Federal Register / Vol. 63, No. 139 /Tuesday, July 21, 1998 / Proposed Rules 39039

1The Tennessee Valley Federal milk order, an

order involved in this rulemaking proceeding, was

terminated as of October 1, 1997.

List of Subjects in 7 CFR Part 927

Marketing agreements, Pears,

Reporting and recordkeeping

requirements.

For the reasons set forth in the

preamble, 7 CFR part 927 is proposed to

be amended as follows:

PART 927—WINTER PEARS GROWN

IN OREGON AND WASHINGTON

1. The authority citation for 7 CFR

part 927 continues to read as follows:

Authority: 7 U.S.C. 601–674.

§ 927.236 [Amended]

2. Section 927.236 is proposed to be

amended by removing the words ‘‘July

1, 1997,’’ and adding in their place the

words ‘‘July 1, 1998,’’ and by removing

‘‘$0.44’’ and adding in its place ‘‘$0.49.’’

Dated: July 15, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable

Programs.

[FR Doc. 98–19389 Filed 7–20–98; 8:45 am]

BILLING CODE 3410–02–P

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1005, 1007, and 1046

[Docket No. AO–338–A9, et al.; DA–96–08]

Milk in the Carolina and Certain Other

Marketing Areas; Final Decision and

Order To Terminate Proceeding on

Proposed Amendments to Marketing

Agreements and Orders

7 CFR

part Marketing area Docket No.

1005 .. Carolina ................. AO–388–A9.

1007 .. Southeast .............. AO–366–A38.

1046 .. Louisville-Lexington-Evansville.AO–123–A67.

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Final decision and termination

of proceeding.

SUMMARY: This document denies

proposed amendments to 3 Federal milk

orders in the Southeastern United States

and terminates the rulemaking

proceeding. The proposals involve

deductions from the minimum uniform

price to producers and the definition of

‘‘producer’’ specified in each of the

orders. The decision to deny the

proposals is based upon 2 public

hearings, and upon comments and

exceptions filed in response to a

subsequent recommended decision

issued by the Department.

FOR FURTHER INFORMATION CONTACT:

Nicholas Memoli, Marketing Specialist,

USDA/AMS/Dairy Division, Order

Formulation Branch, Room 2971, South

Building, P.O. Box 96456, Washington,

DC 20090–6456, (202) 690–1932, e-mail

address: NicholaslMemoli@usda.gov.

SUPPLEMENTARY INFORMATION: This

administrative action is governed by the

provisions of Sections 556 and 557 of

Title 5 of the United States Code and

therefore is excluded from the

requirements of Executive Order 12866.

This partial final decision denies the

proposed amendments to the Carolina,

Southeast, and Louisville-LexingtonEvansville Federal milk orders,1 and

terminates this rulemaking proceeding.

Small Business Consideration

In accordance with the Regulatory

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

Agricultural Marketing Service has

considered the economic impact of this

action on small entities. The Act seeks

to ensure that, within the statutory

authority of a program, the regulatory

and informational requirements are

tailored to the size and nature of small

businesses. For the purpose of the

Regulatory Flexibility Act, a dairy farm

is considered a ‘‘small business’’ if it

has an annual gross revenue of less than

$500,000, and a dairy products

manufacturer is a ‘‘small business’’ if it

has fewer than 500 employees. For the

purposes of determining which dairy

farms are ‘‘small businesses,’’ the

$500,000 per year criterion was used to

establish a production guideline of

326,000 pounds per month. Although

this guideline does not factor in

additional monies that may be received

by dairy producers, it should be an

inclusive standard for most ‘‘small’’

dairy farmers. For purposes of

determining a handler’s size, if the plant

is part of a larger company operating

multiple plants that collectively exceed

the 500-employee limit, the plant will

be considered a large business even if

the local plant has fewer than 500

employees.

The milk of approximately 7,600

producers is pooled on the Carolina,

Southeast, and Louisville-LexingtonEvansville milk orders. Of these

producers, 97 percent produce below

the 326,000-pound production guideline

and are considered to be small

businesses.

There are 48 handlers operating pool

plants under the 3 orders. Of these

handlers, 22 have fewer than 500

employees and qualify as small

businesses.

The Agricultural Marketing Service

has determined, as set forth in the

recommended decision, that neither the

denial, nor the adoption, of proposed

amendments involving deductions from

the minimum payments to producers

will have a significant economic impact

on a substantial number of small entities

under current marketing conditions.

Dairy farmers are presently receiving the

minimum order prices and should

continue to do so given the current level

of over-order premiums now in effect.

Similarly, neither adoption nor denial of

the proposed amendments will have any

effect on handlers’ costs under the

orders because, currently, handlers are

voluntarily paying producer prices in

excess of the minimum prices specified

in the orders. Furthermore, for the long

term, the issue of deductions from

minimum payments will be considered

as part of the Federal order reform in

connection with the Federal Agriculture

Improvement and Reform Act of 1996

which requires an examination of the

Federal milk order system. The

concerns of small businesses will be

addressed throughout the review

process.

Additionally, neither the denial nor

the adoption of the proposal to modify

the definition of ‘‘producer’’ under the

3 orders will have a significant

economic impact on a substantial

number of small entities. Standards

already exist in the 3 orders to assure an

adequate association by producers in

meeting the fluid milk needs of the

markets. The denial of the proposal to

incorporate additional producer

qualification standards maintains the

existing regulatory burden, and will not

place any additional responsibilities on

handlers operating under the orders.

Prior Documents in This Proceeding

Notice of Hearing: Issued May 1,

1996; published May 3, 1996 (61 FR

19861).

Tentative Partial Final Decision:

Issued July 12, 1996; published July 18,

1996 (61 FR 37628).

Interim Amendment of Orders: Issued

August 2, 1996; published August 9,

1996 (61 FR 41488).

Extension of Time for Filing

Comments to the Tentative Decision:

Issued August 16, 1996; published

August 23, 1996 (61 FR 43474).

Extension of Time for Filing

Comments to the Tentative Decision:

Issued October 18, 1996; published

October 25, 1996 (61 FR 55229).

Notice of Reopened Hearing: Issued

November 19, 1996; published

November 25, 1996 (61 FR 59843).
39040 Federal Register / Vol. 63, No. 139 /Tuesday, July 21, 1998 / Proposed Rules

2Mid-America Dairymen, Inc., Western Dairymen

Cooperative, Milk Marketing Inc., and Associated

Milk Producers, Inc., Southern Region, merged to

form ‘‘Dairy Farmers of America’’ effective January

1, 1998.

Partial Final Decision: Issued May 12,

1997; published May 20, 1997 (62 FR

27525).

Order Amending the Orders: Issued

July 17, 1997; published July 23, 1997

(62 FR 39738).

Partial Recommended Decision:

Issued July 17, 1997; published July 23,

1997 (62 FR 39470).

Preliminary Statement

Public hearings were held upon

proposed amendments to the marketing

agreements and the orders regulating the

handling of milk in the aforesaid

marketing areas. The hearings were

held, pursuant to the provisions of the

Agricultural Marketing Agreement Act

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

and the applicable rules of practice (7

CFR Part 900), in Charlotte, North

Carolina, on May 15–16, 1996, and in

Atlanta, Georgia, on December 17–18,

1996. Notice of the initial hearing was

issued on May 1, 1996, and published

May 3, 1996 (61 FR 19861).

The material issues on the record of

the hearings relate to:

1. Transportation credits for

supplemental bulk milk received for

Class I use.

2. Deductions from the minimum

uniform price to producers.

3. Whether emergency marketing

conditions in the 4 regulated marketing

areas warrant the omission of a

recommended decision with respect to

Issue No. 1 and the opportunity to file

written exceptions thereto.

4. The definition of producer.

An interim order amending the orders

with regard to transportation credits was

issued on August 2, 1996, and

published August 9, 1996 (61 FR

41488). The interim amendments

became effective on August 10, 1996.

The Department reopened the hearing

to hear additional evidence regarding

the transportation credit issue and also

to hear a related ‘‘producer’’ definition

proposal. This hearing was held on

December 17–18, 1996, in Atlanta,

Georgia, following the notice of such

reopened hearing issued on November

19, 1996, and published in the Federal

Register on November 25, 1996 (61 FR

59843).

Interested parties were given until

June 17, 1996, to file post-hearing briefs

regarding the deductions from the

minimum price proposal as published

in the Federal Register and as modified

at the hearing. Regarding the additional

proposal concerning the definition of a

‘‘producer’’ heard at the reopened

hearing, interested parties were given

until February 7, 1997, to file posthearing briefs.

A partial recommended decision

involving minimum payments to

producers and the ‘‘producer’’

definition was issued on July 17, 1997,

and published in the Federal Register

on July 23, 1997 (62 FR 39470).

Issue 1 was discussed in a separate

partial final decision issued on May 12,

1997 (62 FR 27525). Issue 3 was

discussed in the tentative partial final

decision, and is now moot.

Following the final decision issued on

May 12, 1997, producers were polled in

each of the 4 markets involved in this

proceeding to ascertain whether

producers approved of the orders, as

amended. An insufficient vote was

obtained for the Tennessee Valley order,

as amended. Consequently, that order

was terminated effective October 1,

1997.

Rulings on Proposed Findings and

Conclusions

Briefs and proposed findings and

conclusions were filed on behalf of

certain interested parties. These briefs,

proposed findings and conclusions and

the evidence in the record were

considered in making the findings and

conclusions set forth:

Material Issue # 2—Deductions From

the Minimum Uniform Price to

Producers

A proposal by Hunter Farms and

Milkco, Inc., which seeks to clarify the

minimum payment to producers for

Federal milk marketing orders 1005,

1007, and 1046, should be denied.

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 proposal,

such services include: (1) Preparation of

producer payroll; (2) conduct of

screening tests of tanker loads of milk

required by duly constituted regulatory

authorities before milk may be

transferred to the plant’s holding tanks

and any other tanker load tests required

to establish the quantity and quality of

milk received; and (3) any services for

processing or marketing of raw milk or

marketing of packaged milk by the

handler.

A Brief Summary of Testimony and

Briefs Resulting From the May 15–16,

1996 Hearing

The Vice President of Hunter Farms

(Hunter), which operates plants

regulated under Order 5 at High Point

and Charlotte, North Carolina, testified

that Hunter purchases milk from

Piedmont Milk Sales, Carolina-Virginia

Milk Producers Association (CVMPA),

Mid-America Dairymen, Inc. (MidAm), 2 and Cooperative Milk Producers

Association. The witness explained that

CVMPA and Mid-Am are cooperative

associations, while Piedmont Milk Sales

is a marketing agent handling the milk

of independent producers. 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, Hunter

received underpayment notices from the

market administrator on milk that it had

received from Piedmont Milk Sales. The

underlying question was who must pay

for certain services associated with the

receipt of milk at regulated plants.

Hunter argued that during the period of

December 1994 through September

1995, competing handlers who received

milk from cooperative associations at

the minimum order price did not fully

compensate the cooperatives for similar

services that were provided.

Despite the fact that over-order

premiums returned to the Carolina

market, Hunter contends, the problem of

what constitutes a minimum payment to

producers should be clarified in the

event that premiums may be reduced or

disappear entirely in the future. For this

reason, according to the proponent, it is

important to resolve this issue.

In the event that this situation is not

rectified, according to Hunter, a loss of

milk sales and lower prices to producers

will be evident. Hunter stated that

current policy is discriminatory and

unfair. Furthermore, Hunter stated that

all would benefit from a clarification of

the rules defining Federal order

minimum prices.

Milkco Inc. (Milkco), a fluid milk

processing plant located in Asheville,

North Carolina, regulated under Order

5, receives milk from cooperative

associations as well as independent

producers marketing their milk through

Piedmont Milk Sales. Milkco supported

Hunter’s position and stated that Milkco

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 underpayment notices on milk

received under the same or similar

conditions from cooperative

associations.
Federal Register / Vol. 63, No. 139 /Tuesday, July 21, 1998 / Proposed Rules 39041

3 During summer 1997, the dairy operations of

Fleming was acquired by Suiza Foods. The fluid

milk processing business of Fleming has been

reorganized and is now Country Delite Farms, Inc.

A witness representing Hunter and

Milkco described the categories that

should be defined as a handler

responsibility, including preparation of

a producer payroll, the testing of

incoming tanker loads of milk, and any

costs associated with processing raw

milk or marketing milk in bulk or

packaged form. The witness stressed

that the thrust of the proposal is to

ensure equality in the cost of milk

among regulated handlers. According to

the witness, current administrative

practice in this area requires handlers

receiving milk from independent

producers to absorb the cost of a variety

of services which are provided at no

extra charge to handlers receiving milk

from cooperative associations and result

in an inequitable situation.

The General Manager of CarolinaVirginia Milk Producers Association or

CVMPA offered qualified support for

the Hunter-Milkco proposal. He said

that from a philosophical point of view

CVMPA would agree that if producers

provide the services specified by the

proponents—plus any additional

services that are provided to a handler

by a cooperative association—handlers

should be charged the costs associated

with these services. He said that, with

these modifications, CVMPA could

support the proposal. Additionally,

CVMPA suggested expanding the

proposed list of handlers’

responsibilities to include 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.

Additional testimony was also offered

by a representative of Mid-America

Dairymen, Inc. (Mid-Am) involving

Hunter’s proposal. Mid-Am objected to

hearing the proposal and also to the

narrowness of Hunter-Milkco’s

proposal. Mid-Am argued that the issue

of minimum payments to producers is

national in scope and should not be

limited to the orders involved in this

proceeding. It suggested that the issue

be addressed by the Secretary within the

context of the Federal order reform as

required by the 1996 Farm Bill on a

national basis. In addition, the Mid-Am

representative objected to the proposal

on grounds of lack of notice to

interested parties.

The administrative law judge

presiding over the hearing overruled

Mid-Am’s objection to hearing the

proposal, noting that the Secretary had

given interested parties the minimum 3-

day notice requirement specified in 7

CFR 900.4(a). He also indicated that this

proposal was being considered on a

non-emergency basis and that,

accordingly, interested parties had more

than adequate time to brief it, discuss it,

and consider it.

Briefs were submitted by interested

parties both in support of and in

opposition to this proposal. Proponents,

Hunter and Milkco, submitted a brief in

support of their proposal, emphasizing

the points made on the hearing record.

Hunter and Milkco maintain that

uniform applicability in the treatment of

handlers is essential, and any lack of

uniformity is in violation of the

Agricultural Marketing Agreement Act,

as amended. According to the

proponents, issuance of underpayment

notices only on that milk which was

received from independent producers

who contracted with a specific

marketing agency does not promote

uniformity and is discriminatory.

Hunter and Milkco’s brief also

addresses the objections made by MidAm to this proposal. The proponents

maintain that Mid-Am’s objection to

their proposal based on grounds of lack

of notice is unfounded because the

notice given was adequate. In addition,

Hunter and Milkco argue that the

suggestion by Mid-Am that this

proposal be considered on a national

basis is unjustified. Proponents

maintain that the problem which has

prompted this proposal is specific to the

Federal order under consideration, and

no evidence was presented to show that

this problem exists in other regions of

the United States.

Fleming Companies, Inc. (Fleming),3

also filed a brief in support of this

proposal. Fleming states that ‘‘* * * To

the extent such services primarily

benefit producers, it is appropriate that

producers be authorized to contract for

such services, and to allow a deduction

for the reasonable value of such

services.’’ Fleming also expressed

concern that without the clarification

offered by the proposal, equity among

member producers and non-member

producers may be jeopardized and price

uniformity may not be maintained if

cooperative associations are able to

assume the cost of producer-oriented

services, while handlers receiving

independent milk are not permitted to

make a deduction for these services

even if authorized by the producer.

A brief filed by Mid-America

Dairymen, Inc., reiterated the

cooperative’s strong opposition to the

proposal and its position that this issue

should be addressed on a national basis

in the context of Federal order reform.

Furthermore, Mid-Am states that it is

clear that 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.

The Kroger Co. states in its brief that

proposal 2 is worthy of study and

should be considered by the Secretary

for all Federal milk marketing orders

within the context of Federal milk order

reform.

Summary of the Partial Recommended

Decision Issued July 17, 1997

The Department issued a partial

recommended decision on July 17, 1997

(62 FR 39470), which recommended

denial of Hunter/Milkco’s proposal to

amend the 4 southeastern milk orders.

On the basis of the testimony heard and

the briefs filed, the Department

determined that the issue should be

addressed in the context of Federal

order reform.

Under orders, the Department

explained, payment for milk received

from producers may not be less than the

uniform price as announced each month

by the market administrator, except to

producers who receive payment from

their cooperative association. The

Department stated a cooperative

association under the authorizing

legislation may blend the net proceeds

of its sales of milk for payment to its

member producers. However, payments

to a producer by a handler, the

Department asserted, can be reduced to

reflect ‘‘proper deductions authorized in

writing by the producer.’’ Historically, it

noted, such deductions from minimum

milk prices of only two basic types have

been permitted.

The Department indicated that the

two types of deductions permitted are

(1) payments that are made by a handler

on behalf of the producer to creditors of

the producer, and (2) payments that are

obligations of the producer in the

production of milk and the

transportation costs for delivery to the

handler’s plant. Accordingly, the

Department stated, handlers are not

required to make payments to creditors

on behalf of producers but are permitted

to do so if the deductions are proper and

authorized. It stated such permission

recognizes that handlers frequently

make payments to producers’ creditors

as a service to the producers. Thus, the

Department concluded, the term

‘‘proper’’ is included to prevent
39042 Federal Register / Vol. 63, No. 139 /Tuesday, July 21, 1998 / Proposed Rules

4The 1996 Farm Bill requires the Secretary of

Agriculture to merge the existing 33 Federal milk

orders (currently 31 orders) into no more than 14,

and no less than 10, milk orders by April 1, 1999.

A proposed rule was issued on January 23, 1998,

and published in the Federal Register on January

30, 1998 (63 FR 4802). Interested parties had until

April 30, 1998, to file comments. A discussion of

minimum payments to producers is included in the

proposed rule (63 FR 4942).

unwarranted deductions from minimum

prices for milk.

The Department went on to state that

the authorization by a producer of a

certain deduction may not be proper

and thus disallowed by the market

administrator. Additionally, it

indicated, producers cannot give up

their rights to receive the uniform price

by a deduction that is not of the two

types described above.

The Department concluded that there

were extensive conceptual differences

among market participants concerning

what constitutes minimum prices to

producers. The decision stated that the

lack of evidence and conflicting

opinions made it extremely difficult to

delineate in Federal milk orders those

services which are the responsibility of

handlers and those which lie within the

domain of producers. Furthermore, even

if a decision could be reached on this

point it would be very difficult to

establish uniform rates for the services

suggested by the various parties on the

basis of the record before the

Department. The Department, therefore,

concluded that the proposal should be

denied and the matter considered in the

Federal order reform proceeding where

nationwide input and a more extensive

evidentiary record could be obtained.

The decision stated that the

underpayment problem which Milkco

and Hunter experienced has been

rendered moot with the return of overorder premiums. Although these

premiums could again disappear,

bringing the uniform pricing issue to the

fore once again, the Department

anticipates this is not likely to happen

in the near future. Nevertheless, the

decision stated, if this should happen,

proponents could request relief through

other means pending final resolution of

this matter.

Exceptions to the Partial Recommended

Decision

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 handlers 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.

Conclusion

The Milkco/Hunter’s minimum

payment proposal should be denied. It

is the Department’s determination that

the Hunter/Milkco proposal would not

have solved the handler equity problem

but instead would have created a host

of additional problems.

Proponents would have us specify

that certain services, are a handler’s

responsibilities and, therefore, should

be at handler’s expense. Thus, if a

cooperative association were providing

one of these services for a handler, the

cooperative association would be

required to bill the handler for this

service. However, the Department

cannot adopt order provisions without

substantial record evidence. The record

contains little evidence as to which

specific services should be included and

even that evidence is conflicting.

Furthermore, neither proponents, nor

any other participant, provided

guidance in the record concerning the

cost of these services, which, we

suspect, vary considerably from

organization to organization.

In addition, the Department is

engaged in congresionally regulated

order consolidation 4 in which greater

uniformity in order provisions is a

stated goal. The record in this

proceeding demonstrates no basis why

the minimum payments provisions

should be different in just these three

orders. Instead, it appears that the

provisions should be based upon the

same considerations, and should not

differ from one order to another. This

issue regarding minimum payments to

producers should, therefore, be

considered as part of the Federal order

reform. Thus, for the reasons stated

above, the record evidence of the public

hearing and the comments and

exceptions received in response to the

partial recommended decision do not

support adoption of the Milkco/Hunter

proposal.

Material Issue #4—Definition of

Producer

A proposal to modify the definition of

producer for Federal milk orders 5, 7,

and 46 should also be denied on the

basis of the testimony and evidence

received at the reopened hearing. MidAmerica Dairymen, Inc. (Mid-Am),

Carolina-Virginia Milk Producers

Association (CVMPA), and MarylandVirginia Milk Producers Association,

proponents of the proposal, stated that

the objective of the proposal is to further

define producer qualification to

minimize the pooling of milk not

historically associated with these 3

southeastern markets.

A Brief Summary of Testimony and

Briefs Resulting From the December 17–

18, 1996 Hearing

A spokesman for the proponents

offered testimony explaining that baseexcess plans (included in each of the

orders at the time of the reopened

hearing, but terminated from each order

effective January 1, 1997, as a result of

the expiration of legislative authority to

include such plans in Federal milk

orders) have substantially removed the

incentive for a dairy farmer who was

associated with another market during

the base-building months to become a

producer under one of these orders

during the base-paying months. He

expressed concern that with the

elimination of such plans, no provisions

would exist to prevent a dairy farmer

from pooling any milk diverted or

delivered within limits to pool plants

under the orders during the former basepaying months.

The witness stated that the proposed

provisions for the orders will exclude

from the producer definition, during the

flush production months of February

through May, any dairy farmer who

delivered more than 40 percent of his or

her milk to plants as other than

‘‘producer milk’’ during the months of

August through November. The

proposed provisions, according to the

witness, are designed to restrict those

producers not normally associated with

such orders from pooling their milk

during the flush production months

when it is not needed to supply fluid

needs if they have not pooled such milk

during the prior short months when

supplies were needed.

In addition, the spokesman stated that

for the purpose of determining the

percentage of a producer’s milk that was

pooled during the prior August through

November period, deliveries to plants as

producer milk under the orders should

be considered deliveries under the

applicable order. He testified that this
Federal Register / Vol. 63, No. 139 /Tuesday, July 21, 1998 / Proposed Rules 39043

proviso is necessary to accommodate:

(1) The historical shifting of producers

between the orders; (2) the shifting of

pool distributing plants; and (3) the

shifting of producer milk due to the

opening and closing of pool plants in

the orders’ area.

The witness also testified that the

proposal, as found in the notice of

hearing, should be modified to define

the classification of the milk received

and specify the pricing of the milk as

classified in each of the orders.

According to the spokesman, the

changes to the order language would

require the receiving handler to pay into

the pool the difference between the

Class I price and the Class III price.

Regarding the administrative costs

associated with the relevant proposal,

the witness contended that there should

be no noticeable difference between

costs associated with the producer

qualification proposal and costs

associated with the base-excess plan. In

conclusion, the spokesman testified that

the adoption of such proposal is

necessary to foster orderly marketing in

the area and protect producer pools of

the southeastern orders involved in this

proceeding.

A representative of CVMPA testified

that CVMPA fully supports the producer

qualification proposal to make sure that

high Class I utilization markets in the

Southeast do not carry surplus from

other surrounding markets resulting in

low Class I utilization rates during the

flush months of production. He

maintained that the proposal benefits

producers, processors, and consumers

by maintaining fluid supplies, while

encouraging the survival of local

producers.

A representative from Associated

Milk Producers, Inc. (AMPI), Southern

Region, a cooperative association

representing over 2,500 dairy farmers in

the South and Southwest, testified in

opposition to Mid-Am’s proposal to

modify the producer definition of the

orders. The witness also maintained that

such proposal is not related to the issue

of transportation credits, and should,

therefore, not be included in the

reopened hearing.

According to the spokesman, the

current producer pooling requirements

under Order 7 are more restrictive than

the proposed producer qualification

requirements; thus, the proposal

actually constructs an additional layer

of unnecessary pooling requirements.

The witness claimed that no handlers

are currently abusing the order by

diverting the maximum amount

allowable under the provisions of Order

7; otherwise, he argued, such a high

percentage of Class I utilization would

not be maintained.

AMPI’s witness also testified that it is

apparent that the proponents intend to

replace the base-excess plans in the

orders involved in this proceeding.

However, such an alternative is not

viable, he argued, because sufficient

protection for local producers already

exists. While acknowledging the

existence of such ‘‘dairy farmers for

other market’’ provisions in other

Federal orders, the spokesman testified

that the Southeast markets will not

benefit from such a provision. If the

proposal is nevertheless adopted, he

said, AMPI recommends a modification

to the proposal such that milk imported

from outside the marketing area that is

received at a fully or ly regulated plant

during any month of the year must be

allocated to Class I and the handler of

origin must be compensated at the

receiving plant’s Class I price.

Another AMPI representative testified

that administration of Mid-Am’s

proposal would create additional costs

and place a more serious burden on the

cooperative. According to the witness,

additional time and resources would be

necessary to adapt AMPI’s procedures to

the new provision, including greater

technical and manual assistance.

A representative of Piedmont Milk

Sales testified that Piedmont supports

the concept that a producer must make

his milk available to the Class I market

when it is needed in the fall or short

period in order to be allowed to pool his

milk in the same market during the

spring or flush months. He contended

that such a limitation assures that the

producer who receives the blend price

enhanced by the Class I value in those

markets has actually earned it.

A spokesman for Fleming Dairy,

which operates pool distributing plants

in Nashville, Tennessee, and Baker,

Louisiana, testified in support of MidAm’s proposal, but suggested that the

producer qualification period should be

July through November, rather than

August through November.

Additionally, a representative of

Barber Pure Milk Co., a pool plant

operator in Birmingham, Alabama, and

Dairy Fresh Corporation, a pool plant

operator in Greensboro, Alabama,

testified in support of Mid-Am’s

producer qualification proposal. He

suggested that any milk which is

delivered directly from the farm and is

received at a pool plant should qualify

as producer milk, but any milk which is

diverted should not.

Select Milk Producers submitted a

brief in opposition to the proposed

changes in the producer definition.

According to Select, a similar proposal

was introduced during the Southeast

merger proceedings and was

subsequently denied due to the lack of

justification for such a provision.

Select’s brief indicated that the pooling

standards and diversion limitations

provided in the orders give the market

administrator enough flexibility to

prevent distant milk from being

associated with the markets; therefore, a

‘‘dairy farmer for other markets’’

provision is not needed in these orders.

A brief filed on behalf of AMPI argued

that the ‘‘dairy farmer for other markets’’

proposal submitted by Mid-Am and

CVMPA and heard at the reopened

hearing was in violation of the rules of

practice and procedure governing the

proceedings of marketing agreements

and orders. AMPI maintains that this

proposal does not qualify as an issue

related to transportation credits, and

therefore, should not have been

discussed at the reopened hearing.

Additionally, AMPI argued that the

hearing record lacks the necessary

evidence that would support adoption

of such proposal. While reiterating its

opposition to the additional work

associated with implementation of the

proposal as testified to at the reopened

hearing, AMPI’s brief also opposed the

notion that in Mid-Am and CVMPA’s

proposal determination of a producer’s

eligibility would not only be dependent

upon the amount of milk pooled under

the order in which the producer is

seeking producer status, but also upon

the volume of milk pooled by that

producer for the subject months in all of

the orders involved in this proceeding.

According to AMPI, there is no

justification or evidence which supports

the proposed ‘‘dairy farmer for other

markets’’ provision.

CVMPA, one of the proponents of the

producer qualification proposal, filed a

brief in support of its proposal

reiterating the arguments presented

during the reopened hearing. In its brief,

CVMPA pointed out that its proposal

would not create a barrier to entry into

these markets as was testified to by a

representative of AMPI. CVMPA argued

that such a proposal would actually

encourage milk to be pooled when local

supplies are inadequate to meet Class I

needs. While acknowledging that

diversion limitations and producer

touch-base provisions currently in effect

under the subject orders do provide

limited Class I utilization protection for

the markets, CVMPA argued that these

limitations are insufficient to protect

producers who have pooled their milk

during the fall months from being

displaced by producers entering those

markets during the spring flush months

in order to take advantage of the high
39044 Federal Register / Vol. 63, No. 139 /Tuesday, July 21, 1998 / Proposed Rules

Class I utilization percentages reflected

in the high blend prices of these

southeastern markets.

CVMPA also addressed the argument

made by AMPI that the proposal would

create an additional administrative

burden for both the market

administrators’ offices and reporting

handlers. According to CVMPA, no

additional work would be created by the

proposal, and the administration of the

proposed provision would be easier

than that associated with the former

base-paying plans. CVMPA also

expanded the proposal to allow a

producer to qualify as a producer in the

spring if his/her farm had not delivered

Grade A milk from such farm during the

previous August through November

period. Furthermore, CVMPA stated that

the producer’s eligibility should be

based upon the proportion of Grade A

milk delivered from the farm in the

previous fall in order to prevent a

producer who is converting from Grade

B to Grade A or a producer who lost his/

her Grade A permit from being

penalized.

A brief was also filed by Mid-Am in

support of the proposal to modify the

producer definition. In addition to

reiterating the arguments testified to

during the reopened hearing, Mid-Am’s

brief stated that the proposed producer

qualification provisions are necessary to

foster orderly marketing in the area and

also to protect the producer pools of the

orders involved in this proceeding. In

its brief, Mid-Am also contends that the

only opposition to the proposal testified

to during the hearing was made by

AMPI, which would be prevented from

rotating their producers’ milk in order to

receive transportation credits. Mid-Am

requests that the proposed provisions be

implemented at the earliest possible

date. No exceptions were received in

response to the partial recommended

decision.

Conclusion

The record of the reopened hearing

does not clearly demonstrate the need to

amend the producer definition of Orders

5, 7, and 46. Current safeguards exist to

ensure that sufficient supplies of milk

are made available for fluid use without

the unwarranted pooling of additional

supplies of milk that are not associated

with serving the fluid market.

Proponents of this proposal believe

that the termination of seasonal base

plans will create disorderly marketing

conditions in the 3 orders. However, the

testimony and evidence received at the

December 17–18, 1996, hearing do not

sufficiently support this argument.

According to the proponents, the

termination of seasonal base plans,

effective January 1, 1997, removes the

incentive for producers to pool their

milk during the short months when

milk is needed in the Southeast because

they will no longer receive the higher

base prices for their milk during the

following flush months. While it is

feared by the proponents that the

termination will open up the 3

Southeast markets to those producers

not normally associated with such

markets, but who seek to take advantage

of the high Class I utilization rates, the

record was unconvincing in its need for

modification of the producer definition

for this reason.

It is apparent that the proposal was

initiated in response to the elimination

of seasonal base plans in Federal milk

orders. In other words, the proposed

modification of the producer definition

is intended to fill the void left by the

removal of the base-excess plans.

However, changing the producer

definition should not be compared to

the incorporation of base plans in the

orders. Base plans are instituted in order

to level out production throughout the

year so that adequate milk supplies are

ensured during the short production

months, while discouraging surplus

supplies in the flush production

months. The base plans also did have

the effect of preventing producers not

normally associated with a market from

entering such market during the flush

production months because they would

have received the low, excess price for

their milk. Nevertheless, the removal of

base plans does not by itself necessitate

amending the orders.

The orders currently have strict

pooling requirements. For example, as

was testified to at the reopened hearing

by AMPI’s spokesman, the pooling

requirements for Order 7 specify that a

producer’s milk must be received at

least 4 days at a pool plant to be eligible

to be pooled during the months of

December through June. Additionally,

there is a 50 percent diversion

limitation in Order 7 to nonpool plants

for those same months. The Carolina

order has diversion limitations for

cooperative associations during most

months of 25 percent of the total

quantity of producer milk. The order

also maintains pooling requirements

specifying how many days a month

producer milk must be received at pool

plants. The Louisville-LexingtonEvansville order specifies a diversion

limitation based upon the number of

days that a producer’s milk is diverted

during a month. The evidence in this

proceeding is insufficient to conclude

that the current pooling standards will

not recognize the seasonally varying

needs for milk for fluid use. The

creation of additional producer pooling

standards is unnecessary and

unwarranted on the basis of the record

herein and, therefore, the proposal

should be denied.

To the extent that the suggested

findings and conclusions filed by

interested parties on either issue are

inconsistent with the findings and

conclusions set forth herein, the

requests to make such findings or reach

such conclusions are denied for the

reasons previously stated in this

decision.

Rulings on Exceptions

In arriving at the findings and

conclusions, and the regulatory

provisions of this decision, each of the

exceptions received was carefully and

fully considered in conjunction with the

record evidence. To the extent that the

findings and conclusions and the

regulatory provisions of this decision

are at variance with any of the

exceptions, such exceptions are hereby

overruled for the reasons previously

stated in this decision.

Determination

The findings and conclusions of this

partial final decision do not require any

changes in the regulatory provisions of

the three respective orders regulating

the handling of milk in the Carolina,

Southeast, and Louisville-LexingtonEvansville marketing areas.

Termination Order

In view of the foregoing, it is hereby

determined that the proceeding with

respect to proposed amendments to the

three specified marketing orders should

be and is hereby terminated.

List of Subjects in 7 CFR Parts 1005,

1007, and 1046

Milk marketing orders.

The authority citation for 7 CFR Parts

1005, 1007, and 1046 of Title 7, chapter

X continues to read as follows:

Authority: 7 U.S.C. 601–674.

Dated: July 16, 1998.

Michael V. Dunn,

Assistant Secretary, Marketing & Regulatory

Programs.

[FR Doc. 98–19390 Filed 7–20–98; 8:45 am]

BILLING CODE 3410–02–P