under another Federal

order;

(c) Receives at its plant or acquires for

route disposition no more than 150,000

pounds of fluid milk products from

handlers fully regulated under any

Federal order. This limitation shall not

apply if the producer-handler’s own

farm production is less than 150,000

pounds during the month.

(d) Disposes of no other source milk

as Class I milk except by increasing the

nonfat milk solids content of the fluid

milk products received from own farm

production or pool handlers;

(e) Disposes of no fluid milk products

using the distribution system of another

handler except for direct deliveries to

retail outlets or to a pool handler’s

plant;

(f) Provides proof satisfactory to the

market administrator that the care and

management of the dairy animals and

other resources necessary to produce all

Class I milk handled (excluding receipts

from handlers fully regulated under any

Federal order) and the processing,

packaging, and distribution operations

are the producer-handler’s own

enterprise and at its own risk; and

(g) Producer-handler shall not include

any producer who also operates a

distributing plant if the producer-
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5063

handler so requests that the two be

operated as separate entities with the

distributing plant regulated under

§ 1033.7(a) and the farm operated as a

producer under § 1033.12.

§ 1033.11 [Reserved]

§ 1033.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1033.13; or

(2) Received by a handler described in

§ 1033.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

received at an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1033.13(d);

(3) A dairy farmer whose milk is

received by diversion at a pool plant

from a handler regulated under another

Federal order if the other Federal order

designates the dairy farmer as a

producer under that order and that milk

is allocated by request to a utilization

other than Class I; and

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another Federal order

with respect to that portion of the milk

so diverted that is assigned to Class I

under the provisions of such other

order.

§ 1033.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk), including nonfat

components, and butterfat in milk of a

producer that is:

(a) Received by the operator of a pool

plant directly from a producer or a

handler described in § 1000.9(c). Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of a pool plant

or a handler described in § 1000.9(c) but

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it is picked

up at the producer’s farm. All milk

received pursuant to this paragraph

shall be priced at the location of the

plant where it is first physically

received;

(b) Received by a handler described in

§ 1000.9(c) in excess of the quantity

delivered to pool plants;

(c) Diverted by a pool plant operator

to another pool plant. Milk so diverted

shall be priced at the location of the

plant to which diverted; or

(d) Diverted by the operator of a pool

plant or by a cooperative association

described in § 1033.9(c) to a nonpool

plant, subject to the following

conditions:

(1) Milk of a dairy farmer shall not be

eligible for diversion until milk of such

dairy farmer has been physically

received as producer milk at a pool

plant and the dairy farmer has

continuously retained producer status

since that time. If a dairy farmer loses

producer status under this order (except

as a result of a temporary loss of Grade

A approval), the dairy farmer’s milk

shall not be eligible for diversion until

milk of the dairy farmer has been

physically received as producer milk at

a pool plant;

(2) The equivalent of at least one day’s

production is caused by the handler to

be physically received at a pool plant in

each of the months of September

through November;

(3) Of the total quantity of producer

milk received during the month

(including diversions but excluding the

quantity of producer milk received from

a handler described in § 1000.9(c)), the

handler diverted to nonpool plants not

more than 60 percent during the months

of September through February;

(4) Diverted milk shall be priced at

the location of the plant to which

diverted;

(5) Any milk diverted in excess of the

limits set forth in paragraph (d)(3) of

this section shall not be producer milk.

The diverting handler shall designate

the dairy farmer deliveries that shall not

be producer milk. If the handler fails to

designate the dairy farmer deliveries

which are ineligible, producer milk

status shall be forfeited with respect to

all milk diverted to nonpool plants by

such handler; and

(6) The delivery day requirements and

the diversion percentages in paragraphs

(d)(2) and (d)(3) of this section may be

increased or decreased by the market

administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested persons. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

§ 1033.14 Other source milk.

See § 1000.14 of this chapter.

§ 1033.15 Fluid milk product.

See § 1000.15 of this chapter.

§ 1033.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1033.17 [Reserved]

§ 1033.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1033.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.

Handler Reports

§ 1033.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator’s office

receives the report on or before the 7th

day after the end of the month, in the

detail and on the prescribed forms, as

follows:

(a) Each handler that operates a pool

plant pursuant to § 1033.7 and each

handler described in § 1000.9(c) shall

report for each of its operations the

following information:

(1) Product pounds, pounds of

butterfat, pounds of protein, and the

value of the somatic cell adjustment

pursuant to § 1000.50(p), contained in

or represented by:

(i) Receipts of producer milk,

including producer milk diverted by the

reporting handler; and

(ii) Receipts of milk from handlers

described in § 1000.9(c);

(2) Product pounds and pounds of

butterfat contained in:

(i) Receipts of fluid milk products and

bulk fluid cream products from other

pool plants;

(ii) Receipts of other source milk; and

(iii) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products;

(3) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph; and

(4) Such other information with

respect to the receipts and utilization of

skim milk, butterfat, milk protein, and

somatic cell information as the market

administrator may prescribe.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a) of this section.

Receipts of milk that would have been
5064 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

producer milk if the plant had been

fully regulated shall be reported in lieu

of producer milk. The report shall show

also the quantity of any reconstituted

skim milk in route disposition in the

marketing area.

(c) Each handler not specified in

paragraphs (a) and (b) of this section

shall report with respect to its receipts

and utilization of milk and milk

products in such manner as the market

administrator may prescribe.

§ 1033.31 Payroll reports.

(a) On or before the 22nd day after the

end of each month, each handler that

operates a pool plant pursuant to

§ 1033.7 and each handler described in

§ 1033.9(c) shall report to the market

administrator its producer payroll for

the month, in the detail prescribed by

the market administrator, showing for

each producer the information

described in § 1033.73(e).

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.

§ 1033.32 Other reports.

In addition to the reports required

pursuant to §§ 1033.30 and 1033.31,

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

Classification of Milk

§ 1033.40 Classes of utilization.

See § 1000.40 of this chapter.

§ 1033.41 [Reserved]

§ 1033.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1033.43 General classification rules.

See § 1000.43 of this chapter.

§ 1033.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1033.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1033.50 Class prices and component

prices.

See § 1000.50 of this chapter.

§ 1033.51 Class I differential and price.

The Class I differential shall be the

differential established for Cuyahoga

County, Ohio which is reported in

§ 1000.52. The Class I price shall be the

price computed pursuant to § 1000.50(a)

for Cuyahoga County, Ohio.

§ 1033.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1033.53 Announcement of class prices

and component prices.

See § 1000.53 of this chapter.

§ 1033.54 Equivalent price.

See § 1000.54 of this chapter.

Producer Price Differential

§ 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 its pool plants, and of each

handler described in § 1033.9(c) as

follows:

(a) Class I value.

(1) Multiply the hundredweight of

skim milk in Class I as determined

pursuant to § 1000.44(a) by the Class I

skim milk price applicable at the

handler’s location; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class I as determined pursuant to

§ 1000.44(b) by the Class I butterfat

price applicable at the handler’s

location;

(b) Add the Class II value computed

as follows:

(1) Multiply the hundredweight of

skim milk in Class II as determined

pursuant to § 1000.44(a) by 70 cents;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class II as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class II as determined pursuant to

§ 1000.44(b) by the butterfat price;

(c) Add the Class III value computed

as follows:

(1) Multiply the pounds of skim milk

in Class III as determined pursuant to

§ 1000.44(a) by the average protein

content of producer skim milk received

by the handler, and multiply the

resulting pounds of protein by the

protein price;

(2) Add an amount obtained by

subtracting from the pounds of skim

milk in Class III as determined pursuant

to § 1000.44(a) the pounds of protein

determined in § 1033.60(c)(1) and

multiplying the resulting pounds of

fluid carrier by a price determined by

multiplying 5.7 times the other solids

price and dividing the result by 91 (the

resulting price, rounded to the 4th

decimal place, shall be known as the

fluid carrier price); and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class III as determined pursuant to

§ 1000.44(b) by the butterfat price;

(d) Add the Class IV value computed

as follows:

(1) Multiply the pounds of skim milk

in Class IV as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class IV as determined pursuant to

§ 1000.44(b) by the butterfat price;

(e) Add an adjustment for the somatic

cell content of producer milk

determined by multiplying the value

reported pursuant to § 1033.30(a)(1) by

the percentage of the total producer

milk allocated to Class II, Class III, and

Class IV pursuant to § 1000.44(c);

(f) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43(b)(2) by the

respective skim milk and butterfat

prices applicable at the location of the

pool plant;

(g) Add the amount obtained from

multiplying the difference between the

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);

(h) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3)(i)

through (iii) and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from plants

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plants;
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5065

(i) Add the amount obtained from

multiplying the difference between the

Class I price and the Class III price

applicable at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§ 1000.43(d) and § 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

step of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

bulk fluid milk products from an

unregulated supply plant to the extent

that an equivalent amount of skim milk

or butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(j) Subtract, for reconstituted milk

made from receipts of nonfluid milk

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicable at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I pursuant to

§ 1000.43(d); and

(k) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another order under

§ 1000.76(a)(5) or (c).

§ 1033.61 Computation of producer price

differential.

For each month the market

administrator shall compute a producer

price differential per hundredweight. If

the unreserved balance in the producersettlement fund to be included in the

computation is less than 2 cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1033.71 for the preceding

month shall not be included in the

computation of the producer price

differential. The report of such handler

shall not be included in the

computation for succeeding months

until the handler has made full payment

of outstanding monthly obligations.

Subject to the aforementioned

conditions, the market administrator

shall compute the producer price

differential in the following manner:

(a) Combine into one total the values

computed pursuant to § 1033.60 for all

handlers required to file reports

prescribed in § 1033.30;

(b) Subtract the total values obtained

by multiplying each handler’s total

pounds of protein, fluid carrier, and

butterfat contained in the milk for

which an obligation was computed

pursuant to § 1033.60 by the protein

price, the fluid carrier price, and the

butterfat price, respectively, and the

total value of the somatic cell

adjustment pursuant to § 1033.30(a)(1);

(c) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1033.75;

(d) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(e) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(1) The total hundredweight of

producer milk; and

(2) The total hundredweight for which

a value is computed pursuant to

§ 1033.60(i); and

(f) Subtract not less than 4 cents nor

more than 5 cents from the price

computed pursuant to paragraph (e) of

this section. The result shall be known

as the producer price differential for the

month.

§ 1033.62 Announcement of producer

prices.

On or before the 13th day after the

end of each month, the market

administrator shall announce publicly

the following prices and information:

(a) The producer price differential;

(b) The protein price;

(c) The fluid carrier price;

(d) The butterfat price;

(e) The somatic cell adjustment rate;

(f) The average butterfat and protein

content of producer milk; and

(g) The statistical uniform price for

milk containing 3.5 percent butterfat,

computed by combining the Class III

price and the producer price

differential.

Payments for Milk

§ 1033.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1033.71 Payments to the producersettlement fund.

Each handler shall make payment to

the producer-settlement fund in a

manner that provides receipt of the

funds by the market administrator no

later than the 15th day after the end of

the month. Payment shall be the

amount, if any, by which the amount

specified in (a) of this section exceeds

the amount specified in (b) of this

section:

(a) The total value of milk to the

handler for the month as determined

pursuant to § 1033.60.

(b) The sum of:

(1) An amount obtained by

multiplying the total hundredweight of

producer milk as determined pursuant

to § 1000.44(c) by the producer price

differential as adjusted pursuant to

§ 1033.75;

(2) An amount obtained by

multiplying the total pounds of protein

and butterfat contained in producer

milk by the protein and butterfat prices,

respectively;

(3) An amount obtained by

multiplying the total hundredweight of

fluid carrier contained in producer milk

by the fluid carrier price computed

pursuant to § 1033.60(c)(2);

(4) The total value of the somatic cell

adjustment to producer milk; and

(5) An amount obtained by

multiplying the pounds of skim milk

and butterfat for which a value was

computed pursuant to § 1033.60(i) by

the producer price differential as

adjusted pursuant to § 1033.75 for the

location of the plant from which

received.

§ 1033.72 Payments from the producersettlement fund.

No later than the 16th day after the

end of each month, the market

administrator shall pay to each handler

the amount, if any, by which the

amount computed pursuant to

§ 1033.71(b) exceeds the amount

computed pursuant to § 1033.71(a). If, at

such time, the balance in the producersettlement fund is insufficient to make

all payments pursuant to this section,

the market administrator shall reduce

uniformly such payments and shall

complete the payments as soon as the

funds are available.

§ 1033.73 Payments to producers and to

cooperative associations.

(a) Each handler shall pay each

producer for producer milk for which

payment is not made to a cooperative

association pursuant to paragraph (b) of

this section, as follows:

(1) Partial payment. For each

producer who has not discontinued

shipments as of the date of this partial

payment, payment shall be made so that

it is received by each producer on or

before the 26th day of the month for

milk received during the first 15 days of

the month from the producer at not less

than the lowest announced class price

for the preceding month, less proper

deductions authorized in writing by the

producer; and

(2) Final payment. For milk received

during the month, payment shall be
5066 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

made so that it is received by each

producer no later than the 17th day after

the end of the month in an amount

equal to not less than the sum of:

(i) The hundredweight of producer

milk received times the producer price

differential for the month as adjusted

pursuant to § 1033.75;

(ii) The pounds of butterfat received

times the butterfat price for the month;

(iii) The pounds of protein received

times the protein price for the month;

(iv) The hundredweight of fluid

carrier received times the fluid carrier

price for the month;

(v) The hundredweight of milk

received times the somatic cell

adjustment for the month;

(vi) Less any payment made pursuant

to paragraph (a)(1) of this section;

(vii) Less proper deductions

authorized in writing by such producer

and plus or minus adjustments for

errors in previous payments to such

producer; and

(viii) Less deductions for marketing

services pursuant to § 1000.86.

(b) Payments for milk received from

cooperative associations. On or before

the day prior to the dates specified in

paragraphs (a)(1) and (a)(2) of this

section, each handler shall pay to a

cooperative association for milk

received as follows:

(1) Partial payment to a cooperative

association. For bulk fluid milk/

skimmed milk received during the first

15 days of the month from a cooperative

association in any capacity, except as

the operator of a pool plant, the partial

payment shall be equal to the

hundredweight of milk received

multiplied by the lowest announced

class price for the preceding month;

(2) Partial payment to a cooperative

association for milk transferred from its

pool plant. For bulk milk/skimmed milk

products received during the first 15

days of the month from a cooperative

association in its capacity as the

operator of a pool plant, the partial

payment shall be at the pool plant

operator’s estimated use value of the

milk using the most recent class prices

available, adjusted for butterfat and

plant location;

(3) Final payment to a cooperative

association for milk transferred from its

pool plant. Following the classification

of bulk fluid milk products and bulk

fluid cream products received during

the month from a cooperative

association in its capacity as the

operator of a pool plant, the final

payment for such receipts shall be not

less than an amount computed by

multiplying the respective quantities

assigned to each class under § 1000.44

by the value calculated pursuant to

§ 1033.60(a) and location adjustments

pursuant to § 1033.75, minus the

amount of the payment made to the

association pursuant to paragraph (a)(1)

of this section.

(4) Final payment to a cooperative

association for bulk milk received

directly from producers’ farms. For bulk

milk received from a cooperative

association during the month, including

the milk of producers who are not

members of such association and who

the market administrator determines

have authorized the cooperative

association to collect payment for their

milk, the final payment for such milk

shall be an amount equal to the sum of

the individual payments otherwise

payable for such milk pursuant to

paragraph (a)(2) of this section.

(c) If a handler has not received full

payment from the market administrator

pursuant to § 1033.72 by the payment

date specified in paragraph (a) or (b) of

this section, the handler may reduce

payments pursuant to paragraphs (a)

and (b) of this section, but not by more

than the amount of the underpayment.

The payments shall be completed on the

next scheduled payment date after

receipt of the balance due from the

market administrator.

(d) If a handler claims that a required

payment to a producer cannot be made

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer-settlement fund, and in the

event that the handler subsequently

locates and pays the producer or a

lawful claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or to the lawful

claimant, as the case may be.

(e) In making payments to producers

pursuant to this section, each handler

shall furnish each producer, except a

producer whose milk was received from

a cooperative association handler

described in § 1000.9(c), a supporting

statement in a form that may be retained

by the recipient which shall show:

(1) The name, address, Grade A

identifier assigned by a duly constituted

regulatory agency, and payroll number

of the producer;

(2) The daily and total pounds, and

the month and dates such milk was

received from that producer;

(3) The total pounds of butterfat,

protein, and fluid carrier contained in

the producer’s milk;

(4) The average somatic cell count of

the producer’s milk;

(5) The minimum rate or rates at

which payment to the producer is

required pursuant to this order;

(6) The rate used in making payment

if the rate is other than the applicable

minimum rate;

(7) The amount, or rate per

hundredweight, or rate per pound of

component, and the nature of each

deduction claimed by the handler; and

(8) The net amount of payment to the

producer or cooperative association.

§ 1033.74 [Reserved]

§ 1033.75 Plant location adjustments for

producer milk and nonpool milk.

(a) The producer price differential for

producer milk shall be adjusted

according to the location of the plant at

which the milk was physically received

by subtracting from the price differential

the amount by which the Class I price

specified in § 1033.51 exceeds the Class

I price at the plant’s location. If the

Class I price at the plant location

exceeds the Class I price specified in

§ 1033.51, the difference shall be added

to the producer price differential; and

(b) The producer price differential

applicable to other source milk shall be

adjusted following the procedure

specified in paragraph (a) of this

section, except that the adjusted

producer price differential shall not be

less than zero.

§ 1033.76 Payments by a handler

operating a partially regulated distributing

plant.

See § 1000.76 of this chapter.

§ 1033.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1033.78 Charges on overdue accounts.

See § 1000.78 of this chapter.

Administrative Assessment and

Marketing Service Deduction

§ 1033.85 Assessment for order

administration.

See § 1000.85 of this chapter.

§ 1033.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

PART 1124—MILK IN THE PACIFIC

NORTHWEST MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1124.1 General provisions.

Definitions

1124.2 Pacific Northwest marketing area.

1124.3 Route disposition.

1124.4 Plant.

1124.5 Distributing plant.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5067

1124.6 Supply plant.

1124.7 Pool plant.

1124.8 Nonpool plant.

1124.9 Handler.

1124.10 Producer-handler.

1124.11 Cooperative reserve supply unit.

1124.12 Producer.

1124.13 Producer milk.

1124.14 Other source milk.

1124.15 Fluid milk product.

1124.16 Fluid cream product.

1124.17 [Reserved]

1124.18 Cooperative association.

1124.19 Commercial food processing

establishment.

Handler Reports

1124.30 Reports of receipts and utilization.

1124.31 Payroll reports.

1124.32 Other reports.

Classification of Milk

1124.40 Classes of utilization.

1124.41 [Reserved]

1124.42 Classification of transfers and

diversions.

1124.43 General classification rules.

1124.44 Classification of producer milk.

1124.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1124.50 Class prices and component prices.

1124.51 Class I differential and price.

1124.52 Adjusted Class I differentials.

1124.53 Announcement of class prices and

component prices.

1124.54 Equivalent price.

Producer Price Differential

1124.60 Handler’s value of milk.

1124.61 Computation of producer price

differential.

1124.62 Announcement of producer prices.

Payments for Milk

1124.70 Producer-settlement fund.

1124.71 Payments to the producersettlement fund.

1124.72 Payments from the producersettlement fund.

1124.73 Payments to producers and to

cooperative associations.

1124.74 [Reserved]

1124.75 Plant location adjustments for

producer milk and nonpool milk.

1124.76 Payments by a handler operating a

partially regulated distributing plant.

1124.77 Adjustment of accounts.

1124.78 Charges on overdue accounts.

Administrative Assessment and Marketing

Service Deduction

1124.85 Assessment for order

administration.

1124.86 Deduction for marketing services.

Authority: 7 U.S.C. 601–674.

Subpart—Order Regulating Handling

General Provisions

§ 1124.1 General provisions.

The terms, definitions, and provisions

in Part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1124.2 Pacific Northwest marketing area.

The marketing area means all territory

within the bounds of the following

states and political subdivisions,

including all piers, docks, and wharves

connected therewith and all craft

moored thereat, and all territory

occupied by government (municipal,

State, or Federal) reservations,

installations, institutions, or other

similar establishments if any part

thereof is within any of the listed states

or political subdivisions:

Washington

All of the State of Washington.

Idaho Counties

Benewah, Bonner, Boundary, Kootenai,

Latah, and Shoshone.

Oregon Counties

Benton, Clackamas, Clatsop, Columbia,

Coos, Crook, Curry, Deschutes, Douglas,

Gilliam, Hood River, Jackson, Jefferson,

Josephine, Klamath, Lake, Lane, Lincoln,

Linn, Marion, Morrow, Multnomah, Polk,

Sherman, Tillamook, Umatilla, Wasco,

Washington, Wheeler, and Yamhill.

§ 1124.3 Route disposition.

See § 1000.3 of this chapter.

§ 1124.4 Plant.

See § 1000.4 of this chapter.

§ 1124.5 Distributing plant.

See § 1000.5 of this chapter.

§ 1124.6 Supply plant.

See § 1000.6 of this chapter.

§ 1124.7 Pool plant.

Pool plant means a plant, unit of

plants, or a system of plants as specified

in paragraphs (a) through (f) of this

section. The pooling standards

described in paragraphs (a), (c), (d), (e),

and (f) of this section are subject to

modification pursuant to paragraph (g)

of this section:

(a) A distributing plant from which

during the month:

(1) Total route disposition is equal to

25 percent of more of the total quantity

of bulk fluid milk products physically

received at the plant; and

(2) Route disposition in the marketing

area is at least 15 percent of total route

disposition.

(3) For purposes of this section,

packaged fluid milk products that are

transferred to a distributing plant shall

be considered as route disposition from

the transferring plant, rather than the

receiving plant, for the single purpose of

qualifying the transferring plant as a

pool distributing plant.

(b) A distributing plant located in the

marketing area at which the majority of

milk received is processed into

aseptically packaged fluid milk

products unless there are no sales from

the plant into any marketing area and

the plant operator in writing requests

nonpool plant status for the plant for the

month.

(c) A supply plant from which during

any month not less than 20 percent of

the total quantity of milk that is

physically received at such plant from

dairy farmers eligible to be producers

pursuant to § 1124.12 (excluding milk

received at such plant as diverted milk

from another plant, which milk is

classified in Class III under this order

and is subject to the pricing and pooling

provisions of this or another order

issued pursuant to the Act) or diverted

as producer milk to another plant

pursuant to § 1124.13, is shipped in the

form of a fluid milk product to a pool

distributing plant or is a route

disposition in the marketing area of

fluid milk products processed and

packaged at such plant;

(1) A supply plant that has qualified

as a pool plant during each of the

immediately preceding months of

September through February shall

continue to so qualify in each of the

following months of March through

August, unless the plant operator files a

written request with the market

administrator that such plant not be a

pool plant, such nonpool status to be

effective the first month following such

request and thereafter until the plant

qualifies as a pool plant on the basis of

milk shipments;

(2) A cooperative association that

operates a supply plant may include as

qualifying shipments its deliveries to

pool distributing plants directly from

farms of producers pursuant to

§ 1000.9(c);

(3) A pool plant operator may include

as qualifying shipments milk diverted to

pool distributing plants pursuant to

§ 1124.13(c);

(4) No plant may qualify as a pool

plant due to a reduction in the shipping

percentage pursuant to paragraph (g) of

this section unless it has been a pool

supply plant during each of the

immediately preceding three months.

(d)–(f) [Reserved]

(g) The applicable shipping

percentages of paragraphs (a) and (c) of

this section may be increased or

decreased by the market administrator if

found necessary to obtain needed

shipments or to prevent uneconomic

shipments. Before making a finding that

a change is necessary the market

administrator shall investigate the need

for revision, either on the market

administrator’s own initiative or at the

request of interested persons. If such
5068 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

investigation shows that a revision

might be appropriate, a notice shall be

issued stating that a revision is being

considered and inviting data, views, and

arguments. If the market administrator

determines that an adjustment to the

shipping percentages is necessary, the

market administrator shall notify the

industry within one day of the effective

date of such adjustment.

(h) The term pool plant shall not

apply to the following plants:

(1) A producer-handler as defined

under any Federal order;

(2) An exempt plant as defined in

§ 1000.8(e);

(3) A plant located within the

marketing area and qualified pursuant

to paragraph (a) of this section which

meets the pooling requirements of

another Federal order, and from which

more than 50 percent of its route

disposition has been in the other

Federal order marketing area for three

consecutive months;

(4) A plant located outside the

marketing area and qualified pursuant

to paragraph (a) of this section that

meets the pooling requirements of

another Federal order and has had

greater sales in such other Federal

order’s marketing area for 3 consecutive

months;

(5) A plant located in another Federal

order marketing area and qualified

pursuant to paragraph (a) of this section

that meets the pooling requirements of

such other Federal order and does not

have a majority of its route distribution

in this marketing area for 3 consecutive

months or if the plant is required to be

regulated under such other Federal

order without regard to its route

disposition in any other Federal order

marketing area; and

(6) A plant qualified pursuant to

paragraph (c) of this section which also

meets the pooling requirements of

another Federal order and from which

greater qualifying shipments are made

to plants regulated under the other

Federal order than are made to plants

regulated under this order, or the plant

has automatic pooling status under the

other Federal order.

§ 1124.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1124.9 Handler.

See § 1000.9 of this chapter.

§ 1124.10 Producer-handler.

Except as provided in paragraph (f) of

this section, producer-handler means a

person who operates a dairy farm and a

distributing plant from which there is

monthly route disposition within the

marketing area in excess of 150,000

pounds during the month and who has

been so designated by the market

administrator upon determination that

all of the requirements of this section

have been met, providing that none of

the conditions therein for cancellation

of such designation exists.

(a) Requirements for designation. The

producer-handler provides proof

satisfactory to the market administrator

that:

(1) In its capacity as a dairy farmer,

the care and management of the dairy

animals and other resources and

facilities (designated as such pursuant

to paragraph (b)(1) of this section)

necessary to produce all Class I milk

handled (excluding receipts from

handlers fully regulated under any

Federal order); and

(2) In its capacity as a handler, the

plant operation at which it processes

and packages and from which it

distributes its own milk production

(designated as such pursuant to

paragraph (b)(2) of this section) are

under the complete and exclusive

control and management of the

producer-handler and are at its own

enterprise and at its sole risk.

(3) The producer-handler neither

receives at its designated milk

production resources and facilities nor

receives, handles, processes or

distributes at or through any of its

designated milk handling, processing or

distributing resources and facilities

other source milk products for

reconstitution into fluid milk products,

or fluid milk products derived from any

source other than:

(i) Its designated milk production

resources and facilities (own farm

production);

(ii) Pool handlers and plants regulated

under any Federal order within the

limitation specified in paragraph (c)(2)

of this section; or

(iii) nonfat milk solids which are used

to fortify fluid milk products.

(4) The producer-handler is neither

directly nor indirectly associated with

the business control or management of,

nor has a financial interest in, another

handler’s operation; nor is any other

handler so associated with the

producer-handler’s operation.

(5) Designation of any person as a

producer-handler following a

cancellation of its prior designation

shall be preceded by performance in

accordance with paragraph (a)(1)

through (4) of this section for a period

of 1 month.

(b) Designation of resources and

facilities. Designation of a person as a

producer-handler shall include the

determination and designation of the

milk production, handling, processing

and distributing resources and facilities,

all of which shall be deemed to

constitute an integrated operation, as

follows:

(1) As milk production resources and

facilities. All resources and facilities

(milking herd(s), buildings housing such

herd(s), and the land on which such

buildings are located) used for the

production of milk:

(i) Which are directly, indirectly or

partially owned, operated or controlled

by the producer-handler;

(ii) In which the producer-handler in

any way has an interest, including any

contractual arrangement; and

(iii) Which are directly, indirectly or

partially owned, operated or controlled

by any partner or stockholder of the

producer-handler. However, for

purposes of this paragraph, any such

milk production resources and facilities

which the producer-handler proves to

the satisfaction of the market

administrator do not constitute an

actual or potential source of milk supply

for the producer-handler’s operation as

such shall not be considered a part of

the producer-handler’s milk production

resources and facilities.

(2) As milk handling, processing and

distributing resources and facilities. All

resources and facilities (including store

outlets) used for handling, processing

and distributing any fluid milk product:

(i) Which are directly, indirectly or

partially owned, operated or controlled

by the producer-handler; or

(ii) In which the producer-handler in

any way has an interest, including any

contractual arrangement, or with respect

to which the producer-handler directly

or indirectly exercises any degree of

management or control.

(3) All designations shall remain in

effect until canceled pursuant to

paragraph (c) of this section.

(c) Cancellation. The designation as a

producer-handler shall be canceled

upon determination by the market

administrator that any of the

requirements of paragraph (a)(1) through

(4) of this section are not continuing to

be met, or under any of the following

conditions:

(1) Milk from the milk production

resources and facilities of the producerhandler, designated in paragraph (b)(1)

of this section is delivered in the name

of another person as producer milk to

another handler;

(2) The producer-handler handles

fluid milk products derived from

sources other than the milk production

facilities and resources designated in

paragraph (b)(1) of this section, except

that it may receive at its plant or acquire

for route disposition fluid milk products

from fully regulated plants and handlers
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5069

under any Federal order if such receipts

do not exceed 150,000 pounds monthly.

This limitation shall not apply if the

producer-handler’s own farm

production is less than 150,000 pounds

during the month; or

(3) The producer-handler disposes of

fluid milk products using the

distribution system of another handler,

except for direct deliveries by the

producer-handler to retail outlets or to

a pool handler’s plant.

(4) Cancellation of a producerhandler’s status pursuant to this

paragraph shall be effective on the first

day of the month following the month

in which the requirements were not

met, or the conditions for cancellation

occurred.

(d) Public announcement. The market

administrator shall publicly announce

the name, plant location and farm

location(s) of persons designated as

producer-handlers, of those whose

designations have been canceled, and

the effective dates of producer-handler

status or loss of producer-handler status

for each. Such announcements shall be

controlling with respect to the

accounting at plants of other handlers

for fluid milk products received from

any producer-handler.

(e) Burden of establishing and

maintaining producer-handler status.

The burden rests upon the handler who

is designated as a producer-handler to

establish through records required

pursuant to § 1000.5 that the

requirements set forth in paragraph (a)

of this section have been and are

continuing to be met, and that the

conditions set forth in paragraph (c) of

this section for cancellation of

designation do not exist.

(f) Producer-handler shall not include

any producer who also operates a

distributing plant if the producerhandler so requests that the two be

operated as separate entities with the

distributing plant regulated pursuant to

§ 1124.7(a) and the farm operated as a

producer pursuant to § 1124.12.

§ 1124.11 Cooperative reserve supply unit.

Cooperative reserve supply unit

means any cooperative association or its

agent that is a handler pursuant to

§ 1000.9(c) that does not own or operate

a plant, if such cooperative has been

qualified to receive payments pursuant

to § 1124.73 and has been a handler of

producer milk under this or its

predecessor order during each of the 12

previous months, and if a majority of

the cooperative’s member producers are

located within 125 miles of a pool

distributing plant. A cooperative reserve

supply unit shall be subject to the

following conditions:

(a) The cooperative shall file a request

with the market administrator for

cooperative reserve supply unit status at

least 15 days prior to the first day of the

month in which such status is desired

to be effective. Once qualified as a

cooperative reserve supply unit

pursuant to this paragraph, such status

shall continue to be effective unless the

cooperative requests termination prior

to the first day of the month that change

of status is requested, or the cooperative

fails to meet all of the conditions of this

section;

(b) The cooperative reserve supply

unit supplies fluid milk products to

pool distributing plants located within

125 miles of a majority of the

cooperative’s member producers in

compliance with any announcement by

the market administrator requesting a

minimum level of shipments as further

provided below:

(1) The market administrator may

require such supplies of bulk fluid milk

from cooperative reserve supply units

whenever the market administrator

finds that milk supplies for Class I use

are needed for plants defined in

§ 1124.7(a) or (b). Before making such a

finding, the market administrator shall

investigate the need for such shipments

either on the market administrator’s

own initiative or at the request of

interested persons. If the market

administrator’s investigation shows that

such shipments might be appropriate,

the market administrator shall issue a

notice stating that a shipping

announcement is being considered and

inviting data, views and arguments with

respect to the proposed shipping

announcement.

(2) Failure of a cooperative reserve

supply unit to comply with any

announced shipping requirements,

including making any significant change

in the unit’s marketing operation that

the market administrator determines has

the impact of evading or forcing such an

announcement, shall result in

immediate loss of cooperative reserve

supply unit status until such time as the

unit has been a handler pursuant to

§ 1000.9(c) for at least 12 consecutive

months.

§ 1124.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk (or components of milk) is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1124.13; or

(2) Received by a handler described in

§ 1000.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

received at an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1124.13(d);

(3) A dairy farmer whose milk is

received by diversion at a pool plant

from a handler regulated under another

Federal order if the other Federal order

designates the dairy farmer as a

producer under that order and that milk

is allocated by request to a utilization

other than Class I;

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another Federal order

with respect to that portion of the milk

so diverted that is assigned to Class I

under the provisions of such other

order; and

(5) A dairy farmer whose milk, at any

time during the month, has been pooled

under a State milk order.

§ 1124.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk), including nonfat

components, and butterfat in milk of a

producer that is:

(a) Received by the operator of a pool

plant directly from a producer or a

handler described in § 1000.9(c). Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of a pool plant

or a handler described in § 1000.9(c) but

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it is picked

up at the producer’s farm. All milk

received pursuant to this paragraph

shall be priced at the location of the

plant where it is first physically

received;

(b) Received by a handler described in

§ 1000.9(c) in excess of the quantity

delivered to pool plants;

(c) Diverted by a pool plant operator

to another pool plant. Milk so diverted

shall be priced at the location of the

plant to which diverted; or

(d) Diverted by the operator of a pool

plant or a cooperative association

described in § 1000.9(c) to a nonpool

plant, subject to the following

conditions:

(1) Of the quantity of producer milk

received during the month (including

diversions, but excluding the quantity of

producer milk received from a handler

described in § 1000.9(c)) the handler

diverts to nonpool plants not more than

65 percent during the months of
5070 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

September through November and

January, and not more than 75 percent

during the months of February through

August and December;

(3) Diverted milk shall be priced at

the location of the plant to which

diverted;

(4) Any milk diverted in excess of the

limits prescribed in paragraph (d)(2) of

this section shall not be producer milk.

If the diverting handler or cooperative

association fails to designate the dairy

farmers’ deliveries that are not to be

producer milk, no milk diverted by the

handler or cooperative association

during the month to a nonpool plant

shall be producer milk; and

(5) The applicable diversion limits in

paragraph (d)(2) of this section may be

increased or decreased by the market

administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested persons. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments.

Any decision to revise an applicable

percentage must be issued in writing at

least one day before the effective date.

§ 1124.14 Other source milk.

See § 1000.14 of this chapter.

§ 1124.15 Fluid milk product.

See § 1000.15 of this chapter.

§ 1124.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1124.17 [Reserved]

§ 1124.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1124.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.

Handler Reports

§ 1124.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator’s office

receives the report on or before the 9th

day after the end of the month, in the

detail and on the prescribed forms, as

follows:

(a) Each handler that operates a pool

plant pursuant to § 1124.7 and each

handler described in § 1000.9(c) shall

report for each of its operations the

following information:

(1) Product pounds, pounds of

butterfat, pounds of protein, and pounds

of solids-not-fat other than protein

(other solids) contained in or

represented by:

(i) Receipts of producer milk,

including producer milk diverted by the

handler; and

(ii) Receipts of milk from handlers

described in § 1000.9(c);

(2) Product pounds and pounds of

butterfat contained in:

(i) Receipts of fluid milk products and

bulk fluid cream products from other

pool plants;

(ii) Receipts of other source milk; and

(iii) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products;

(3) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph; and

(4) Such other information with

respect to the receipts and utilization of

skim milk, butterfat, milk protein, and

other nonfat solids, as the market

administrator may prescribe.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a) of this section.

Receipts of milk that would have been

producer milk if the plant had been

fully regulated shall be reported in lieu

of producer milk. The report shall show

also the quantity of any reconstituted

skim milk in route disposition in the

marketing area.

(c) Each handler not specified in

paragraphs (a) and (b) of this section

shall report with respect to its receipts

and utilization of milk and milk

products in such manner as the market

administrator may prescribe.

§ 1124.31 Payroll reports.

(a) On or before the 20th day after the

end of each month, each handler that

operates a pool plant pursuant to

§ 1124.7 and each handler described in

§ 1000.9(c) shall report to the market

administrator its producer payroll for

the month, in the detail prescribed by

the market administrator, showing for

each producer the information

described in § 1124.73(f).

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.

§ 1124.32 Other reports.

In addition to the reports required

pursuant to §§ 1124.30 and 1124.31,

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

Classification of Milk

§ 1124.40 Classes of utilization.

See § 1000.40 of this chapter.

§ 1124.41 [Reserved]

§ 1124.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1124.43 General classification rules.

See § 1000.43 of this chapter.

§ 1124.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1124.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1124.50 Class prices and component

prices.

See § 1000.50 of this chapter.

§ 1124.51 Class I differential and price.

The Class I differential shall be the

differential established for King County,

Washington, which is reported in

§ 1000.52. The Class I price shall be the

price computed pursuant to § 1000.50(a)

for King County, Washington.

§ 1124.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1124.53 Announcement of class prices

and component prices.

See § 1000.53 of this chapter.

§ 1124.54 Equivalent price.

See § 1000.54 of this chapter.

Producer Price Differential

§ 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 its pool plants, and of each

handler described in § 1000.9(c) as

follows:

(a) Class I value.

(1) Multiply the hundredweight of

skim milk in Class I as determined

pursuant to § 1000.44(a) by the Class I

skim milk price applicable at the

handler’s location; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in
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Class I as determined pursuant to

§ 1000.44(b) by the Class I butterfat

price applicable at the handler’s

location.

(b) Add the Class II value, computed

as follows:

(1) Multiply the hundredweight of

skim milk in Class II as determined

pursuant to § 1000.44(a) by 70 cents;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class II as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price;

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class II as determined pursuant to

§ 1000.44(b) by the butterfat price;

(c) Add the Class III value computed

as follows:

(1) Multiply the pounds of skim milk

in Class III as determined pursuant to

§ 1000.44(a) by the average protein

content of producer skim milk received

by the handler, and multiply the

resulting pounds of protein by the

protein price;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class III as determined pursuant to

§ 1000.44(a) by the average other solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of other solids by the

other solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class III as determined pursuant to

§ 1000.44(b) by the butterfat price;

(d) Add the Class IV value computed

as follows:

(1) Multiply the pounds of skim milk

in Class IV as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class IV as determined pursuant to

§ 1000.44(b) by the butterfat price;

(e) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43(b)(2) by the

respective skim milk and butterfat

prices applicable at the location of the

pool plant;

(f) Add the amount obtained from

multiplying the difference between the

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);

(g) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3)(i)

through (iii) and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from a plant

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plants;

(h) Add the amount obtained from

multiplying the difference between the

Class I price and the Class III price

applicable at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§ 1000.43(d) and § 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

step of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

bulk fluid milk products from an

unregulated supply plant to the extent

that an equivalent amount of skim milk

or butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(i) Subtract, for reconstituted milk

made from receipts of nonfluid milk

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicale at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I pursuant to

§ 1000.43(d); and

(j) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another order under

§ 1000.76(a)(5) or (c).

§ 1124.61 Computation of producer price

differential.

For each month the market

administrator shall compute a producer

price differential per hundredweight. If

the unreserved balance in the producersettlement fund to be included in the

computation is less than 2 cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1124.71 for the preceding

month shall not be included in the

computation of the producer price

differential. The report of such handler

shall not be included in the

computation for succeeding months

until the handler has made full payment

of outstanding monthly obligations.

Subject to the aforementioned

conditions, the market administrator

shall compute the producer price

differential in the following manner:

(a) Combine into one total the values

computed pursuant to § 1124.60 for all

handlers required to file reports

prescribed in § 1124.30;

(b) Subtract the total values obtained

by multiplying each handler’s total

pounds of protein, other solids, and

butterfat contained in the milk for

which an obligation was computed

pursuant to § 1124.60 by the protein

price, the other solids price, and the

butterfat price, respectively;

(c) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1124.75;

(d) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(e) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(1) The total hundredweight of

producer milk; and

(2) The total hundredweight for which

a value is computed pursuant to

§ 1124.60(i); and

(f) Subtract not less than 4 cents nor

more than 5 cents from the price

computed pursuant to paragraph (e) of

this section. The result shall be known

as the producer price differential for the

month.

§ 1124.62 Announcement of producer

prices.

On or before the 14th day after the

end of each month, the market

administrator shall announce publicly

the following prices and information:

(a) The producer price differential;

(b) The protein price;

(c) The other solids price;

(d) The butterfat price;

(e) The average butterfat, protein and

other solids content of producer milk;

and

(f) The statistical uniform price for

milk containing 3.5 percent butterfat,

computed by combining the Class III

price and the producer price

differential.
5072 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

Payment for Milk

§ 1124.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1124.71 Payments to the producersettlement fund.

Each handler shall make payment to

the producer-settlement fund in a

manner that provides receipt of the

funds by the market administrator no

later than the 16th day after the end of

the month. Payment shall be the

amount, if any, by which the amount

specified in (a) of this section exceeds

the amount specified in (b) of this

section:

(a) The total value of milk to the

handler for the month as determined

pursuant to § 1124.60.

(b) The sum of:

(1) An amount obtained by

multiplying the total hundredweight of

producer milk as determined pursuant

to § 1000.44(c) by the producer price

differential as adjusted pursuant to

§ 1124.75;

(2) An amount obtained by

multiplying the total pounds of protein,

other solids, and butterfat contained in

producer milk by the protein, other

solids, and butterfat prices respectively;

and

(3) An amount obtained by

multiplying the pounds of skim milk

and butterfat for which a value was

computed pursuant to § 1124.60(i) by

the producer price differential as

adjusted pursuant to § 1124.75 for the

location of the plant from which

received.

§ 1124.72 Payments from the producersettlement fund.

No later than the 18th day after the

end of each month, the market

administrator shall pay to each handler

the amount, if any, by which the

amount computed pursuant to

§ 1124.71(b) exceeds the amount

computed pursuant to § 1124.71(a). If, at

such time, the balance in the producersettlement fund is insufficient to make

all payments pursuant to this section,

the market administrator shall reduce

uniformly such payments and shall

complete the payments as soon as the

funds are available.

§ 1124.73 Payments to producers and to

cooperative associations.

(a) Each handler shall pay each

producer for producer milk for which

payment is not made to a cooperative

association pursuant to paragraph (b) of

this section, as follows:

(1) Partial payment. For each

producer who has not discontinued

shipments as of the 18th day of the

month, partial payment shall be made

so that it is received by each producer

on or before the last day of the month

for milk received during the first 15

days of the month from the producer at

not less than the lowest announced

class price for the preceding month, less

proper deductions authorized in writing

by the producer; and

(2) Final payment. For milk received

during the month, payment shall be

made so that it is received by each

producer no later than the 19th day after

the end of the month in an amount

equal to not less than the sum of:

(i) The hundredweight of producer

milk received times the producer price

differential for the month as adjusted

pursuant to § 1124.75;

(ii) The pounds of butterfat received

times the butterfat price for the month;

(iii) The pounds of protein received

times the protein price for the month;

(iv) The pounds of other solids

received times the other solids price for

the month;

(v) Less any payment made pursuant

to paragraph (a)(1) of this section;

(vi) Less proper deductions

authorized in writing by such producer

and plus or minus adjustments for

errors in previous payments to such

producer; and

(vii) Less deductions for marketing

services pursuant to § 1000.86.

(b) Payments for milk received from

cooperative association members. On or

before the 2nd day prior to the dates

specified in paragraphs (a)(1) and (a)(2)

of this section, each handler shall pay

to a cooperative association for milk

from producers who market their milk

through the cooperative association and

who have authorized the cooperative to

collect such payments on their behalf an

amount equal to the sum of the

individual payments otherwise payable

for such producer milk pursuant to

paragraphs (a)(1) and (a)(2) of this

section.

(c) Payment for milk received from

cooperative association pool plants or

from cooperatives as handlers pursuant

to § 1000.9(c). On or before the 2nd day

prior to the dates specified in paragraph

(a)(1) and (a)(2) of this section, each

handler who receives fluid milk

products at its plant from a cooperative

association in its capacity as the

operator of a pool plant or who receives

milk from a cooperative association in

its capacity as a handler pursuant to

§ 1000.9(c), including the milk of

producers who are not members of such

association and who the market

administrator determines have

authorized the cooperative association

to collect payment for their milk, shall

pay the cooperative for such milk as

follows:

(1) For bulk fluid milk products and

bulk fluid cream products received from

a cooperative association in its capacity

as the operator of a pool plant and for

milk received from a cooperative

association in its capacity as a handler

pursuant to § 1000.9(c) during the first

15 days of the month, at not less than

the lowest announced class price per

hundredweight for the preceding

month;

(2) For the total quantity of bulk fluid

milk products and bulk fluid cream

products received from a cooperative

association in its capacity as the

operator of a pool plant, at not less than

the total value of such products received

from the association’s pool plants, as

determined by multiplying the

respective quantities assigned to each

class under § 1000.44, as follows:

(i) The hundredweight of Class I skim

milk times the Class I skim milk price

for the month plus the pounds of Class

I butterfat times the Class I butterfat

price for the month. The Class I price to

be used shall be that price effective at

the location of the shipping plant;

(ii) The hundredweight of Class II

skim milk times $ .70;

(iii) The pounds of nonfat solids

received in Class II and Class IV milk

times the nonfat solids price for the

month;

(iv) The pounds of butterfat received

in Class II, Class III, and Class IV milk

times the butterfat price for the month;

(v) The pounds of protein received in

Class III milk times the protein price for

the month;

(vi) The pounds of other solids

received in Class III milk times the other

solids price for the month; and

(vii) Add together the amounts

computed in paragraphs (c)(2)(i)

through (vi) of this section and from that

sum deduct any payment made

pursuant to paragraph (c)(1) of this

section.

(3) For the total quantity of milk

received during the month from a

cooperative association in its capacity as

a handler under § 1000.9(c) as follows:

(i) The hundredweight of producer

milk received times the producer price

differential as adjusted pursuant to

§ 1124.75;

(ii) The pounds of butterfat received

times the butterfat price for the month;

(iii) The pounds of protein received

times the protein price for the month;

(iv) The pounds of other solids

received times the other solids price for

the month; and

(v) Add together the amounts

computed in paragraphs (c)(3)(i)

through (iv) of this section and from that

sum deduct any payment made
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5073

pursuant to paragraph (c)(1) of this

section.

(d) If a handler has not received full

payment from the market administrator

pursuant to § 1124.72 by the payment

date specified in paragraph (a), (b) or (c)

of this section, the handler may reduce

pro rata its payments to producers or to

the cooperative association (with

respect to receipts described in

paragraph (b), prorating the

underpayment to the volume of milk

received from the cooperative

association in proportion to the total

milk received from producers by the

handler), but not by more than the

amount of the underpayment. The

payments shall be completed on the

next scheduled payment date after

receipt of the balance due from the

market administrator.

(e) If a handler claims that a required

payment to a producer cannot be made

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer-settlement fund, and in the

event that the handler subsequently

locates and pays the producer or a

lawful claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or to the lawful

claimant, as the case may be.

(f) In making payments to producers

pursuant to this section, each handler

shall furnish each producer, except a

producer whose milk was received from

a cooperative association handler

described in § 1000.9(a) or (c), a

supporting statement in a form that may

be retained by the recipient which shall

show:

(1) The name, address, Grade A

identifier assigned by a duly constituted

regulatory agency, and payroll number

of the producer;

(2) The daily and total pounds, and

the month and dates such milk was

received from that producer;

(3) The total pounds of butterfat,

protein, and other solids contained in

the producer’s milk;

(4) The minimum rate or rates at

which payment to the producer is

required pursuant to this order;

(5) The rate used in making payment

if the rate is other than the applicable

minimum rate;

(6) The amount, or rate per

hundredweight, or rate per pound of

component, and the nature of each

deduction claimed by the handler; and

(7) The net amount of payment to the

producer or cooperative association.

§ 1124.74 [Reserved]

§ 1124.75 Plant location adjustments for

producer milk and nonpool milk.

(a) The producer price differential for

producer milk shall be adjusted

according to the location of the plant at

which the milk was physically received

by subtracting from the price differential

the amount by which the Class I price

specified in § 1124.51 exceeds the Class

I price at the plant’s location. If the

Class I price at the plant location

exceeds the Class I price specified in

§ 1124.51, the difference shall be added

to the producer price differential; and

(b) The producer price differential

applicable to other source milk shall be

adjusted following the procedure

specified in paragraph (a) of this

section, except that the adjusted

producer price differential shall not be

less than zero.

§ 1124.76 Payments by a handler

operating a partially regulated distributing

plant.

See § 1000.76 of this chapter.

§ 1124.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1124.78 Charges on overdue accounts.

See § 1000.78 of this chapter.

Administrative Assessment and

Marketing Service Deduction

§ 1124.85 Assessment for order

administration.

See § 1000.85 of this chapter.

§ 1124.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

PART 1126—MILK IN THE

SOUTHWEST MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1126.1 General Provisions.

Definitions

1126.2 Southwest marketing area.

1126.3 Route disposition.

1126.4 Plant.

1126.5 Distributing plant.

1126.6 Supply plant.

1126.7 Pool plant.

1126.8 Nonpool plant.

1126.9 Handler.

1126.10 Producer-handler.

1126.11 [Reserved]

1126.12 Producer.

1126.13 Producer milk.

1126.14 Other source milk.

1126.15 Fluid milk product.

1126.16 Fluid cream product.

1126.17 [Reserved]

1126.18 Cooperative association.

1126.19 Commercial food processing

establishment.

Handler Reports

1126.30 Reports of receipts and utilization.

1126.31 Payroll reports.

1126.32 Other reports.

Classification of Milk

1126.40 Classes of utilization.

1126.41 [Reserved]

1126.42 Classification of transfers and

diversions.

1126.43 General classification rules.

1126.44 Classification of producer milk.

1126.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1126.50 Class prices and component prices.

1126.51 Class I differential and price.

1126.52 Adjusted Class I differentials.

1126.53 Announcement of class prices and

component prices.

1126.54 Equivalent price.

Producer Price Differential

1126.60 Handler’s value of milk.

1126.61 Computation of producer price

differential.

1126.62 Announcement of producer prices.

Payments for Milk

1126.70 Producer-settlement fund.

1126.71 Payments to the producersettlement fund.

1126.72 Payments from the producersettlement fund.

1126.73 Payments to producers and to

cooperative associations.

1126.74 [Reserved]

1126.75 Plant location adjustments for

producer milk and nonpool milk.

1126.76 Payments by a handler operating a

partially regulated distributing plant.

1126.77 Adjustment of accounts.

1126.78 Charges on overdue accounts.

Administrative Assessment and Marketing

Service Deduction

1126.85 Assessment for order

administration.

1126.86 Deduction for marketing services.

Authority: 7 U.S.C. 601–674.

Subpart—Order Regulating Handling

General Provisions

§ 1126.1 General provisions.

The terms, definitions, and provisions

in part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1126.2 Southwest marketing area.

The marketing area means all territory

within the bounds of the following

states and political subdivisions,

including all piers, docks and wharves

connected therewith and all craft

moored thereat, and all territory

occupied by government (municipal,

State or Federal) reservations,

installations, institutions, or other

similar establishments if any part
5074 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

thereof is within any of the listed states

or political subdivisions:

New Mexico and Texas

All of the States of New Mexico and Texas.

Colorado Counties

Archuleta, LaPlata, and Montezuma.

§ 1126.3 Route disposition.

See § 1000.3 of this chapter.

§ 1126.4 Plant.

See § 1000.4 of this chapter.

§ 1126.5 Distributing plant.

See § 1000.5 of this chapter.

§ 1126.6 Supply plant.

See § 1000.6 of this chapter.

§ 1126.7 Pool plant.

Pool plant means a plant specified in

paragraphs (a) through (d) of this

section, or a unit of plants as specified

in paragraph (e) of this section, but

excluding a plant specified in paragraph

(g) of this section. The pooling

standards described in paragraphs (a),

(c), and (d) of this section are subject to

modification pursuant to paragraph (f)

of this section:

(a) A distributing plant from which

during the month the total route

disposition is equal to 25 percent or

more of the total quantity of fluid milk

products physically received at such

plant and route disposition in the

marketing area is at least 15 percent of

total route distribution. Packaged fluid

milk products that are transferred to a

distributing plant and which are

classified as Class I milk shall be

considered as route disposition from the

transferring plant, rather than the

receiving plant, for the single purpose of

determining the transferring plant’s pool

status under this paragraph.

(b) A distributing plant located in the

marketing area at which the majority of

milk received is processed into

aseptically packaged fluid milk

products unless there are no sales from

the plant into any marketing area and

the plant operator in writing requests

nonpool status for the plant for the

month.

(c) A supply plant from which 50

percent of the total quantity of milk that

is physically received during the month

from dairy farmers and handlers

described in § 1000.9(c) is transferred to

pool distributing plants.

(d) A plant located within the

marketing area that is operated by a

cooperative association if pool plant

status under this paragraph is requested

for such plant by the cooperative

association and during the month at

least 30 percent of the producer milk of

members of such cooperative

association is delivered directly from

farms to pool distributing plants or is

transferred to such plants as a fluid milk

product from the cooperative’s plant.

(e) Two or more plants operated by

the same handler and located within the

marketing area may qualify for pool

status as a unit by meeting the total and

in-area route disposition requirements

specified in paragraph (a) of this section

and the following additional

requirements:

(1) At least one of the plants in the

unit must qualify as a pool plant

pursuant to paragraph (a) of this section;

(2) Other plants in the unit must

process only Class I or Class II products

and must be located in a pricing zone

providing the same or a lower Class I

price than the price applicable at the

distributing plant included in the unit

pursuant to paragraph (e)(1) of this

section; and

(3) A written request to form a unit,

or to add or remove plants from a unit,

must be filed with the market

administrator prior to the first day of the

month for which it is to be effective.

(f) The applicable percentages in

paragraphs (a), (c), and (d) of this

section may be increased or decreased

up to 10 percentage points by the

market administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested parties if the request is made

in writing at least 15 days prior to the

date for which the requested revision is

desired effective. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

(g) The term pool plant shall not

apply to the following plants:

(1) A producer-handler plant;

(2) An exempt plant as defined in

§ 1000.8(e);

(3) A plant qualified pursuant to

paragraph (a) of this section that is

located within the marketing area if the

plant also meets the pooling

requirements of another Federal order,

and more than 50 percent of its route

distribution has been in such other

Federal order marketing area for 3

consecutive months;

(4) A plant qualified pursuant to

paragraph (a) of this section which is

not located within any Federal order

marketing area that meets the pooling

requirements of another Federal order

and has had greater sales in such other

Federal order’s marketing area for 3

consecutive months;

(5) A plant qualified pursuant to

paragraph (a) of this section that is

located in another Federal order

marketing area if the plant meets the

pooling requirements of such other

Federal order and does not have a

majority of its route distribution in this

marketing area for 3 consecutive months

or if the plant is required to be regulated

under such other Federal order without

regard to its route disposition in any

other Federal order marketing area;

(6) A plant qualified pursuant to

paragraph (c) or (d) of this section

which also meets the pooling

requirements of another Federal order

and from which greater qualifying

shipments are made to plants regulated

under the other Federal order than are

made to plants regulated under this

order, or the plant has automatic

pooling status under the other Federal

order; and

(7) That portion of a pool plant

designated as a nonpool plant that is

physically separate and operated

separately from the pool portion of such

plant. The designation of a portion of a

regulated plant as a nonpool plant must

be requested in writing by the handler

and must be approved by the market

administrator.

§ 1126.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1126.9 Handler.

See § 1000.9 of this chapter.

§ 1126.10 Producer-handler.

Except as provided in paragraph (g) of

this section, producer-handler means a

person who:

(a) Operates a dairy farm and a

distributing plant from which there is

monthly route disposition in excess of

150,000 pounds during the month;

(b) Receives no fluid milk products

from sources other than own farm

production, pool handlers, and plants

fully regulated under another Federal

order.

(c) Receives no more than 150,000

pounds of fluid milk products from

handlers fully regulated under any

Federal order, including such products

received at a location other than the

producer-handler’s processing plant for

distribution on routes. This limitation

shall not apply if the producer-handler’s

own farm production is less than

150,000 pounds during the month.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5075

(d) Disposes of no other source milk

as Class I milk except by increasing the

nonfat milk solids content of the fluid

milk products received from own farm

production or pool handlers;

(e) Disposes of no fluid milk products

using the distribution system of another

handler except for direct deliveries to

retail outlets or to a pool handler’s

plant;

(f) Provides proof satisfactory to the

market administrator that the care and

management of the dairy animals and

other resources necessary to produce all

Class I milk handled (excluding receipts

from handlers fully regulated under any

Federal order) and the processing,

packaging, and distribution operations

are the producer-handler’s own

enterprise and at its own risk; and

(g) Producer-handler shall not include

any producer who also operates a

distributing plant if the producerhandler so requests that the two be

operated as separate entities with the

distributing plant regulated under

§ 1126.7(a) and the farm operated as a

producer under § 1126.12.

§ 1126.11 [Reserved]

§ 1126.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk (or components of milk) is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1126.13; or

(2) Received by a handler described in

§ 1000.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

received at an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1126.13(d);

(3) A dairy farmer whose milk is

received by diversion at a pool plant

from a handler regulated under another

Federal order if the other Federal order

designates the dairy farmer as a

producer under that order and the milk

is allocated by request to a utilization

other than Class I; and

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another Federal order

with respect to that portion of the milk

so diverted that is assigned to Class I

under the provisions of such other

order.

§ 1126.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk), including nonfat

components, and butterfat contained in

milk of a producer that is:

(a) Received by the operator of a pool

plant directly from a producer or a

handler described in § 1000.9(c). Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of a pool plant

or a handler described in § 1000.9(c) but

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it is picked

up at the producer’s farm. All milk

received pursuant to this paragraph

shall be priced at the location of the

plant where it is first physically

received;

(b) Received by a handler described in

§ 1000.9(c) in excess of the quantity

delivered to pool plants;

(c) Diverted by a pool plant operator

for the account of the handler operating

such plant to another pool plant. Milk

so diverted shall be priced at the

location of the plant to which diverted;

or

(d) Diverted by the operator of a pool

plant or a handler described in

§ 1000.9(c) to a nonpool plant, subject to

the following conditions:

(1) Milk of a producer whose dairy

farm is located outside the marketing

area shall not be eligible for diversion

unless at least 15% of the producer’s

milk is physically received at a pool

plant during the month;

(2) The total quantity of milk so

diverted during the month by a

cooperative association shall not exceed

the total quantity of producer milk that

the cooperative association caused to be

delivered to, and physically received at,

pool plants during the month;

(3) The operator of a pool plant that

is not a cooperative association may

divert any milk that is not under the

control of a cooperative association that

diverts milk during the month pursuant

to this paragraph. The total quantity of

milk so diverted during the month shall

not exceed the total quantity of the

producer milk physically received at

such plant (or such unit of plants in the

case of plants that pool as a unit

pursuant to § 1126.7(e)) during the

month;

(4) Any milk diverted in excess of the

limits prescribed in paragraphs (d)(2)

and (3) of this section shall not be

producer milk. If the diverting handler

or cooperative association fails to

designate the dairy farmers’ deliveries

that will not be producer milk, no milk

diverted by the handler or cooperative

association shall be producer milk;

(5) Diverted milk shall be priced at

the location of the plant to which

diverted; and

(6) The delivery day requirements in

paragraph (d)(1) and the diversion

percentages in paragraphs (d)(2) and (3)

of this section may be increased or

decreased by the market administrator if

the market administrator finds that such

revision is necessary to assure orderly

marketing and efficient handling of milk

in the marketing area. Before making

such a finding, the market administrator

shall investigate the need for the

revision either on the market

administrator’s own initiative or at the

request of interested persons. If the

investigation shows that a revision

might be appropriate, the market

administrator shall issue a notice stating

that the revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

§ 1126.14 Other source milk.

See § 1000.14 of this chapter.

§ 1126.15 Fluid milk product.

See § 1000.15 of this chapter.

§ 1126.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1126.17 [Reserved]

§ 1126.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1126.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.

Handler Reports

§ 1126.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator’s office

receives the report on or before the 8th

day after the end of the month, in the

detail and on prescribed forms, as

follows:

(a) Each pool plant operator and each

handler described in § 1000.9(c), shall

report for each of its operations the

following information:

(1) Product pounds, pounds of

butterfat, pounds of protein, pounds of

nonfat solids other than protein (other

solids), and the value of the somatic cell

adjustment pursuant to § 1000.50(p)

contained in or represented by:

(i) Receipts of producer milk,

including producer milk diverted by the

reporting handler; and

(ii) Receipts of milk from handlers

described in § 1000.9(c);

(2) Product pounds and pounds of

butterfat contained in:
5076 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(i) Receipts of fluid milk products and

bulk fluid cream products from other

pool plants;

(ii) Receipts of other source milk; and

(iii) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products; and

(3) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph; and

(4) Such other information with

respect to the receipts and utilization of

skim milk, butterfat, milk protein, other

nonfat solids, and somatic cell

information, as the market administrator

may prescribe.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a) of this section.

Receipts of milk that would have been

producer milk if the plant had been

fully regulated shall be reported in lieu

of producer milk. The report shall show

also the quantity of any reconstituted

skim milk in route disposition in the

marketing area.

(c) Each handler not specified in

paragraphs (a) or (b) of this section shall

report with respect to its receipts and

utilization of milk and milk products in

such manner as the market

administrator may prescribe.

§ 1126.31 Payroll reports.

(a) On or before the 20th day after the

end of each month, each handler that

operates a pool plant pursuant to

§ 1126.7 and each handler described in

§ 1000.9(c) shall report to the market

administrator its producer payroll for

the month, in the detail prescribed by

the market administrator, showing for

each producer the information specified

in § 1126.73(e);

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.

§ 1126.32 Other reports.

In addition to the reports required

pursuant to §§ 1126.30 and 1126.31,

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

Classification of Milk

§ 1126.40 Classes of utilization.

See § 1000.40 of this chapter.

§ 1126.41 [Reserved]

§ 1126.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1126.43 General classification rules.

See § 1000.43 of this chapter.

§ 1126.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1126.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1126.50 Class prices and component

prices.

See § 1000.50 of this chapter.

§ 1126.51 Class I differential and price.

The Class I differential shall be the

differential established for Dallas

County, Texas, which is reported in

§ 1000.52. The Class I price shall be the

price computed pursuant to § 1000.50(a)

for Dallas County, Texas.

§ 1126.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1126.53 Announcement of class prices

and component prices.

See § 1000.53 of this chapter.

§ 1126.54 Equivalent price.

See § 1000.54 of this chapter.

Producer Price Differential

§ 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 § 1000.9(c) as

follows:

(a) Class I value.

(1) Multiply the hundredweight of

skim milk in Class I as determined

pursuant to § 1000.44(a) by the Class I

skim milk price applicable at the

handler’s location; and

(2) Add an amount obtained by

multiplying the total pounds of butterfat

in Class I as determined pursuant to

§ 1000.44(b) by the Class I butterfat

price applicable at the handler’s

location.

(b) Add the Class II value, computed

as follows:

(1) Multiply the hundredweight of

milk in Class II as determined pursuant

to § 1000.44(a) by 70 cents;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class II as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiplying the

resulting pounds of nonfat solids by the

nonfat solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class II as determined pursuant to

§ 1000.44(b) by the butterfat price.

(c) Add the Class III value, computed

as follows:

(1) Multiply the pounds of skim milk

in Class III as determined pursuant to

§ 1000.44(a) by the average protein

content of producer skim milk received

by the handler, and multiply the

resulting pounds of protein by the

protein price;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class III as determined pursuant to

§ 1000.44(a) by the average other solids

content of producer skim milk received

by the handler, and multiplying the

resulting pounds of other solids by the

other solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class III as determined pursuant to

§ 1000.44(b) by the butterfat price.

(d) Add the Class IV value, computed

as follows:

(1) Multiply the pounds of skim milk

in Class IV as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class IV as determined pursuant to

§ 1000.44(b) by the butterfat price.

(e) Add an adjustment for somatic cell

content of producer milk as determined

by multiplying the value reported

pursuant to § 1126.30(a)(1) by the

percentage of the total producer milk

allocated to Class II, Class III, and Class

IV pursuant to § 1000.44(c).

(f) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43(b)(2) by the

respective skim milk and butterfat

prices applicable at the location of the

pool plant;

(g) Add the amount obtained from

multiplying the difference between the

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);
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(h) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3)(i)

through (iii) and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from a plant

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plants;

(i) Add the amount obtained from

multiplying the difference between the

Class I price and the Class III price

applicable at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§ 1000.43(d) and § 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

step of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

bulk fluid milk products from an

unregulated supply plant to the extent

that an equivalent amount of skim milk

or butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(j) Subtract, for reconstituted milk

made from receipts of nonfluid milk

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicable at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I use pursuant to

§ 1000.43(d); and

(k) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another Federal order

under § 1000.76(a)(5) or (c).

§ 1126.61 Computation of producer price

differential.

For each month the market

administrator shall compute a producer

price differential per hundredweight. If

the unreserved balance in the producersettlement fund to be included in the

computation is less than 2 cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1126.71 for the preceding

month shall not be included in the

computation of the producer price

differential. The report of such handler

shall not be included in the

computation for succeeding months

until the handler has made full payment

of outstanding monthly obligations.

Subject to the aforementioned

conditions, the market administrator

shall compute the producer price

differential in the following manner:

(a) Combine into one total the values

computed pursuant to § 1126.60 for all

handlers required to file reports

prescribed in § 1126.30;

(b) Subtract the total of the values

obtained by multiplying each handler’s

total pounds of protein, other solids,

and butterfat contained in the milk for

which an obligation was computed

pursuant to § 1126.60 by the protein

price, other solids price, and the

butterfat price, respectively, and the

total value of the somatic cell

adjustment pursuant to § 1126.30(a)(1);

(c) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1126.75;

(d) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(e) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(1) The total hundredweight of

producer milk; and

(2) The total hundredweight for which

a value is computed pursuant to

§ 1126.60(i); and

(f) Subtract not less than 4 cents nor

more than 5 cents from the price

computed pursuant to paragraph (e) of

this section. The result shall be known

as the producer price differential for the

month.

§ 1126.62 Announcement of producer

prices.

On or before the 13th day after the

end of each month, the market

administrator shall announce the

following prices and information:

(a) The producer price differential;

(b) The protein price;

(c) The other solids price;

(d) The butterfat price;

(e) The somatic cell adjustment rate;

(f) The average butterfat, nonfat

solids, protein, and other solids content

of producer milk; and

(g) The statistical uniform price for

milk containing 3.5 percent butterfat,

computed by combining the Class III

price and the producer price

differential.

Payments for Milk

§ 1126.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1126.71 Payments to the producersettlement fund.

Each handler shall make payment to

the producer-settlement fund in a

manner that provides receipt of the

funds by the market administrator no

later than the 16th day after the end of

the month. Payment shall be the

amount, if any, by which the amount

specified in paragraph (a) of this section

exceeds the amount specified in

paragraph (b) of this section:

(a) The total value of milk to the

handler for the month as determined

pursuant to § 1126.60.

(b) The sum of:

(1) An amount obtained by

multiplying the total hundredweight of

producer milk as determined pursuant

to § 1000.44(c) by the producer price

differential as adjusted pursuant to

§ 1126.75;

(2) An amount obtained by

multiplying the total pounds of protein,

other solids, and butterfat contained in

producer milk by the protein, other

solids, and butterfat prices respectively;

(3) The total value of the somatic cell

adjustment to producer milk; and

(4) An amount obtained by

multiplying the pounds of skim milk

and butterfat for which a value was

computed pursuant to § 1126.60(i) by

the producer price differential as

adjusted pursuant to § 1126.75 for the

location of the plant from which

received.

§ 1126.72 Payments from the producersettlement fund.

No later than the 17th day after the

end of each month, the market

administrator shall pay to each handler

the amount, if any, by which the

amount computed pursuant to

§ 1126.71(b) exceeds the amount

computed pursuant to § 1126.71(a). If, at

such time, the balance in the producersettlement fund is insufficient to make

all payments pursuant to this section,

the market administrator shall reduce

uniformly such payments and shall

complete the payments as soon as the

funds are available.

§ 1126.73 Payments to producers and to

cooperative associations.

(a) Each handler shall pay each

producer for producer milk for which

payment is not made to a cooperative

association pursuant to paragraph (b) of

this section, as follows:

(1) Partial payment. For each

producer who has not discontinued

shipments as of the 23rd day of the
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month, payment shall be made so that

it is received by the producer on or

before the 26th day of the month for

milk received during the first 15 days of

the month at not less than the lowest

announced class price for the preceding

month, less proper deductions

authorized in writing by the producer;

and

(2) Final payment. For milk received

during the month, payment shall be

made so that it is received by each

producer no later than the 18th day after

the end of the month in an amount

computed as follows:

(i) Multiply the hundredweight of

producer milk received times the

producer price differential for the

month as adjusted pursuant to

§ 1126.75;

(ii) Multiply the pounds of butterfat

received times the butterfat price for the

month;

(iii) Multiply the pounds of protein

received times the protein price for the

month;

(iv) Multiply the pounds of other

solids received times the other solids

price for the month;

(v) Multiply the hundredweight of

milk received times the somatic cell

adjustment for the month;

(vi) Add the amounts computed in

paragraph (a)(2)(i) through (v) of this

section, and from that sum:

(A) Subtract the partial payment made

pursuant to paragraph (a)(1) of this

section;

(B) Subtract the deduction for

marketing services pursuant to

§ 1000.86;

(C) Add or subtract for errors made in

previous payments to the producer; and

(D) Subtract proper deductions

authorized in writing by the producer.

(b) On or before the day prior to the

dates specified for partial and final

payments pursuant to paragraph (a) of

this section, each pool plant operator

shall pay a cooperative association for

milk received as follows:

(1) Partial payment to a cooperative

association. For bulk milk/skimmed

milk received during the first 15 days of

the month from a cooperative

association in any capacity, except as

the operator of a pool plant, the

payment shall be equal to the

hundredweight of milk received

multiplied by the lowest announced

class price for the preceding month;

(2) Partial payment to a cooperative

association for milk transferred from its

pool plant. For bulk milk/skimmed milk

products received during the first 15

days of the month from a cooperative

association in its capacity as the

operator of a pool plant, the partial

payment shall be at the pool plant

operator’s estimated use value of the

milk using the most recent class prices

available, adjusted for butterfat value

and plant location;

(3) Final payment to a cooperative

association for milk transferred from its

pool plant. Following the classification

of bulk fluid milk products and bulk

fluid cream products received during

the month from a cooperative

association in its capacity as the

operator of a pool plant, the final

payment for such receipts shall be

determined as follows:

(i) Multiply the hundredweight of

Class I skim milk by the Class I skim

milk price for the month applicable at

the location of the shipping plant;

(ii) Multiply the pounds of Class I

butterfat by the Class I butterfat price for

the month applicable at the location of

the shipping plant;

(iii) Multiply the hundredweight of

Class II skim milk by $.70;

(iv) Multiply the pounds of nonfat

solids received in Class II and Class IV

milk by the nonfat solids price for the

month;

(v) Multiply the hundredweight of

butterfat in Class II, III, and IV milk by

the butterfat price for the month;

(vi) Multiply the pounds of protein

received in Class III milk by the protein

price for the month;

(vii) Multiply the pounds of other

solids received in Class III milk by the

other solids price for the month;

(viii) Multiply the hundredweight of

Class II, Class III, and Class IV milk

received times the somatic cell

adjustment;

(ix) Add together the amounts

computed in paragraph (b)(3)(i) through

(viii) of this section and from that sum

deduct any payment made pursuant to

paragraph (b)(2) of this section.

(4) Final payment to a cooperative

association for bulk milk received

directly from producers’ farms. For bulk

milk received from a cooperative

association during the month, including

the milk of producers who are not

members of such association and who

the market administrator determines

have authorized the cooperative

association to collect payment for their

milk, the final payment for such milk

shall be an amount equal to the sum of

the individual payments otherwise

payable for such milk pursuant to

paragraph (a)(2) of this section.

(c) If a handler has not received full

payment from the market administrator

pursuant to § 1126.72 by the payment

date specified in paragraph (a) or (b) of

this section, the handler may reduce pro

rata its payments to producers or to

cooperative associations pursuant to

paragraphs (a) and (b) of this section,

but by not more than the amount of the

underpayment. The payments shall be

completed on the next scheduled

payment date after receipt of the balance

due from the market administrator.

(d) If a handler claims that a required

payment to a producer cannot be made

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer-settlement fund, and in the

event that the handler subsequently

locates and pays the producer or a

lawful claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or to the lawful

claimant as the case may be.

(e) In making payments to producers

pursuant to this section, each pool plant

operator shall furnish each producer,

except a producer whose milk was

received from a cooperative association

handler described in § 1000.9(a) or (c),

a supporting statement in a form that

may be retained by the recipient which

shall show:

(1) The name, address, Grade A

identifier assigned by a duly constituted

regulatory agency, and the payroll

number of the producer;

(2) The month and dates that milk

was received from the producer,

including the daily and total pounds of

milk received;

(3) The total pounds of butterfat,

protein, and other solids contained in

the producer’s milk;

(4) The somatic cell count of the

producer’s milk;

(5) The minimum rate or rates at

which payment to the producer is

required pursuant to this order;

(6) The rate used in making payment

if the rate is other than the applicable

minimum rate;

(7) The amount, or rate per

hundredweight, or rate per pound of

component, and the nature of each

deduction claimed by the handler; and

(8) The net amount of payment to the

producer or cooperative association.

§ 1126.74 [Reserved]

§ 1126.75 Plant location adjustments for

producer milk and nonpool milk.

(a) The producer price differential for

producer milk shall be adjusted

according to the location of the plant at

which the milk was physically received

by subtracting from the price differential

the amount by which the Class I price

specified in § 1126.51 exceeds the Class

I price at the plant’s location. If the
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Class I price at the plant location

exceeds the Class I price specified in

§ 1126.51, the difference shall be added

to the producer price differential; and

(b) The producer price differential

applicable for other source milk shall be

adjusted following the procedure

specified in paragraph (a) of this

section, except that the adjusted

producer price differential shall not be

less than zero.

§ 1126.76 Payments by a handler

operating a partially regulated distributing

plant.

See § 1000.76 of this chapter.

§ 1126.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1126.78 Charges on overdue accounts.

See § 1000.78 of this chapter.

Administrative Assessment and

Marketing Service Deduction

§ 1126.85 Assessment for order

administration.

See § 1000.85 of this chapter.

§ 1126.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

PART 1131—MILK IN ARIZONA-LAS

VEGAS MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1131.1 General provisions.

Definitions

1131.2 Arizona-Las Vegas marketing area.

1131.3 Route disposition.

1131.4 Plant.

1131.5 Distributing Plant.

1131.6 Supply Plant.

1131.7 Pool plant.

1131.8 Nonpool plant.

1131.9 Handler.

1131.10 Producer-handler.

1131.11 [Reserved]

1131.12 Producer.

1131.13 Producer milk.

1131.14 Other source milk.

1131.15 Fluid milk product.

1131.16 Fluid cream product.

1131.17 [Reserved]

1131.18 Cooperative association.

1131.19 Commercial food processing

establishment.

Handler Reports

1131.30 Reports of receipts and utilization.

1131.31 Payroll reports.

1131.32 Other reports.

Classification of Milk

1131.40 Classes of utilization.

1131.41 [Reserved]

1131.42 Classification of transfers and

diversions.

1131.43 General classification rules.

1131.44 Classification of producer milk.

1131.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1131.50 Class prices, component prices,

Class I differential and price.

1131.51 [Reserved]

1131.52 Adjusted Class I differentials.

1131.53 Announcement of class prices and

component prices.

1131.54 Equivalent price.

Uniform Price

1131.60 Handler’s value of milk.

1131.61 Computation of uniform price,

uniform butterfat price and uniform skim

milk price.

1131.62 Announcement of uniform price,

uniform butterfat price and uniform skim

milk price.

Payments for Milk

1131.70 Producer-settlement fund.

1131.71 Payments to the producersettlement fund.

1131.72 Payments from the producersettlement fund.

1131.73 Payments to producers and to

cooperative associations.

1131.74 [Reserved]

1131.75 Plant location adjustments for

producers and nonpool milk.

1131.76 Payments by a handler operating a

partially regulated distributing plant.

1131.77 Adjustment of accounts.

1131.78 Charges on overdue accounts.

Administrative Assessment and Marketing

Service Deduction

1131.85 Assessment for order

administration.

1131.86 Deduction for marketing services.

Authority: 7 U.S.C. 601—674.

Subpart—Order Regulating Handling

General Provisions

§ 1131.1 General provisions.

The terms, definitions, and provisions

in Part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1131.2 Arizona-Las Vegas marketing

area.

The marketing area means all territory

within the bounds of the following

states and political subdivisions,

including all piers, docks and wharves

connected therewith and all craft

moored thereat, and all territory

occupied by government (municipal,

State or Federal) reservations,

installations, institutions, or other

similar establishments if any part

thereof is within any of the listed states

or political subdivisions:

Arizona

All of the State of Arizona.

Nevada Counties

Clark.

§ 1131.3 Route disposition.

See § 1000.3 of this chapter.

§ 1131.4 Plant.

See § 1000.4 of this chapter.

§ 1131.5 Distributing Plant.

See § 1000.5 of this chapter.

§ 1131.6 Supply Plant.

See § 1000.6 of this chapter.

§ 1131.7 Pool plant.

Pool Plant means a plant or unit of

plants specified in paragraphs (a)

through (e) of this section. The pooling

standards described in paragraphs (a),

(c), and (d) of this section are subject to

modification pursuant to paragraph (f)

of this section.

(a) A distributing plant from which

during the month there is route

disposition equal to 25 percent or more

of the total quantity of bulk fluid milk

products physically received at such

plant; and route disposition in the

marketing area of at least 15 percent of

total route disposition. For purposes of

this section, packaged fluid milk

products that are transferred to a

distributing plant shall be considered as

route disposition from the transferring

plant, rather than the receiving plant,

for the single purpose of qualifying the

transferring plant as a pool distributing

plant.

(b) A distributing plant located in the

marketing area which during the month

processes a majority of its receipts of

milk products into aseptically packaged

fluid milk products. If during the month

the plant had no route disposition into

any federal milk order the plant

operator may request nonpool status for

such plant for the month.

(c) A supply plant from which 50% or

more of the total quantity of milk that

is physically received at such plant from

dairy farmers and handlers described in

§ 1000.9(c) is transferred to pool

distributing plants.

(d) A plant located within the

marketing area and operated by a

cooperative association if, during the

month, or the immediately preceding

12-month period, 35 percent or more of

the producer milk of members of the

association (and any producer milk of

nonmembers and members of another

cooperative association which may be

marketed by the cooperative

association) is physically received in the

form of bulk fluid milk products at

plants specified in paragraph (a) or (b)

of this section either directly from farms

or by transfer from supply plants

operated by the cooperative association
5080 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

and from plants of the cooperative

association for which pool plant status

has been requested under this paragraph

subject to the following conditions:

(1) The plant does not qualify as a

pool plant under paragraph (a), (b) or (c)

or this section or under comparable

provisions of another Federal order; and

(2) The plant is approved by a duly

constituted regulatory agency for the

handling of milk approved for fluid

consumption in the marketing area.

(e) Two or more plants operated by

the same handler and located in the

marketing area may qualify for pool

plant status as a unit by together

meeting the requirements specified in

paragraph (a) of this section and subject

to all of the following additional

requirements:

(1) At least one of the plants in the

unit must qualify as a pool plant

pursuant to paragraph (a) of this section;

(2) Other plants in the unit must

process Class I or Class II products,

using 50 percent or more of the total

Grade A fluid milk products received in

bulk form at such plant or diverted

therefrom by the plant operator in Class

I or Class II products, and must be

located in a pricing zone providing the

same or lower Class I price than the

price applicable at the distributing plant

included in the unit pursuant to

paragraph (e)(1) of this section;

(3) A written request to form a unit

must be filed by the handler with the

market administrator prior to the first

day of the month for which such status

is desired to be effective. The unit shall

continue from month to month

thereafter without further notification.

The handler shall notify the market

administrator in writing prior to the first

day of any month for which termination

or any change of the unit is desired.

(f) The applicable percentages in

paragraphs (a), (b), (c), and (d) of this

section may be increased or decreased

by the market administrator if found

necessary to obtain needed shipments or

to prevent uneconomic shipments.

Before making such a finding, the

market administrator shall investigate

the need for revision, either on the

market administrator’s own initiative or

at the request of interested parties. If

such investigation shows that a revision

might be appropriate, a notice shall be

issued stating that a revision adjustment

is being considered and inviting data,

views, and arguments. If the market

administrator determines that an

adjustment to the shipping percentages

is necessary, the market administrator

shall notify the industry within one day

of the effective date of such adjustment.

(g) The term pool plant shall not

apply to the following plants:

(1) A producer-handler as defined

under any Federal order;

(2) An exempt plant as defined in

§ 1000.8(e).

(3) A plant located within the

marketing area and qualified pursuant

to paragraph (a) or (e) of this section

which meets the pooling requirements

of another Federal order, and from

which more than 50 percent of its route

disposition has been in the other

Federal order marketing area for three

consecutive months.

(4) A plant located outside the

marketing area and qualified pursuant

to paragraph (a) of this section that

meets the pooling requirements of

another Federal order or a State order

providing for marketwide pooling, and

has had greater sales in such other

Federal order’s marketing area for 3

consecutive months;

(5) A plant located in another Federal

order marketing area and qualified

pursuant to paragraph (a) of this section

that meets the pooling requirements of

such other Federal order and does not

have a majority of its route distribution

in this marketing area for 3 consecutive

months or if the plant is required to be

regulated under such other Federal

order without regard to its route

disposition in any other Federal order

marketing area;

(6) A plant qualified pursuant to

paragraph (c) of this section which also

meets the pooling requirements of

another Federal order and from which

greater qualifying shipments are made

to plants regulated under the other

Federal order than are made to plants

regulated under this order, or the plant

has automatic pooling status under the

other Federal order; and

(7) That portion of a regulated plant

designated as a nonpool plant that is

physically separate and operated

separately from the pool portion of such

plant. The designation of a portion of a

regulated plant as a nonpool plant must

be requested in advance and in writing

by the handler and must be approved by

the market administrator.

§ 1131.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1131.9 Handler.

See § 1000.9 of this chapter.

§ 1131.10 Producer-handler.

Except as provided in paragraph (g) of

this section, producer-handler means a

person who:

(a) Operates a dairy farm and a

distributing plant from which there is

monthly route disposition in excess of

150,000 pounds during the month;

(b) Receives no fluid milk products

from sources other than own farm

production, pool handlers, and plants

fully regulated under another Federal

order;

(c) Receives at its plant or acquires for

route disposition no more than 150,000

pounds of fluid milk products from

handlers fully regulated under any

Federal order. This limitation shall not

apply if the producer-handler’s own

farm production is less than 150,000

pounds during the month.

(d) Disposes of no other source milk

as Class I milk except by increasing the

nonfat milk solids content of the fluid

milk products received from own farm

production or pool handlers;

(e) Disposes of no fluid milk products

using the distribution system of another

handler except for direct deliveries to

retail outlets or to a pool handler’s

plant;

(f) Does not distribute fluid milk

products to a wholesale customer who

also is serviced by a handler described

in § 1000.9(a) or (d) that supplied the

same product in the same-sized package

with a similar label to the wholesale

customer during the month;

(g) Provides proof satisfactory to the

market administrator that the care and

management of the dairy animals and

other resources necessary to produce all

Class I milk handled (excluding receipts

from handlers fully regulated under any

Federal order) and the processing,

packaging, and distribution operations

are the producer-handler’s own

enterprise and at its own risk; and

(h) Producer-handler shall not include

any producer who also operates a

distributing plant if the producerhandler so requests that the two be

operated as separate entities with the

distributing plant regulated under

§ 1131.7(a) and the farm operated as a

producer under § 1131.12.

§ 1131.11 [Reserved]

§ 1131.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk (or components of milk) is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1131.13; or

(2) Received by a handler described in

§ 1000.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

received at an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1131.13(d);
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5081

(3) A dairy farmer whose milk is

received by diversion at a pool plant

from a handler regulated under another

Federal order if the other Federal order

designates the dairy farmer as a

producer under that order and that milk

is allocated by request to a utilization

other than Class I;

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another Federal order

with respect to that portion of the milk

so diverted that is assigned to Class I

under the provisions of such other

order; and

(5) A dairy farmer whose milk is

received at a pool plant if during the

month milk from the same farm is

received at a nonpool plant (except a

nonpool plant that has no utilization or

milk products in any class other than

Class III or Class IV) other than as a

diversion under this or some other

Federal order.

§ 1131.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk) and butterfat in milk of a

producer that is:

(a) Received by the operator of a pool

plant directly from a producer or a

handler described in § 1000.9(c). Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of the pool plant

or a handler described in § 1000.9(c) but

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it was

picked up at the producer’s farm. All

milk received pursuant to this

paragraph shall be priced at the location

of the plant where it is first physically

received.

(b) Received by a handler described in

§ 1000.9(c) in excess of the quantity

delivered to pool plants.

(c) Diverted by a pool plant operator

to another pool plant. Milk so diverted

shall be priced at the location of the

plant to which diverted; or

(d) Diverted by the operator of a pool

plant or a cooperative association

described in § 1000.9(c) to a nonpool

plant, subject to the following

conditions:

(1) Milk of a dairy farmer shall not be

eligible for diversion unless at least one

day’s production of such dairy farmer is

physically received at a pool plant

during the month;

(2) The total quantity of milk diverted

by a handler in any month shall not

exceed 20 percent of the total producer

milk caused by the handler to be

received at pool plants or diverted;

(3) Diverted milk shall be priced at

the location of the plant to which

diverted;

(4) Any milk diverted in excess of the

limits prescribed in (d)(2) of this section

shall not be producer milk. If the

diverting handler or cooperative

association fails to designate the dairy

farmers’ deliveries that are not to be

producer milk, no milk diverted by the

handler or cooperative association

during the month to a nonpool plant

shall be producer milk. In the event

some of the milk of any producer is

determined not to be producer milk

pursuant to this paragraph, other milk

delivered by such producer as producer

milk during the month will not be

subject to § 1131.12(b)(5); and

(5) The applicable diversion limits in

paragraph (d)(2) of this section may be

increased or decreased by the market

administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested persons. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

§ 1131.14 Other source milk.

See § 1000.14 of this chapter.

§ 1131.15 Fluid milk product.

See § 1000.15 of this chapter.

§ 1131.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1131.17 [Reserved]

§ 1131.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1131.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.

Handler Reports

§ 1131.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator’s office

received the report on or before the 7th

day after the end of the month, in the

detail and on the forms prescribed by

the market administrator, as follows:

(a) With respect to each of its pool

plants, the quantities of skim milk and

butterfat contained in or represented by:

(1) Receipts of producer milk,

including producer milk diverted by the

plant operator to other plants;

(2) Receipts of milk from handlers

described in § 1000.9(c);

(3) Receipts of fluid milk products

and bulk fluid cream products from

other pool plants;

(4) Receipts of other source milk;

(5) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products; and

(6) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a) of this section.

Receipts of milk that would have been

producer milk if the plant had been

fully regulated shall be reported in lieu

of producer milk. Such report shall

show also the quantity of any

reconstituted skim milk in route

disposition in the marketing area.

(c) Each handler described in

§ 1000.9(c) shall report:

(1) The quantities of all skim milk and

butterfat contained in receipts of milk

from producers; and

(2) The utilization or disposition of all

such receipts.

(d) Each handler described in

§ 1131.10 shall report:

(1) The pounds of milk received from

each of the handler’s own-farm

production units, showing separately

the production of each farm unit and the

number of dairy cows in production at

each farm unit;

(2) Fluid milk products and bulk fluid

cream products received at its plant or

acquired for route disposition from pool

plants, other order plants, and handlers

described in § 1000.9(c);

(3) Receipts of other source milk not

reported pursuant to paragraph (d)(2) of

this section;

(4) Inventories at the beginning and

end of the month of fluid milk products

and fluid cream products; and

(5) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph.

(e) Each handler not specified in

paragraphs (a) through (d) of this section

shall report with respect to its receipts

and utilization of milk and milk

products in such manner as the market

administrator may prescribe.

§ 1131.31 Payroll reports.

(a) On or before the 20th day after the

end of each month, each handler
5082 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

described in § 1000.9(a) and (c) shall

report to the market administrator its

producer payroll for such month, in the

detail prescribed by the market

administrator, showing for each

producer:

(1) The producer’s name and address;

(2) The total pounds of milk received

from the producer;

(3) The average butterfat content of

such milk; and

(4) The price per hundredweight, the

gross amount due, the amount and

nature of any deductions, and the net

amount paid.

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.

§ 1131.32 Other reports.

In addition to the reports required

pursuant to § 1131.30 and § 1131.31,

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

Classification of Milk

§ 1131.40 Classes of utilization.

See § 1000.40 of this chapter.

§ 1131.41 [Reserved]

§ 1131.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1131.43 General classification rules.

See § 1000.43 of this chapter.

§ 1131.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1131.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1131.50 Class prices, component prices,

Class I differential and price.

Class prices and component prices are

described in § 1000.50. The Class I

differential shall be the differential

established for Maricopa County,

Arizona, which is reported in § 1000.52.

The Class I price shall be the price

computed pursuant to § 1000.50(a) for

Maricopa County, Arizona.

§ 1131.51 [Reserved]

§ 1131.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1131.53 Announcement of class prices

and component prices.

See § 1000.53 of this chapter.

§ 1131.54 Equivalent price.

See § 1000.54 of this chapter.

Uniform Price

§ 1131.60 Handler’s value of milk.

For the purpose of computing the

uniform price, 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

§ 1000.9(c) as follows:

(a) Multiply the pounds of skim milk

and butterfat in producer milk that were

classified in each class pursuant to

§ 1000.44(c) by the applicable skim milk

and butterfat prices and add the

resulting amounts;

(b) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43(b)(2) by the

respective skim milk and butterfat

prices applicable at the location of the

pool plant;

(c) Add the amount obtained from

multiplying the difference between the

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);

(d) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3)(i)

through (iii), and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from a plant

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plants;

(e) Add the amount obtained from

multiplying the Class I price applicable

at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§ 1000.43(d) and § 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

steps of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

bulk fluid milk products from an

unregulated supply plant to the extent

that an equivalent amount of skim milk

or butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(f) Subtract, for reconstituted milk

made from receipts of nonfluid milk

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicable at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I use pursuant to

§ 1000.43(d);

(g) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another order under

§ 1000.76(a)(5) or (c).

§ 1131.61 Computation of uniform price,

uniform butterfat price and uniform skim

milk price.

(a) For each month the market

administrator shall compute the

uniform price per hundredweight. If the

unreserved balance in the producersettlement fund to be included in the

computation is less than two cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1131.71 for the preceding

month shall not be included in the

computation of the uniform price. The

report of such handler shall not be

included in the computation for

succeeding months until the handler

has made full payment of outstanding

monthly obligations. Subject to the

aforementioned conditions, the market

administrator shall compute the

uniform price in the following manner:

(1) Combine into one total the values

computed pursuant to § 1131.60 for all

handlers required to file reports

prescribed in § 1131.30;

(2) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1131.75;

(3) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(4) Add or subtract, as the case may

be, to obtain an all-producer milk test of

3.5% butterfat, the value of the required

pounds of butterfat times the uniform
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5083

butterfat price computed pursuant to

paragraph (b) of this section;

(5) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(i) The total hundredweight of

producer milk;

(ii) The total hundredweight for

which a value is computed pursuant to

§ 1131.60(f); and

(6) Subtract not less than 4 cents nor

more than 5 cents per hundredweight.

The result shall be the uniform price for

milk received from producers during the

month.

(b) Uniform butterfat price. The

Uniform butterfat price per pound,

rounded to the nearest one-hundredth

cent, shall be obtained by multiplying

the pounds of butterfat in producer milk

allocated to each class pursuant to

§ 1000.44(b) by the respective class

butterfat prices (Class I butterfat price

for Class I and the butterfat price for all

other classes) and dividing the sum of

such values by the total pounds of such

butterfat.

(c) Uniform skim milk price. The

uniform skim milk price per

hundredweight, rounded to the nearest

cent, shall be the uniform price for the

month computed pursuant to paragraph

(a) of this section, less the uniform

butterfat price for the month computed

pursuant to paragraph (b) of this section

multiplied by 3.5, with the result

divided by .965.

§ 1131.62 Announcement of uniform price,

uniform butterfat price and uniform skim

milk price.

On or before the 11th day after the

end of each month, the market

administrator shall announce the

following prices and information:

(a) The uniform price computed

pursuant to § 1131.61 for such month;

(b) The uniform butterfat price

computed pursuant to § 1131.61(b) for

such month; and

(c) The uniform skim milk price

computed pursuant to § 1131.61(c) for

such month.

Payments for Milk

§ 1131.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1131.71 Payments to the producersettlement fund.

Each handler shall make payment to

the producer-settlement fund in a

manner that provides receipt of the

funds by the market administrator no

later than the 13th day after the end of

the month. Payments due the market

administrator shall be deemed not to

have been made until the money owed

has been received at the market

administrator’s office, or deposited into

the market administrator’s bank

account. Payment shall be the amount,

if any, by which the amount specified

in paragraph (a) of this section exceeds

the amount specified in paragraph (b) of

this section:

(a) The total value of milk to the

handler for the month as determined

pursuant to § 1131.60.

(b) The sum of:

(1) The value at the uniform prices for

skim milk and butterfat, adjusted for

plant location, of the handler’s receipts

of producer milk; and

(2) The value at the uniform price as

adjusted pursuant to § 1131.75

applicable at the location of the plant

from which received of other source

milk for which a value is computed

pursuant to § 1131.60(e).

§ 1131.72 Payments from the producersettlement fund.

No later than the 14th day after the

end of each month, the market

administrator shall pay to each handler

the amount, if any, by which the

amount computed pursuant to

§ 1131.71(b) exceeds the amount

computed pursuant to § 1131.71(a). If, at

such time, the balance in the producersettlement fund is insufficient to make

all payments pursuant to this section,

the market administrator shall reduce

uniformly such payments and shall

complete the payments as soon as the

funds are available.

§ 1131.73 Payments to producers and to

cooperative associations.

(a) Except as provided in paragraphs

(b) and (c) of this section, each handler

shall make payment to each producer

from whom milk is received during the

month as follows:

(1) Partial Payment. For each

producer who has not discontinued

shipments as of the 25th day of the

month, payment shall be made so that

it is received by the producer on or

before the 27th day of each month to

each producer who did not discontinue

shipping milk to such handler before

the 25th day of the month, for milk

received from such producer during the

first 15 days of the month at not less

than 1.3 times the lowest class price for

the preceding month, adjusted for plant

location pursuant to § 1131.75 and

proper deductions authorized in writing

by the producer; and

(2) Final Payment. On or before the

15th day of the following month, not

less than an amount computed by the

sum of the following:

(i) The hundredweight of producer

milk received times the uniform price

for the month as adjusted pursuant to

§ 1131.75;

(ii) The hundredweight of producer

skim milk received times the uniform

skim milk price for the month;

(iii) The pounds of producer butterfat

received times the uniform butterfat

price for the month;

(iv) Less payments made pursuant to

paragraph (a) of this section;

(v) Less deductions made for

marketing service pursuant to § 1000.86;

(vi) Plus or minus adjustments for

errors made in previous payments to

such producer; and

(vii) Less proper deductions

authorized in writing by such producer.

(b) Two days prior to the dates on

which partial and final payments are

due pursuant to paragraph (a) of this

section, each pool plant operator shall

pay a cooperative association for milk

received as follows:

(1) Partial payment to a cooperative

association. On or before the 25th day

of the month each handler shall pay to

a cooperative association that the

market administrator determines is

authorized by its members to collect

payment for their milk, an amount not

less than 1.3 times the lowest class price

for the preceding month multiplied by

the hundredweight of milk received

during the first 15 days of the month

from such cooperative association,

including the milk of producers not

members of such cooperative

association who the market

administrator determines have

authorized the cooperative association

to collect payment for their milk;

(2) Final Payment to a cooperative

association. On or before the 13th day

of the following month, each handler

shall pay to a cooperative association

which the market administrator

determines is authorized by its members

to collect payment for their milk not less

than an amount computed pursuant to

paragraph (a)(2) of this section for milk

received from such cooperative

association during the month, including

the milk of producers not members of

such cooperative association who the

market administrator determines have

authorized the cooperative association

to collect payment for their milk;

(c) If a handler has not received full

payment from the market administrator

pursuant to § 1131.72 by the payment

date specified in paragraph (a) or (b) of

this section, the handler may reduce pro

rata his payments pursuant to such

paragraphs, but by not more than the

amount of such underpayment.

Payments to producers shall be

completed on the next scheduled

payment date after receipt of the balance

due from the market administrator.

(d) If a handler claims that a required

payment to a producer cannot be made
5084 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer-settlement fund. In the

event the handler subsequently locates

and pays the producer or a lawful

claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or the lawful

claimant, as the case may be.

(e) In making payments to producers

pursuant to this section, each pool plant

operator shall furnish each producer,

except a producer whose milk was

received from a handler described in

§ 1000.9(a) or (c), a supporting statement

in such form that it may be retained by

the recipient which shall show:

(1) The month, and identity of the

producer;

(2) The daily and total pounds and the

total pounds of butterfat content of

producer milk;

(3) The minimum rate at which

payment to the producer is required

pursuant to this order;

(4) The rate used in making payments

if the rate is other than the applicable

minimum rate;

(5) The amount, rate per

hundredweight, and nature of each

deduction claimed by the handler; and

(6) The net amount of payment to the

producer.

§ 1131.74 [Reserved]

§ 1131.75 Plant location adjustments for

producers and on nonpool milk.

(a) The uniform price for producer

milk shall be adjusted according to the

location of the plant at which the milk

was first physically received by

subtracting from the price the amount

by which the Class I price specified in

§ 1131.50 exceeds the Class I price at the

plant’s location. If the Class I price at

the plant location exceeds the Class I

price specified in § 1131.50, the

difference shall be added to the uniform

price; and

(b) The uniform price applicable to

other source milk shall be adjusted

following the procedure specified in

paragraph (a) of this section, except that

the adjusted uniform price shall not be

less than the lowest announced class

price.

§ 1131.76 Payments by handler operating

a partially regulated distributing plant.

See § 1000.76 of this chapter.

§ 1131.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1131.78 Charges on overdue accounts.

See § 1000.78 of this chapter.

Administrative Assessment and

Marketing Service Deduction

§ 1131.85 Assessment for order

administration.

See § 1000.85 of this chapter.

§ 1131.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

PART 1134—MILK IN THE WESTERN

MARKETING AREA

Subpart—Order Regulating Handling

General Provisions

Sec.

1134.1 General provisions.

Definitions

1134.2 Western marketing area.

1134.3 Route disposition.

1134.4 Plant.

1134.5 Distributing plant.

1134.6 Supply plant.

1134.7 Pool plant.

1134.8 Nonpool plant.

1134.9 Handler.

1134.10 Producer-handler.

1134.11 Proprietary bulk tank handler.

1134.12 Producer.

1134.13 Producer milk.

1134.14 Other source milk.

1134.15 Fluid milk product.

1134.16 Fluid cream product.

1134.17 [Reserved]

1134.18 Cooperative association.

1134.19 Commercial food processing

establishment.

Handler Reports

1134.30 Reports of receipts and utilization.

1134.31 Payroll reports.

1134.32 Other reports.

Classification of Milk

1134.40 Classes of utilization.

1134.41 [Reserved]

1134.42 Classification of transfers and

diversions.

1134.43 General classification rules.

1134.44 Classification of producer milk.

1134.45 Market administrator’s reports and

announcements concerning

classification.

Class Prices

1134.50 Class prices and component prices.

1134.51 Class I differential and price.

1134.52 Adjusted Class I differentials.

1134.53 Announcement of class and

component prices.

1134.54 Equivalent price.

Producer Price Differential

1134.60 Handler’s value of milk.

1134.61 Computation of producer price

differential.

1134.62 Announcement of producer prices.

Payments for Milk

1134.70 Producer-settlement fund.

1134.71 Payments to the producersettlement fund.

1134.72 Payments from the producersettlement fund.

1134.73 Payments to producers and to

cooperative associations.

1134.74 [Reserved]

1134.75 Plant location adjustments for

producer milk and nonpool milk.

1134.76 Payments by a handler operating a

partially regulated distributing plant.

1134.77 Adjustment of accounts.

1134.78 Charges on overdue accounts.

Administrative Assessment and Marketing

Service Deduction

1134.85 Assessment for order

administration.

1134.86 Deduction for marketing services.

Authority: 7 U.S.C. 601–674.

Subpart—Order Regulating Handling

General Provisions

§ 1134.1 General provisions.

The terms, definitions, and provisions

in Part 1000 of this chapter apply to and

are hereby made a part of this order.

Definitions

§ 1134.2 Western marketing area.

The marketing area means all territory

within the bounds of the following

states and political subdivisions,

including all piers, docks and wharves

connected therewith and all craft

moored thereat, and all territory

occupied by government (municipal,

State or Federal) reservations,

installations, institutions, or other

similar establishments if any part

thereof is within any of the listed states

or political subdivisions:

Utah

All of the State of Utah.

Colorado Counties

Delta, Garfield, Mesa, and Montrose.

Idaho Counties

Ada, Adams, Bannock, Bear Lake,

Bingham, Blaine, Boise, Bonneville, Camas,

Canyon, Caribou, Cassia, Elmore, Franklin,

Gem, Gooding, Jefferson, Jerome, Lincoln,

Madison, Minidoka, Oneida, Owyhee,

Payette, Power, Twin Falls, Valley, and

Washington.

Nevada Counties

Elko, Lincoln, and White Pine.

Oregon Counties

Baker, Grant, Harney, Malheur, and Union.

Wyoming Counties

Lincoln and Uinta.

§ 1134.3 Route disposition.

See § 1000.3 of this chapter.

§ 1134.4 Plant.

See § 1000.4 of this chapter.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5085

§ 1134.5 Distributing plant.

See § 1000.5 of this chapter.

§ 1134.6 Supply plant.

See § 1000.6 of this chapter.

§ 1134.7 Pool plant.

Pool Plant means a plant or unit of

plants specified in paragraphs (a)

through (e) of this section. The pooling

standards described in paragraphs (a),

(c), and (d) of this section are subject to

modification pursuant to paragraph (f)

of this section.

(a) A distributing plant from which

during the month there is route

disposition equal to 25 percent or more

of the total quantity of bulk fluid milk

products physically received at such

plant and there is route disposition in

the marketing area of at least 15 percent

of total route disposition. For purposes

of this section, packaged fluid milk

products that are transferred to a

distributing plant shall be considered as

route disposition from the transferring

plant, rather than the receiving plant,

for the single purpose of determining

the pool status of the transferring plant

under this section.

(b) A distributing plant located in the

marketing area which during the month

processes a majority of its receipts of

milk products into aseptically packaged

fluid milk products. If during the month

the plant had no route disposition into

any federal milk order the plant

operator may request nonpool status for

such plant for the month.

(c) A supply plant from which during

the month the quantity of bulk fluid

milk products transferred or diverted to

plants described in paragraph (a) or (b)

of this section is 35 percent of more of

the total Grade A milk received at the

plant from dairy farmers (except dairy

farmers described in § 1134.12(b)) and

handlers described in § 1000.9(c),

including milk diverted by the plant

operator, subject to the following

conditions:

(1) A supply plant that has qualified

as a pool plant during each of the

immediately preceding months of

September through February shall

continue to so qualify in each of the

following months of March through

August unless the plant operator files a

written request with the market

administrator that such plant not be a

pool plant, such nonpool status to be

effective the first month following such

request. A plant withdrawn from pool

supply plant status may not be

reinstated for any subsequent month of

the March through July period unless it

qualifies as a pool plant on the basis of

milk shipments;

(2) A pool plant operator may include

as qualifying shipments milk diverted to

pool distributing plants pursuant to

§ 1134.13(c);

(3) No plant may qualify as a pool

plant due to a reduction in the shipping

percentage pursuant to paragraph (f) of

this section unless it has been a pool

supply plant during each of the

immediately preceding three months.

(d) A milk manufacturing plant

located within the marketing area that is

operated by a cooperative association if,

during the month or the immediately

preceding 12-month period ending with

the current month, 35% or more of such

cooperative’s member producer milk

(and any producer milk of nonmembers

and members of another cooperative

association which may be marketed by

the cooperative association) is

physically received in the form of bulk

fluid milk products at plants specified

in paragraph (a) or (b) of this section

either directly from farms or by transfer

from supply plants operated by the

cooperative association and from plants

of the cooperative association for which

pool plant status has been requested

under this paragraph subject to the

following conditions:

(1) The plant does not qualify as a

pool plant under paragraph (a), (b) or (c)

of this section or under comparable

provisions of another Federal order; and

(2) The plant is approved by a duly

constituted regulatory agency for the

handling of milk approved for fluid

consumption in the marketing area.

(e) Two or more plants located in the

marketing area and operated by the

same handler may qualify for pool plant

status as a unit by together meeting the

requirements specified in paragraph (a)

of this section and subject to the

following additional requirements:

(1) At least one of the plants in the

unit must individually qualify as a pool

plant pursuant to paragraph (a) of this

section.

(2) Other plants in the unit must

process Class I or Class II products,

using 50 percent or more of the total

Grade A fluid milk products received in

bulk form at such plant or diverted

therefrom by the plant operator in Class

I or Class II products, and must be

located in a pricing zone providing the

same or a lower Class I price than the

price applicable at the distributing plant

included in the unit pursuant to

paragraph (e)(1) of this section; and

(3) A written request to form a unit

must be filed by the handler with the

market administrator prior to the first

day of the month for which such status

is to be effective. The unit shall

continue from month to month

thereafter without further notification.

The handler shall notify the market

administrator in writing prior to the first

day of any month for which termination

or any change of the unit is desired.

(f) The applicable percentages in

paragraphs (a), (c), and (d) of this

section may be increased or decreased

by the market administrator if found

necessary to obtain needed shipments or

to prevent uneconomic shipments.

Before making a finding that a change is

necessary, the market administrator

shall investigate the need for revision,

either on the market administrator’s

own initiative or at the request of

interested persons. If such investigation

shows that a revision might be

appropriate, a notice shall be issued

stating that such a revision is being

considered and inviting written data,

views, and arguments. If the market

administrator determines that an

adjustment to the shipping percentages

is necessary, the market administrator

shall notify the industry within one day

of the effective date of such adjustment.

(g) The term pool plant shall not

apply to the following plants:

(1) A producer-handler as defined

under any Federal order;

(2) An exempt plant as defined in

1000.8(e).

(3) A plant located within the

marketing area and qualified pursuant

to paragraph (a) or (e) of this section

which meets the pooling requirements

of another Federal order, and from

which more than 50 percent of its route

disposition has been in the other

Federal order marketing area for three

consecutive months;

(4) A plant located outside the

marketing area and qualified pursuant

to paragraph (a) of this section that

meets the pooling requirements of

another Federal order and has had

greater sales in such other Federal

order’s marketing area for 3 consecutive

months;

(5) A plant located in another Federal

order marketing area and qualified

pursuant to paragraph (a) of this section

that meets the pooling requirements of

such other Federal order and does not

have a majority of its route distribution

in this marketing area for 3 consecutive

months or if the plant is required to be

regulated under such other Federal

order without regard to its route

disposition in any other Federal order

marketing area;

(6) A plant qualified pursuant to

paragraph (c) of this section which also

meets the pooling requirements of

another Federal order and from which

greater qualifying shipments are made

to plants regulated under the other

Federal order than are made to plants

regulated under this order, or the plant
5086 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

has automatic pooling status under the

other Federal order; and

(7) That portion of a regulated plant

designated as a nonpool plant that is

physically separate and operated

separately from the pool portion of such

plant. The designation of a portion of a

regulated plant as a nonpool plant must

be requested in advance and in writing

by the handler and must be approved by

the market administrator.

§ 1134.8 Nonpool plant.

See § 1000.8 of this chapter.

§ 1134.9 Handler.

See § 1000.9 of this chapter.

§ 1134.10 Producer-handler.

Except as provided in paragraph (g) of

this section, producer-handler means a

person who:

(a) Operates a dairy farm and a

distributing plant from which there is

monthly route disposition in excess of

150,000 pounds during the month;

(b) Receives no fluid milk products

from sources other than own farm

production, pool handlers, and plants

fully regulated under another Federal

order;

(c) Receives at its plant or acquires for

route disposition no more than 150,000

pounds of fluid milk products from

handlers fully regulated under any

Federal order. This limitation shall not

apply if the producer-handler’s own

farm production is less than 150,000

pounds during the month.

(d) Disposes of no other source milk

as Class I milk except by increasing the

nonfat milk solids content of the fluid

milk products received from own farm

production or pool handlers;

(e) Disposes of no fluid milk products

using the distribution system of another

handler except for direct deliveries to

retail outlets or to a pool handler’s

plant;

(f) Provides proof satisfactory to the

market administrator that the care and

management of the dairy animals and

other resources necessary to produce all

Class I milk handled (excluding receipts

from handlers fully regulated under any

Federal order) and the processing,

packaging, and distribution operations

are the producer-handler’s own

enterprise and at its own risk; and

(g) Producer-handler shall not include

any producer who also operates a

distributing plant if the producerhandler so requests that the two be

operated as separate entities with the

distributing plant regulated under

§ 1134.7(a) and the farm operated as a

producer under § 1134.12.

§ 1134.11 Proprietary bulk tank handler.

(a) Any person, except a cooperative

association, with respect to milk that it

receives for its account from the farm of

a producer in a tank truck owned and

operated by, or under the control of,

such person and which is delivered

during the month for the account of

such person to the pool plant of another

handler or diverted pursuant to

§ 1134.13, subject to the following

conditions:

(1) Such person (who, if qualified

pursuant to this paragraph, shall be

known as a proprietary bulk tank

handler) must operate a plant located in

the marketing area at which milk is

processed only into Class II, Class III, or

Class IV products; and

(2) Prior to operating as a handler

pursuant to this paragraph, such person

must submit to the marker administrator

a statement signed by the applicant and

the operator of the pool plant to which

the milk will be delivered specifying

that the applicant will be the

responsible handler for the milk.

§ 1134.12 Producer.

(a) Except as provided in paragraph

(b) of this section, producer means any

person who produces milk approved by

a duly constituted regulatory agency for

fluid consumption as Grade A milk and

whose milk (or components of milk) is:

(1) Received at a pool plant directly

from the producer or diverted by the

plant operator in accordance with

§ 1134.13; or

(2) Received by a handler described in

§ 1000.9(c).

(b) Producer shall not include:

(1) A producer-handler as defined in

any Federal order;

(2) A dairy farmer whose milk is

delivered to an exempt plant, excluding

producer milk diverted to the exempt

plant pursuant to § 1134.13(d);

(3) A dairy farmer whose milk is

diverted to a pool plant by a handler

regulated under another Federal order if

the other Federal order designates the

dairy farmer as a producer under that

order and that milk is allocated by

request to a utilization other than Class

I; and

(4) A dairy farmer whose milk is

reported as diverted to a plant fully

regulated under another Federal order

with respect to that portion of the milk

so diverted that is assigned to Class I

under the provisions of such other

order.

(5) A dairy farmer whose milk was

received at a pool plant if during the

month milk from the same farm was

received at a nonpool plant (except a

nonpool plant that has no utilization of

milk products in any Class other than

Class III or Class IV) other than as a

diversion under this or some other

Federal order.

§ 1134.13 Producer milk.

Producer milk means the skim milk

(or the skim equivalent of components

of skim milk), including nonfat

components, and butterfat in milk of a

producer that is:

(a) Received by the operator of a pool

plant directly from a producer, by a

handler described in § 1000.9(c), or by

a handler described in § 1134.11. Any

milk picked up from the producer’s

farm tank in a tank truck under the

control of the operator of the pool plant

or a handler described in § 1000.9(c) but

which is not received at a plant until the

following month shall be considered as

having been received by the handler

during the month in which it was

picked up at the producer’s farm. All

milk received pursuant to this

paragraph shall be priced at the location

of the plant where it is first physically

received;

(b) Received by a handler described in

§ 1000.9(c) or in § 1134.11 in excess of

the quantity delivered to pool plants.

(c) Diverted by a pool plant operator

to another pool plant. Milk so diverted

shall be priced at the location of the

plant to which diverted; or

(d) Diverted by the operator of a pool

plant, a cooperative association

described in § 1000.9(c), or a proprietary

bulk tank handler described in

§ 1134.11, to a nonpool plant, subject to

the following conditions:

(1) Milk of a dairy farmer shall not be

eligible for diversion unless at least one

day’s milk production of such dairy

farmer has been physically received as

producer milk at a pool plant and the

dairy farmer has continuously retained

producer status since that time. If a

dairy farmer loses producer status under

this order (except as a result of a

temporary loss of Grade A approval), the

dairy farmer’s milk shall not be eligible

for diversion until milk of the dairy

farmer has been physically received as

producer milk at a pool plant;

(2) Of the quantity of producer milk

received during the month (including

diversions) the handler diverts to

nonpool plants not more than 80

percent;

(3) Diverted milk shall be priced at

the location of the plant to which

diverted;

(4) Any milk diverted in excess of the

limits prescribed in (d)(2) of this section

shall not be producer milk. If the

diverting handler, cooperative

association, or proprietary bulk tank

handler fails to designate the dairy

farmers’ deliveries that are not to be
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5087

producer milk, no milk diverted by the

handler, cooperative association, or

proprietary bulk tank handler during the

month to a nonpool plant shall be

producer milk. In the event some of the

milk of any producer is determined not

to be producer milk pursuant to this

paragraph, other milk delivered by such

producer as producer milk during the

month will not be subject to

§ 1134.12(b)(5); and

(5) The applicable diversion limits in

paragraph (d)(2) of this section may be

increased or decreased by the market

administrator if the market

administrator finds that such revision is

necessary to assure orderly marketing

and efficient handling of milk in the

marketing area. Before making such a

finding, the market administrator shall

investigate the need for the revision

either on the market administrator’s

own initiative or at the request of

interested persons. If the investigation

shows that a revision might be

appropriate, the market administrator

shall issue a notice stating that the

revision is being considered and

inviting written data, views, and

arguments. Any decision to revise an

applicable percentage must be issued in

writing at least one day before the

effective date.

§ 1134.14 Other source milk.

See § 1000.14 of this chapter.

§ 1134.15 Fluid milk product.

See § 1000.15 of this chapter.

§ 1134.16 Fluid cream product.

See § 1000.16 of this chapter.

§ 1134.17 [Reserved]

§ 1134.18 Cooperative association.

See § 1000.18 of this chapter.

§ 1134.19 Commercial food processing

establishment.

See § 1000.19 of this chapter.

Handler Reports

§ 1134.30 Reports of receipts and

utilization.

Each handler shall report monthly so

that the market administrator receives

the report on or before the 7th day after

the end of each month, in the detail and

on the forms prescribed by the market

administrator, as follows:

(a) Each handler that operates a pool

plant pursuant to § 1134.7, and each

handler described in § 1000.9(c) or in

§ 1134.11, shall report for each of its

operations the following information:

(1) Product pounds, pounds of

butterfat, pounds of protein, nd pounds

of solids-not-fat other than protein

(other solids), contained in or

represented by:

(i) Receipts of producer milk,

including producer milk diverted by the

handler; and

(ii) Receipts of milk from handlers

described in § 1000.9(c);

(2) Product pounds and pounds of

butterfat contained in:

(i) Receipts of fluid milk products and

bulk fluid cream products from other

pool plants;

(ii) Receipts of other source milk; and

(iii) Inventories at the beginning and

end of the month of fluid milk products

and bulk fluid cream products;

(3) The utilization or disposition of all

milk and milk products required to be

reported pursuant to this paragraph; and

(4) Such other information with

respect to the receipts and utilization of

skim milk, butterfat, milk protein, and

other nonfat solids, as the market

administrator may prescribe.

(b) Each handler operating a partially

regulated distributing plant shall report

with respect to such plant in the same

manner as prescribed for reports

required by paragraph (a) of this section.

Receipts of milk that would have been

producer milk if the plant had been

fully regulated shall be reported in lieu

of producer milk. The report shall show

also the quantity of any reconstituted

skim milk in route disposition in the

marketing area.

(c) Each handler not specified in

paragraphs (a) and (b) of this section

shall report with respect to its receipts

and utilization of milk and milk

products in such manner as the market

administrator may prescribe.

§ 1134.31 Payroll reports.

(a) On or before the 21st day after the

end of each month, each handler that

operates a pool plant pursuant to

§ 1134.7 and each handler described in

§ 1000.9(c) and in § 1134.11 shall report

to the market administrator its producer

payroll for the month, in the detail

prescribed by the market administrator,

showing for each producer the

information described in § 1134.73(f).

(b) Each handler operating a partially

regulated distributing plant who elects

to make payment pursuant to

§ 1000.76(b) shall report for each dairy

farmer who would have been a producer

if the plant had been fully regulated in

the same manner as prescribed for

reports required by paragraph (a) of this

section.

§ 1134.32 Other reports.

In addition to the reports required

pursuant to §§ 1134.30 and 1134.31,

each handler shall report any

information the market administrator

deems necessary to verify or establish

each handler’s obligation under the

order.

Classification of Milk

§ 1134.40 Classes of utilization.

See § 1134.40 of this chapter.

§ 1134.41 [Reserved]

§ 1134.42 Classification of transfers and

diversions.

See § 1000.42 of this chapter.

§ 1134.43 General classification rules.

See § 1000.43 of this chapter.

§ 1134.44 Classification of producer milk.

See § 1000.44 of this chapter.

§ 1134.45 Market administrator’s reports

and announcements concerning

classification.

See § 1000.45 of this chapter.

Class Prices

§ 1134.50 Class prices and component

prices.

See § 1000.50 of this chapter.

§ 1134.51 Class I differential and price.

The Class I differential shall be the

differential established at Salt Lake

County, Utah, which is reported in

§ 1000.52. The Class I price shall be the

price computed pursuant to § 1000.50(a)

for Salt Lake County, Utah.

§ 1134.52 Adjusted Class I differentials.

See § 1000.52 of this chapter.

§ 1134.53 Announcement of class prices

and component prices.

See § 1000.53 of this chapter.

§ 1134.54 Equivalent price.

See § 1000.54 of this chapter.

Producer Price Differential

§ 1134.60 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 its pool plants, and of each

handler described in § 1000.9(c) and

§ 1134.11 as follows:

(a) Class I value.

(1) Multiply the hundredweight of

skim milk in Class I as determined

pursuant to § 1000.44(a) by the Class I

skim milk price applicable at the

handler’s location; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class I as determined pursuant to

§ 1000.44(b) by the Class I butterfat

price applicable at the handler’s

location.
5088 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

(b) Add the Class II value, computed

as follows:

(1) Multiply the hundredweight of

skim milk in Class II as determined

pursuant to § 1000.44(a) by 70 cents;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class II as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class II as determined pursuant to

§ 1000.44(b) by the butterfat price;

(c) Add the Class III value computed

as follows:

(1) Multiply the pounds of skim milk

in Class III as determined pursuant to

§ 1000.44(a) by the average protein

content of producer skim milk received

by the handler, and multiply the

resulting pounds of protein by the

protein price;

(2) Add an amount obtained by

multiplying the pounds of skim milk in

Class III as determined pursuant to

§ 1000.44(a) by the average other solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of other solids by the

other solids price; and

(3) Add an amount obtained by

multiplying the pounds of butterfat in

Class III as determined pursuant to

§ 1000.44(b) by the butterfat price;

(d) Add the Class IV value computed

as follows:

(1) Multiply the pounds of skim milk

in Class IV as determined pursuant to

§ 1000.44(a) by the average nonfat solids

content of producer skim milk received

by the handler, and multiply the

resulting pounds of nonfat solids by the

nonfat solids price; and

(2) Add an amount obtained by

multiplying the pounds of butterfat in

Class IV as determined pursuant to

§ 1000.44(b) by the butterfat price;

(e) [Reserved]

(f) Add the amounts obtained from

multiplying the pounds of skim milk

and butterfat overage assigned to each

class pursuant to § 1000.43(b)(2) by the

respective skim milk and butterfat

prices applicable at the location of the

pool plant;

(g) Add the amount obtained from

multiplying the difference between the

Class III price for the preceding month

and the Class I price applicable at the

location of the pool plant or the Class

II price, as the case may be, for the

current month by the hundredweight of

skim milk and butterfat subtracted from

Class I and Class II pursuant to

§ 1000.44(a)(7) and the corresponding

step of § 1000.44(b);

(h) Add the amount obtained from

multiplying the difference between the

Class I price applicable at the location

of the pool plant and the Class III price

by the hundredweight of skim milk and

butterfat assigned to Class I pursuant to

§ 1000.43(d) and the hundredweight of

skim milk and butterfat subtracted from

Class I pursuant to § 1000.44(a)(3)(i)

through (iii) and the corresponding step

of § 1000.44(b), excluding receipts of

bulk fluid cream products from a plant

regulated under other Federal orders

and bulk concentrated fluid milk

products from pool plants, plants

regulated under other Federal orders,

and unregulated supply plants;

(i) Add the amount obtained from

multiplying the difference between the

Class I price and the Class III price

applicable at the location of the nearest

unregulated supply plants from which

an equivalent volume was received by

the pounds of skim milk and butterfat

in receipts of concentrated fluid milk

products assigned to Class I pursuant to

§ 1000.43(d) and § 1000.44(a)(3)(i) and

the pounds of skim milk and butterfat

subtracted from Class I pursuant to

§ 1000.44(a)(8) and the corresponding

step of § 1000.44(b), excluding such

skim milk and butterfat in receipts of

bulk fluid milk products from an

unregulated supply plant to the extent

that an equivalent amount of skim milk

or butterfat disposed of to such plant by

handlers fully regulated under any

Federal milk order is classified and

priced as Class I milk and is not used

as an offset for any other payment

obligation under any order;

(j) Subtract, for reconstituted milk

made from receipts of nonfluid milk

products, an amount computed by

multiplying $1.00 (but not more than

the difference between the Class I price

applicable at the location of the pool

plant and the Class IV price) by the

hundredweight of skim milk and

butterfat contained in receipts of

nonfluid milk products that are

allocated to Class I pursuant to

§ 1000.43(d); and

(k) Exclude, for pricing purposes

under this section, receipts of nonfluid

milk products that are distributed as

labeled reconstituted milk for which

payments are made to the producersettlement fund of another order under

§ 1000.76(a)(5) or (c).

§ 1134.61 Computation of producer price

differential.

For each month the market

administrator shall compute a producer

price differential per hundredweight. If

the unreserved balance in the producersettlement fund to be included in the

computation is less than 2 cents per

hundredweight of producer milk on all

reports, the report of any handler who

has not made payments required

pursuant to § 1134.71 for the preceding

month shall not be included in the

computation of the producer price

differential. The report of such handler

shall not be included in the

computation for succeeding months

until the handler has made full payment

of outstanding monthly obligations.

Subject to the aforementioned

conditions, the market administrator

shall compute the producer price

differential in the following manner:

(a) Combine into one total the values

computed pursuant to § 1134.60 for all

handlers required to file reports

prescribed in § 1134.30;

(b) Subtract the total values obtained

by multiplying each handler’s total

pounds of protein, other solids, and

butterfat contained in the milk for

which an obligation was computed

pursuant to § 1134.60 by the protein

price, the other solids price, and the

butterfat price, respectively;

(c) Add an amount equal to the sum

of the location adjustments computed

pursuant to § 1134.75;

(d) Add an amount equal to not less

than one-half of the unobligated balance

in the producer-settlement fund;

(e) Divide the resulting amount by the

sum of the following for all handlers

included in these computations:

(1) The total hundredweight of

producer milk; and

(2) The total hundredweight for which

a value is computed pursuant to

§ 1134.60(i); and

(f) Subtract not less than 4 cents nor

more than 5 cents from the price

computed pursuant to paragraph (e) of

this section. The result shall be known

as the producer price differential for the

month.

§ 1134.62 Announcement of producer

prices.

On or before the 12th day after the

end of each month, the market

administrator shall announce publicly

the following prices and information:

(a) The producer price differential;

(b) The protein price;

(c) The other solids price;

(d) The butterfat price;

(e) [Reserved]

(f) The average butterfat, protein and

other solids content of producer milk;

and

(g) The statistical uniform price for

milk containing 3.5 percent butterfat,

computed by combining the Class III

price and the producer price

differential.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5089

Payments for Milk

§ 1134.70 Producer-settlement fund.

See § 1000.70 of this chapter.

§ 1134.71 Payments to the producersettlement fund.

Each handler shall make payment to

the producer-settlement fund in a

manner that provides receipt of the

funds by the market administrator no

later than the 14th day after the end of

the month. Payment shall be the

amount, if any, by which the amount

specified in paragraph (a) of this section

exceeds the amount specified in

paragraph (b) of this section:

(a) The total value of milk to the

handler for the month as determined

pursuant to § 1134.60.

(b) The sum of:

(1) An amount obtained by

multiplying the total hundredweight of

producer milk as determined pursuant

to § 1000.44(c) by the producer price

differential as adjusted pursuant to

§ 1134.75;

(2) An amount obtained by

multiplying the total pounds of protein,

other solids, and butterfat contained in

producer milk by the protein, other

solids, and butterfat prices respectively;

(3) [Reserved]

(4) An amount obtained by

multiplying the pounds of skim milk

and butterfat for which a value was

computed pursuant to § 1134.60(i) by

the producer price differential as

adjusted pursuant to § 1134.75 for the

location of the plant from which

received.

§ 1134.72 Payments from the producersettlement fund.

No later than the 15th day after the

end of each month, the market

administrator shall pay to each handler

the amount, if any, by which the

amount computed pursuant to

§ 1134.71(b) exceeds the amount

computed pursuant to § 1134.71(a). If, at

such time, the balance in the producersettlement fund is insufficient to make

all payments pursuant to this section,

the market administrator shall reduce

uniformly such payments and shall

complete the payments as soon as the

funds are available.

§ 1134.73 Payments to producers and to

cooperative associations.

(a) Except as provided in paragraph

(b) and (c) of this section, each handler

shall make payment to each producer

from whom milk is received during the

month as follows:

(1) Partial Payment. On or before the

25th day of each month to each

producer an amount not less than 1.2

times the lowest class price for the

preceding month multiplied by the

hundredweight of milk received from

such producer during the first 15 days

of the month, less proper deductions

authorized by such producer to be made

from payments due pursuant to this

paragraph; and

(2) Final Payment. On or before the

17th day of the following month, not

less than an amount computed by the

sum of the following:

(i) The hundredweight of producer

milk received times the producer price

differential for the month as adjusted

pursuant to § 1134.75;

(ii) The pounds of butterfat in

producer milk received times the

butterfat price for the month;

(iii) The pounds of protein in

producer milk received times the

protein price for the month;

(iv) The pounds of other solids in

producer milk received times the other

solids price for the month;

(v) [Reserved]

(vi) Less any payments made pursuant

to paragraph (a)(1) of this section;

(vii) Less proper deductions

authorized in writing by such producer

and plus or minus adjustments for

errors in previous payments to such

producer; and

(viii) Less deductions made for

marketing service pursuant to § 1000.86;

(b) Partial payment to a cooperative

association. On or before the 24th day

of each month each handler shall pay to

a cooperative association, which the

market administrator determines is

authorized by its members to collect

payment for their milk, an amount not

less than 1.2 times the lowest class price

for the preceding month multiplied by

the hundredweight of milk received

during the first 15 days of the month

from such cooperative association,

including the milk of producers not

members of such cooperative

association who the market

administrator determines have

authorized the cooperative association

to collect payment for their milk;

(c) Final Payment to a cooperative

association. On or before the 16th day

of the following month, each handler

shall pay to a cooperative association

which the market administrator

determines is authorized by its members

to collect payment for their milk not less

than an amount computed pursuant to

paragraph (a)(2) of this section for milk

received from such cooperative

association during the month, including

the milk of producers not members of

such cooperative association who the

market administrator determines have

authorized the cooperative association

to collect payment for their milk;

(d) If a handler has not received full

payment from the market administrator

pursuant to § 1134.72 by the payment

date specified in paragraph (a), (b), or (c)

of this section, the handler may reduce

pro rata its payments to producers or to

the cooperative association by not more

than the amount of such underpayment.

The payments shall be completed on the

next scheduled payment date after

receipt of the balance due from the

market administrator.

(e) If a handler claims that a required

payment to a producer cannot be made

because the producer is deceased or

cannot be located, or because the

cooperative association or its lawful

successor or assignee is no longer in

existence, the payment shall be made to

the producer settlement fund, and in the

event the handler subsequently locates

and pays the producer or a lawful

claimant, or in the event that the

handler no longer exists and a lawful

claim is later established, the market

administrator shall make the required

payment from the producer-settlement

fund to the handler or to the lawful

claimant, as the case may be.

(f) In making payments to producers

pursuant to this section, each handler

shall furnish each producer, except a

producer whose milk was received from

a cooperative association handler

described in § 1000.9(a) or (c), a

supporting statement in a form that may

be retained by the recipient which shall

show:

(1) The name, address, Grade A

identifier assigned by a duly constituted

regulatory agency, and payroll number

of the producer;

(2) The daily and total pounds, and

the month and dates such milk was

received from that producer;

(3) The total pounds of butterfat,

protein, and other solids contained in

the producer’s milk;

(4) [Reserved];

(5) The minimum rate or rates at

which payment to the producer is

required pursuant to this order;

(6) The rate used in making payment

if the rate is other than the applicable

minimum rate;

(7) The amount, or rate per

hundredweight, or rate per pounds of

component, and the nature of each

deduction claimed by the handler; and

(8) The net amount of payment to the

producer or cooperative association.

§ 1134.74 [Reserved]

§ 1134.75 Plant location adjustments for

producer milk and nonpool milk.

(a) The producer price differential for

producer milk shall be adjusted

according to the location of the plant at
5090 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

which the milk was first physically

received by subtracting from the price

differential the amount by which the

Class I price specified in § 1134.51

exceeds the Class I price at the plant’s

location. If the Class I price at the plant

location exceeds the Class I price

specified in § 1134.51, the difference

shall be added to the producer price

differential; and

(b) The producer price differential

applicable to other source milk shall be

adjusted following the procedure

specified in paragraph (a) of this

section, except that the adjusted

producer price differential shall not be

less than zero.

§ 1134.76 Payments by a handler

operating a partially regulated distributing

plant.

See § 1000.76 of this chapter.

§ 1134.77 Adjustment of accounts.

See § 1000.77 of this chapter.

§ 1134.78 Charges on overdue accounts.

See § 1000.78 of this chapter.

Administrative Assessment and

Marketing Service Deduction

§ 1134.85 Assessment for order

administration.

See § 1000.85 of this chapter.

§ 1134.86 Deduction for marketing

services.

See § 1000.86 of this chapter.

Dated: January 21, 1998.

Michael V. Dunn,

Assistant Secretary for Marketing and

Regulatory Programs.

Note: The following appendices will not

appear in the Code of Federal Regulations.

Appendix A: Summary of Preliminary

Suggested Order Consolidation Report

Ten marketing areas are suggested in the

preliminary consolidation report. As a means

of determining where interrelationships

among the current marketing areas are

strongest, data relating to the receipts and

distribution of fluid milk products by

distributing plants were gathered for all

known distributing plants located in the 47

contiguous States, not including the State of

California, for the month of October 1995. At

this time, California is not included as a

suggested order area. The 1996 Farm Bill

allows for the inclusion of a California

Federal milk order if California producers

petition for and approve an order. If a

California order were included in the

suggested Federal order structure at a later

time, it would encompass the entire State

and would include no area outside the State

of California. Although interest in a Federal

order has been expressed by some California

producer groups, no definite action has been

taken.

An analysis of the distribution and

procurement patterns of the fluid processing

plants, along with other factors, was used to

determine which order areas were most

closely related. Proposals submitted by the

public were also taken into account. The

primary criteria used in determining which

markets exhibit a sufficient degree of

association in terms of sales, procurement,

and structural relationships to warrant

consolidation were:

1. Overlapping route disposition.

2. Overlapping areas of milk supply.

3. Number of handlers within a market.

4. Natural boundaries.

5. Cooperative association service areas.

6. Features common to existing orders,

such as similar multiple component pricing

payment plans.

7. Milk utilization in common dairy

products.

The requirement to consolidate existing

marketing areas does not specify expansion

of regulation to previously nonfederally

regulated areas where such expansion would

have the effect of regulating handlers not

currently regulated. However, a number of

the current marketing areas enclose

unregulated areas. These ‘‘pockets’’ are

included in the suggested merged marketing

areas only if their inclusion does not change

the current regulatory status of a plant. In the

process of consolidating marketing areas,

some handlers who currently are partially

regulated may become fully regulated

because their sales in a combined marketing

area will likely meet the pooling standards of

a suggested consolidated order. Further

expansion of the marketing areas, which

would result in regulating additional

handlers, is an issue that should be

addressed by the industry. Proposals to take

such action should be accompanied by

supporting data, views, and arguments

concerning the need and basis for any such

expansion.

The 10 suggested consolidated marketing

areas and the major reasons for consolidation

are:

1. Northeast

Current marketing areas of the New

England, New York-New Jersey, and Middle

Atlantic Federal milk orders. Reasons for

consolidation include the existence of

overlapping sales and procurement areas

between New England and New York-New

Jersey and between New York-New Jersey

and Middle Atlantic. The orders are also

surrounded by nonfederally regulated

territory. A further measure of association is

evident by industry efforts to study and

pursue consolidation of the three Federal

orders, as well as some of the nonfederally

regulated territory, prior to the 1996 Farm

Bill.

2. Appalachian

Current marketing areas of the Carolina

and Tennessee Valley Federal milk orders,

and a portion of the Louisville-LexingtonEvansville Federal milk order. Overlapping

sales and procurement areas between these

marketing areas are major factors for

supporting such a consolidation.

3. Florida

Current marketing areas of the Upper

Florida, Tampa Bay, and Southeastern

Florida Federal milk orders. Natural

boundary limitations and overlapping sales

and procurement areas among the three

orders are major reasons for consolidation, as

well as a measure of association evidenced

by cooperative association proposals to

consolidate these three marketing areas.

Further, the cooperative associations in this

area have worked together for a number of

years to accommodate needed movements of

milk between the three Florida Federal

orders.

4. Southeast

Current marketing area of the Southeast

Federal milk order, plus 1 county from the

Louisville-Lexington-Evansville Federal milk

order marketing area, 15 currently

unregulated Kentucky counties, and 2

currently unregulated northeast Texas

counties. Major reasons for this consolidation

include sales and procurement area overlaps

between the Southeast order and the

Kentucky and Texas counties suggested for

inclusion. There is minimal sales area

overlap with handlers regulated under other

Federal orders.

5. Mideast

Current marketing areas of the Ohio

Valley, Eastern Ohio-Western Pennsylvania,

Southern Michigan, and Indiana Federal

milk orders, plus most of the current

marketing area of the Louisville-LexingtonEvansville Federal milk order, Zone 2 of the

Michigan Upper Peninsula Federal milk

order, and 12 counties of the Southern

Illinois-Eastern Missouri Federal milk order.

Major criteria suggesting this consolidation

include the overlap of fluid sales in the Ohio

Valley marketing area by handlers from the

other areas suggested to be consolidated.

With the consolidation, most route

disposition by handlers located within the

suggested Mideast order would be within the

marketing area. Also, nearly all milk

produced within the area would be pooled

under the consolidated order. The portion of

the Michigan Upper Peninsula marketing

area suggested to be included in the Mideast

consolidated area has sales and milk

procurement areas in common with the

Southern Michigan area and has minimal

association with the western end of the

current Michigan Upper Peninsula marketing

area.

6. Upper Midwest

Current marketing areas of the Chicago

Regional and Upper Midwest Federal milk

orders, plus Zones I and I(a) of the Michigan

Upper Peninsula Federal milk order and

seven unregulated or partly unregulated

Wisconsin counties. Major consolidation

criteria include an overlapping procurement

area between the Chicago Regional and

Upper Midwest orders, overlapping

procurement and route disposition area

between the western end of the Michigan

Upper Peninsula order and the Chicago

Regional order, natural boundary limitations,

and the prevalence of cheese as a major

manufactured product for the substantial

reserve milk supplies that exceed fluid milk

needs.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5091

7. Central

Current marketing areas of the Southern

Illinois-Eastern Missouri (less 12 counties

included in the suggested Mideast marketing

area), Central Illinois, Greater Kansas City,

Nebraska-Western Iowa (less 11 currentlyregulated counties suggested to be

unregulated), Eastern South Dakota, Iowa,

Southwest Plains, and Eastern Colorado

Federal milk orders, plus 63 currentlyunregulated counties in seven of the states.

Major criteria suggesting this consolidation

include the overlapping procurement and

route disposition between the current orders.

The suggested consolidation would result in

a concentration of both the sales and supplies

of milk within the consolidated marketing

area. The suggested consolidation would

combine several relatively small orders and

provide for the release of market data without

revealing proprietary information. In

addition, most of the producers in these areas

share membership in several common

cooperatives.

8. Southwest

Current marketing areas of the Texas, New

Mexico-West Texas, and Central Arizona

Federal milk orders. Major criteria suggesting

consolidation include sales and procurement

area overlaps and common cooperative

association membership between the Texas

and New Mexico-West Texas marketing

areas, and similar marketing concerns with

respect to trade with Mexico for all three

orders. In addition, there is some route

disposition by Central Arizona handlers into

the New Mexico-West Texas marketing area,

and the Central Arizona market contains a

small number of handlers.

9. Western

Current marketing areas of the Western

Colorado, Southwestern Idaho-Eastern

Oregon, and Great Basin Federal milk orders.

Major criteria suggesting consolidation

include overlapping sales between

Southwestern Idaho-Eastern Oregon and

Great Basin, as well as a significant overlap

in procurement for the two orders in five

Idaho counties. The two orders also share a

similar multiple component pricing plan.

The Western Colorado order is included

because it is a small market where data

cannot be released without revealing

confidential information unless combined

with the adjacent Great Basin order.

10. Pacific Northwest

Current marketing area of the Pacific

Northwest Federal milk order plus 1

currently-unregulated county in Oregon. The

degree of association with other marketing

areas is insufficient to warrant consolidation.

Following is a table summarizing relevant

data for the consolidated markets:

CONSOLIDATED MARKET SUMMARY

[Based on October 1995 data]

Consolidated order

Total producer milk

(1,000 lbs.)

Number of

fully regulated distributing plants

Combined

class I utilization

(percent)

Northeast .................................................................................................................................................. 1,934,833 85 46.7

Appalachian .............................................................................................................................................. 320,198 25 82.5

Florida ....................................................................................................................................................... 200,397 18 88.3

Southeast ................................................................................................................................................. 443,921 38 84.3

Mideast ..................................................................................................................................................... 1 1,140,952 68 57.8

Upper Midwest ......................................................................................................................................... 2 1,046,539 4 27 34.2

Central ...................................................................................................................................................... 3 932,929 42 50.6

Southwest ................................................................................................................................................. 861,307 31 48.3

Western .................................................................................................................................................... 304,793 14 5 31.7

Pacific Northwest ...................................................................................................................................... 501,257 23 36.3

Total .................................................................................................................................................. 7,687,126 371 n/a

1Producer milk for F.O. 44 is included. Producer milk for a F.O. 32 handler who would be pooled under the suggested Mideast market is included in the Central consolidated market. 2Producer milk for F.O. 30 and F.O. 68 only.

3Producer milk for a F.O. 32 handler that would be in the Mideast consolidated market is included.

4A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 15.3% combined Class

I utilization. 5A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 21.8% combined Class

I utilization.

Appendix B: Summary of Pricing

Options

Several options for modifying Class I

pricing under the Federal milk market order

program, representing a spectrum of views,

are discussed in this summary report. The

accompanying technical report summarizes

all of the comments and proposals received

by the Department related to Class I pricing

under Federal orders.

Most Class I pricing concepts that were

suggested would continue to employ a

market-driven basic formula price (BFP) with

an added differential. Differentials are a

composite of one or more of the following

elements: (1) A fixed component, (2) a

location adjustment, (3) an adjustor relating

to utilization, or (4) the cost of balancing the

market. Based on the pricing concepts

received, the following options were

developed:

Option 1A: Location-Specific Differential

$1.60 per hundredweight fixed differential

for three surplus regions (Upper Midwest,

West, and Southwest) within a nine-zone

national price surface, plus for the other six

zones an added component that reflects

regional differences in the value of fluid and

manufacturing milk.

Option 1B: Modified Location-Specific

Differential Option

$1.00 per hundredweight fixed differential

plus an added component that reflects the

cost of moving bulk milk to deficit markets.

Option 2: Relative Use Differential

$1.60 per hundredweight fixed differential

plus a formula-based differential driven by

the ratio of Class I milk to all other uses of

milk.

Option 3A: Flat Differential Option

$1.60 per hundredweight flat differential,

uniformly applied across all orders to

generate an identical minimum Class I price.

Option 3B: Flat Differential Modified by

Class I Use—

$2.00 per hundredweight differential in

markets where Class I utilization is less than

70 percent on an annual basis and a

differential equal to $2.00 + $0.075(Class I

use %—70%) in markets where the Class I

utilization is equal to or exceeds 70 percent.

Option 4: Demand-Based Differential—

$1.00 per hundredweight fixed differential

plus a transportation credit based on location

of reserve milk supplies.

Estimated Class I differentials are

presented for each option to provide a

preliminary basis for determining impacts

that may occur. The report provides

estimated differentials for the suggested 10
5092 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

consolidated orders and for the current 32

Federal milk marketing orders.

The report concludes by soliciting

comments on the options presented and

poses a series of questions for the public to

address when submitting comments back to

the Department on the issue of Class I

pricing.

Appendix C: Summary of Classification

Report

The Agricultural Marketing Agreement Act

of 1937 provides that all milk should be

classified ‘‘in accordance with the form in

which or the purpose for which it is used.’’

This has resulted in a system of uniform

classification provisions that places milk

used for fluid purposes in the highest use

class, Class I, and other manufactured

products in lower classes, Classes II, III, and

III–A.

Currently products packaged for fluid

consumption such as whole milk, skim milk,

buttermilk, and flavored milk drinks are

classified as Class I products. Class II

products include ice cream, yogurt, cottage

cheese, and cream. Class III and Class III–A

products include cheese, butter, and nonfat

dry milk.

Among the changes in classification

recommended in the technical report are the

following:

• Eggnog would be reclassified from Class

II to Class I.

• Any fluid beverage having less than 6.5

percent nonfat milk solids would be

reclassified from Class II to Class I.

• Cream cheese would be reclassified from

Class III to Class II.

The technical report recommends changing

the classification of milk used in nonfat dry

milk from Class III–A to Class III. The report

recommends that if Class III–A pricing is not

eliminated, the following four alternatives be

considered:

• Place a floor beneath the Class III–A

price;

• Restrict III–A pricing to certain months

or to certain markets;

• Provide an up-charge for nonfat dry milk

used in higher-valued products; or

• Provide for a combination of these

options.

Maintaining the classification of milk used

to make nonfat dry milk in Class III–A is also

an option, although not discussed in the

technical report.

The technical report addresses Class III–A

pricing because of industry concerns about

the substitution of nonfat dry milk for fluid

milk in Class II and III uses when the Class

III–A price is substantially below the Class III

price.

Appendix D: Summary of Identical

Provisions Report

Federal milk marketing orders contain

numerous provisions that establish the

regulations for the operation of the orders.

Over the years, the orders have been

individualized to account for specific

situations associated with a given marketing

area. However, there are several provisions

within the orders that are similar or that

could be similar and still provide for efficient

and orderly marketing of milk.

The technical report does the following:

• Suggests a model for establishing the

consolidated orders and provides suggestions

on the order language that can be adopted

uniformly throughout all orders.

• Reviewed, simplified, modified, and

eliminated differences in order provisions

that:

• Define various terms used in the orders

• Establish regulatory standards for plants

and handlers

• Provide for uniform reporting dates of

milk receipts and utilization

• Provide for uniform dates for payment of

milk

• Provide for computation of a uniform

price

• Reduces performance standards to make

it easier for producers to associate with a

market.

At this time, it is impossible to determine

if there would be any financial impact on

producers, handlers, or consumers as a result

of any of these suggested provision revisions.

It is projected that there will be little impact

on the overall program because the changes

primarily provide for uniformity. There may

be minimal impact on selected individual

producers, handlers, or consumers, but this

cannot be determined until more specific

information is developed regarding the

orders (i.e., marketing area and pricing). The

suggested identical provisions will be

applied to each of the suggested consolidated

orders and determinations will be based on

the marketing conditions of the given region.

One suggested change in the report that

may stimulate some debate is the definition

of a producer-handler. The technical report

suggests applying the most liberal standard to

the producer-handler definition to prevent

any producer-handler from becoming

regulated as a result of milk order reform.

Producer-handlers have been exempt from

full regulation because they assume the full

risks associated with being a producer and a

distributor of milk produced with only

occasional and small volumes of milk being

purchased from other dairy farmers.

Appendix E: Summary of Basic

Formula Price Report

The basic formula price (BFP) is used to

determine Federal order prices for milk used

in manufactured products and, with the

addition of differentials, to determine

minimum Class I and II prices for milk

pooled under the Federal orders. The current

BFP is based on a survey of prices paid for

manufacturing grade (Grade B) milk by plants

in Minnesota and Wisconsin, updated by

month-to-month changes in commodity

prices (especially cheese). The continuing

decline in the volume of Grade B milk

produced in the upper Midwest and

nationally is an indication that, in the near

future, the M–W price series may not be

statistically reliable as an indicator of the

value of milk used in manufactured products.

The BFP Committee has received input

provided during a public BFP Forum held in

Madison, Wisconsin, and from over 200

written public comments, and conducted a

survey of transaction prices for manufactured

dairy products. The Committee also has

sponsored analysis by a group of university

researchers, and conducted extensive study

and analysis of its own. The BFP Committee

evaluated alternatives to the BFP against the

criteria of stability, predictability, simplicity,

uniformity, transparency, sound economics

and reduced regulation. Options identified

by the Committee were grouped into the

following categories:

Options Considered: Economic formulas,

Product price and component formulas,

Futures markets, California pricing, Cost of

production, Informal rulemaking,

Competitive pay price, Pooling differentials

only.

At this time, the Committee has identified

four options for further discussion and

debate:

• A four-class, multiple component pricing

plan to price butterfat, protein and lactose

used in cheese (Class III), and butterfat and

nonfat solids used in butter/powder (Class

IV).

• A three-class, multiple component

pricing plan to price protein used in cheese,

butterfat used in butter, and other nonfat

solids used in powder (Class III—one

manufacturing class).

• A product price formula computed from

the butter, powder and cheese shares of U.S.

production, using seasonal product yields

and a California cost-based make allowance;

and

• A competitive pay price series using a

national weighted average price paid for

Grade A milk used in manufactured

products, updated by a product price

formula. The price series would contain an

adjuster to attempt to remove the effect of

current regulation and to reduce it to a level

more comparable to the current BFP.

As a basis for Class I prices, the BFP could

be made more stable by using an economic

formula or using a moving average of a

manufacturing price. Class II prices could be

based on components or continue to include

a differential from the manufacturing price

level.

The BFP Committee is continuing to study

and analyze alternatives in response to

public comments.

Appendix F: Summary of Revised

Preliminary Suggested Order

Consolidation Report

The ten marketing areas suggested in the

initial preliminary consolidation report have

increased to eleven and been modified to

some extent in this revised preliminary

report. Several of the initially suggested

marketing areas were the subjects of

numerous comments containing information

that indicated that the boundaries of those

areas should be re-evaluated. In addition,

shifts in regulation and distributing plant

distribution areas were known to have

occurred. As a result, more detailed and

updated (January 1997) data was obtained

relating to the receipts of producer milk and

distribution of fluid milk products by

distributing plants in a number of the

initially-suggested order marketing areas. As

a result, changes were made in the suggested

marketing areas of the Northeast,

Appalachian, Southeast, Mideast, Upper

Midwest, Central, Southwest, and Western
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5093

regions, and a new Arizona-Las Vegas area

was added.

An analysis of the distribution and

procurement patterns of the fluid processing

plants, along with other factors, was used to

determine which order areas were most

closely related. Proposals submitted by the

public were also taken into account. The

primary criteria used in determining which

markets exhibit a sufficient degree of

association in terms of sales, procurement,

and structural relationships to warrant

consolidation continued to be:

1. Overlapping route disposition.

2. Overlapping areas of milk supply.

3. Number of handlers within a market.

4. Natural boundaries.

5. Cooperative association service areas.

6. Features common to existing orders,

such as similar multiple component pricing

plans.

7. Milk utilization in common dairy

products.

In the initial preliminary report, it was

observed that the Farm Bill requirement to

consolidate existing marketing areas does not

specify expansion of regulation to previously

non-Federally regulated areas where such

expansion would have the effect of regulating

handlers not currently regulated. This

revised preliminary report suggests that some

currently non-Federally regulated area be

added on the basis of comments supported

by data, views and arguments filed by

interested persons. Specifically, unregulated

areas contiguous to the initial suggested

consolidated Northeast and Mideast

marketing areas are suggested for inclusion in

those suggested order areas. Some handlers

currently not subject to full Federal order

regulation would become pool plants if the

suggested areas are added. Handlers who

would be affected will be notified of the

possible change in their status, and

encouraged to comment.

As in the initial preliminary report,

‘‘pockets’’ of unregulated areas enclosed in

the current marketing areas are included in

the suggested consolidated marketing areas if

their inclusion does not change the current

regulatory status of a plant. However, in the

process of consolidating marketing areas,

some handlers who currently are partially

regulated may become fully regulated

because their sales in a combined marketing

area will meet the pooling standards of a

suggested consolidated order area. As a

result, this report suggests that some

unregulated areas contiguous to currentlyregulated areas be added to Federal order

areas where additional handlers would be

affected.

The 11 modified suggested marketing areas

(with those modified from the initial

preliminary report, and the modifications,

marked by *) and the major reasons for

consolidation are:

*1. Northeast

Current marketing areas of the New

England, New York-New Jersey, and Middle

Atlantic Federal milk orders, *with the

addition of: contiguous unregulated areas of

New Hampshire, Vermont and New York; the

western non-Federally regulated portion of

Massachusetts, the Western New York State

order area, and Pennsylvania Milk Marketing

Board Areas 2 and 3 in northeastern

Pennsylvania.

Reasons for consolidation include the

existence of overlapping sales and

procurement areas between New England

and New York-New Jersey and between New

York-New Jersey and Middle Atlantic. In

several cases, handlers who would become

regulated because their total sales in the

combined areas would meet pooling

standards are located in areas where they

compete with handlers who would not be

similarly regulated. Handler equity suggests

that these handlers, too, should become

regulated. Another important measure of

association is evidenced by industry efforts

to study and pursue consolidation of the

three Federal orders, as well as some of the

nonfederally regulated territory, prior to the

1996 Farm Bill.

Sixteen additional distributing plants

would be pooled as a result of the expansion

of the consolidated area. Nine of these plants

currently are partially regulated.

*2. Appalachian

Current marketing areas of the Carolina

and Tennessee Valley Federal milk orders,

*with the addition of: all of the LouisvilleLexington-Evansville Federal order area

(except one county—in the suggested

Southeast area) and 26 currently-unregulated

counties in Indiana and Kentucky.

More detailed and updated data showing

overlapping sales and procurement areas

between these marketing areas are major

factors for supporting such a consolidation.

3. Florida

Current marketing areas of the Upper

Florida, Tampa Bay, and Southeastern

Florida Federal milk orders.

Natural boundary limitations and

overlapping sales and procurement areas

among the three orders are major reasons for

consolidation, as well as a measure of

association evidenced by cooperative

association proposals to consolidate these

three marketing areas. Further, the

cooperative associations in this area have

worked together for a number of years to

accommodate needed movements of milk

between the three Florida Federal orders.

*4. Southeast

Current marketing area of the Southeast

Federal milk order, plus 1 county from the

Louisville-Lexington-Evansville Federal milk

order marketing area, plus 15 currentlyunregulated Kentucky counties, *minus 2

currently-unregulated counties in northeast

Texas (in the suggested Southwest area).

Major reasons for this consolidation

include sales and procurement area overlaps

between the Southeast order and this county.

There is minimal sales area overlap with

handlers regulated under other Federal

orders. Collection of additional data showed

greater disposition in the two Texas counties

from Texas handlers than from Southeast

handlers. There are no handlers in these two

counties that would be affected.

*5. Mideast

Current marketing areas of the Ohio Valley,

Eastern Ohio-Western Pennsylvania,

Southern Michigan, and Indiana Federal milk

orders, plus Zone 2 of the Michigan Upper

Peninsula Federal milk order, and currentlyunregulated counties in Michigan, Indiana,

and Ohio *with the addition of: Pennsylvania

Milk Marketing Board Area 6 (in western/

central Pennsylvania) and 2 currentlyunregulated counties in New York, and

*minus the Louisville-Lexington-Evansville

order area, 12 counties in Illinois, and

unregulated counties in Indiana and

Kentucky that are being suggested for

inclusion in the Appalachian area.

Major criteria suggesting this consolidation

include the overlap of fluid sales in the Ohio

Valley marketing area by handlers from the

other areas suggested to be consolidated.

With the consolidation, most route

disposition by handlers located within the

suggested Mideast order would be within the

marketing area. Also, nearly all milk

produced within the area would be pooled

under the consolidated order. The portion of

the Michigan Upper Peninsula marketing

area suggested to be included in the Mideast

consolidated area has sales and milk

procurement areas in common with the

Southern Michigan area and has minimal

association with the western end of the

current Michigan Upper Peninsula marketing

area.

Collection of additional data and recent

changes in marketing patterns indicate that

the relationship between the LouisvilleLexington-Evansville (L-L-E) area and the

order areas initially included in the

suggested Appalachian area is closer than

relationship between L-L-E and the Mideast

area.

Seven distributing plants that would not

have been pool plants as a result of the

initially-suggested consolidation would

become pool plants due to the suggested

expansion of the consolidated area into

Pennsylvania and New York. The number of

pool plants also is affected by a shift of pool

plants from one consolidated area to another

because of the shift of territory from the

initially-suggested Mideast area to the

revised suggested Appalachian area.

*6. Upper Midwest

Current marketing areas of the Chicago

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

the Michigan Upper Peninsula Federal milk

orders, and unregulated portions of

Wisconsin, *with the addition of: the Iowa,

Eastern South Dakota, and most of the

Nebraska-Western Iowa Federal order areas,

plus currently-unregulated counties in Iowa

and Nebraska.

Major consolidation criteria include an

overlapping procurement area between the

Chicago Regional and Upper Midwest orders

and overlapping procurement and route

disposition area between the western end of

the Michigan Upper Peninsula order and the

Chicago Regional order. More-detailed and

updated information revealed more

significant overlapping procurement and

route disposition areas between the Iowa,

Eastern South Dakota and Nebraska-Western

orders and Chicago Regional and Upper

Midwest orders than had been observed in

the initial study. In addition, a common

pricing plan for producers, natural boundary
5094 Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules

limitations, and the prevalence of cheese as

a major manufactured product for the

substantial reserve milk supplies that exceed

fluid milk needs exist in these orders. Some

of the western Nebraska area is more closely

associated with the Eastern Colorado area,

however, and is suggested to remain with the

Central consolidated area.

Eleven additional handlers that would

have been pooled under the consolidated

Central order in the initial Preliminary

Report would be pooled under a consolidated

Upper Midwest order under this revised

report.

*7. Central

Current marketing areas of the Southern

Illinois-Eastern Missouri, Central Illinois,

Greater Kansas City, Southwest Plains, and

Eastern Colorado Federal milk orders, 10

counties currently in the Nebraska-Western

Iowa Federal order area, plus 55 currentlyunregulated counties in Kansas, Missouri,

Illinois, Nebraska and Colorado, *plus the 12

counties in the current Southern IllinoisEastern Missouri area that initially were

suggested as part of the consolidated Mideast

area, *minus the Eastern South Dakota, Iowa

and most of the Nebraska-Western Iowa

Federal order marketing areas.

Major criteria suggesting this consolidation

include the overlapping procurement and

route disposition between the current orders.

The suggested consolidation would result in

a concentration of both the sales and supplies

of milk within the consolidated marketing

area. The suggested consolidation would

combine several relatively small orders and

provide for the release of market data without

revealing proprietary information. In

addition, most of the producers in these areas

share membership in several common

cooperatives.

*8. Southwest

Current marketing areas of Texas and New

Mexico-West Texas Federal milk orders,

*with the addition of: two northeast Texas

counties previously suggested to be added to

the Southeast marketing area, and 47

currently-unregulated counties in southwest

Texas, and *minus the Central Arizona

marketing area.

Major criteria suggesting consolidation

include sales and procurement area overlaps

and common cooperative association

membership between the Texas and New

Mexico-West Texas marketing areas, and

similar marketing concerns with respect to

trade with Mexico for both orders. Addition

of the currently-unregulated Texas counties

will result in the regulation of no additional

handlers, and will reduce handlers’

recordkeeping and reporting burden and the

market administrator’s administrative costs.

In the initial consolidation report, the Central

Arizona area was found to have a minimal

association with the New Mexico-West Texas

and Texas order areas. Further analysis

showed that it has a much more significant

degree of association with the Clark County,

Nevada, portion of the current Great Basin

order area.

The revised suggested consolidated

Southwest area would include 4 fewer fully

regulated pool plants as a result of the

removal of the Central Arizona area.

*9. Arizona-Las Vegas

*An eleventh marketing area composed of

the current marketing area of the Central

Arizona order and the Clark County, Nevada,

portion of the current Great Basin marketing

area, plus eight currently-unregulated

Arizona counties.

The major criterion suggesting

consolidation is sales overlap between the

sole Las Vegas, Nevada, handler and handlers

regulated under the Central Arizona order in

both Clark County, Nevada, and unregulated

portions of northern Arizona. In addition,

both areas exchange significant volumes of

bulk and packaged milk with Southern

California.

The suggested Arizona-Las Vegas

marketing area would include five fully

regulated handlers, with no additional

handlers regulated because of the addition of

the currently-unregulated northern Arizona

area.

*10. Western

Current marketing areas of the Western

Colorado, Southwestern Idaho-Eastern

Oregon, and Great Basin Federal milk orders,

*minus Clark County, Nevada. Major criteria

suggesting consolidation include overlapping

sales between Southwestern Idaho-Eastern

Oregon and Great Basin, as well as a

significant overlap in procurement for the

two orders in five Idaho counties. The two

orders also share a similar multiple

component pricing plan. The Western

Colorado order is included because it is a

small market where data cannot be released

without revealing confidential information

unless combined with the adjacent Great

Basin order.

Collection of more-detailed data indicates

that the strength of earlier relationships

between the former Great Basin and Lake

Mead orders that justified their 1988 merger

have dwindled significantly, with the Las

Vegas area now more closely related to

southern California and competing most

heavily with Central Arizona handlers.

11. Pacific Northwest

Current marketing area of the Pacific

Northwest Federal milk order plus 1

currently-unregulated county in Oregon. The

degree of association with other marketing

areas is insufficient to warrant consolidation.

Following is a table summarizing relevant

data for the consolidated markets.

CONSOLIDATED MARKET SUMMARY

[Based on October 1995 Data]

Consolidated order

Number of fully regulated

distributing plants

Total producer milk

(1000 lbs.)

Combined class I use

(percent)

Weighted average

utilization value

Initial

report

Revised

report

Initial

report

Revised

report 1

Initial

report

Revised

report

Initial

report

Revised

report

Northeast ............................................................ 85 92 1,934,833 2,102,620 46.7 49.0 $13.44 $13.49

Appalachian ........................................................ 25 29 320,198 2 412,813 82.5 81.5 $14.11 $13.94

Florida ................................................................. 18 16 3 200,397 204,541 88.3 88.3 $15.05 $15.05

Southeast ............................................................ 38 40 4 443,921 442,705 84.3 84.3 $14.26 $14.25

Mideast ............................................................... 68 68 5 1,140,952 1,103,366 57.8 57.2 $12.96 $12.94

Upper Midwest .................................................... 27 39 6 1,046,539 1,354,209 7 34.2 8 37.6 $12.59 $12.62

Central ................................................................ 42 30 9 932,929 599,334 50.6 53.5 $13.15 $13.21

Southwest ........................................................... 31 26 861,307 680,232 48.3 48.1 $13.36 $13.39

Arizona—Las Vegas ........................................... N/A 7 N/A 10 181,075 N/A 48.9 N/A $13.26

Western ............................................................... 14 11 304,793 293,714 11 31.7 12 29.6 $12.79 $12.78

Pacific Northwest ................................................ 23 21 501,257 493,207 36.3 35.6 $12.45 $12.44

Total ......................................................... 371 379 7,687,126 7,867,816 N/A N/A N/A N/A

1 Initial report producer deliveries, adjusted to include only those handlers who would be fully regulated (i.e. Status = 1) in the revised suggested marketing area,

unless otherwise noted. When applicable, producer deliveries for currently non-Federally regulated plants which would be fully regulated in a revised suggested consolidated order are included in the appropriate suggested consolidated order. 2 Includes producer milk for one currently fully regulated plant which would be exempt (i.e. Status = 3B) in the Appalachian market in the revised preliminary report.

3Excludes producer milk for one currently fully regulated F.O. 7 plant which would be regulated in the Florida market in the initial preliminary report.

4 Includes producer milk for one currently fully regulated F.O. 7 plant which would be regulated in the Florida market in the initial preliminary report.

5Producer milk for F.O. 44 is included. Producer milk for a F.O. 32 handler who would be pooled under the initially-suggested Mideast market is included in the initially-suggested Central market. 6Producer milk for F.O. 30 and F.O. 68 only.

7A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 15.3% combined Class I utilization.

8A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 19.7% combined Class I utilization.

9 Includes producer milk for a F.O. 32 handler that would be in the initially-suggested Mideast market.
Federal Register / Vol. 63, No. 20 / Friday, January 30, 1998 / Proposed Rules 5095

10Excludes producer milk for one currently fully regulated F.O. 139 plant and one currently unregulated plant which would be regulated in the Arizona-Las Vegas

market in the revised preliminary report. 11A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 21.8% combined Class I utilization. 12A significant amount of producer milk was not pooled in October 1995. Estimated total producer milk would result in a 21.6% combined Class I utilization.

[FR Doc. 98–1758 Filed 1–23–98; 8:45 am]

BILLING CODE 3410–02–P