[Federal Register Volume 63, Number 20 (Friday, January 30, 1998)]
[Proposed Rules]
[Pages 4802-5095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1758]


      

[[Page 4801]]

_______________________________________________________________________

Part II





Department of Agriculture





_______________________________________________________________________



Agricultural Marketing Service



_______________________________________________________________________



7 CFR Part 1000 et al.



Milk in the New England and Other Marketing Areas; Opportunity To File 
Comments, Including Written Exceptions, on Proposed Amendments to 
Marketing Agreements and Orders; Proposed Rule

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

[[Page 4802]]



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.

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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: Milk__Order__R<a href="/cdn-cgi/l/email-protection#a6c3c0c9d4cbe6d3d5c2c788c1c9d0"><span class="__cf_email__" data-cfemail="a4c1c2cbd6c9e4d1d7c0c58ac3cbd2">[email protected]</span></a>.
    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: 
Milk__Order__R<a href="/cdn-cgi/l/email-protection#fd989b928f90bd888e999cd39a928b"><span class="__cf_email__" data-cfemail="f89d9e978a95b88d8b9c99d69f978e">[email protected]</span></a>.
    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 producer-settlement 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

[[Page 4803]]

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\
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    \1\ Section 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 equal to the period of 
time for which the injunction or other restraining order is 
effective.''
    \2\ Since 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.
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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\
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    \3\ Copies of this report may be obtained by contacting Ms. 
Wendy Barrett, Cornell University, ARME, 348 Warren Hall, Ithaca, NY 
14853-7801, (607) 255-1581.
    \4\ Copies 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.
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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

[[Page 4804]]

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.
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    \5\ Copies 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 <a href="http://
www.ams.usda.gov/dairy/">http://
www.ams.usda.gov/dairy/</a>.
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    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. Thirty-one 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 <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="e9888a8a869c879dc4c4a4808582b6b6a69b8d8c9bb6b6bb8c8f869b84a99c9a8d88c78e869fc4c4">[email protected]</a>
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 in-person 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

[[Page 4805]]

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.
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    \6\ Copies of these press releases may be obtained from Dairy 
Programs at (202) 720-4392, or via the Internet at <a href="http://
www.ams.usda.gov/news/newsrel.htm">http://
www.ams.usda.gov/news/newsrel.htm</a>.
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    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 <a href="http://www.ams.usda.gov/
dairy">http://www.ams.usda.gov/
dairy</a>.
    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,

[[Page 4806]]

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      Marketing Areas in Revised      Marketing Areas in Proposed 
---------------------------------------------------------    Consol. Report (Dec. 96)         Consol. Report (May 97)            Rule  (Option 3)       
                                                                    (Option 1)                      (Option 2)           -------------------------------
                                                         ----------------------------------------------------------------   Consol. Mkt. WAUV  ($/cwt)  
                                                            Consol. Mkt. WAUV  ($/cwt)      Consol. Mkt. WAUV  ($/cwt)   -------------------------------
                                                         ----------------------------------------------------------------                               
                     Current Markets                        WAUV using      WAUV using      WAUV using      WAUV using      WAUV using      WAUV using  
                                                           Current Mkt.    Consol. Mkt.    Current Mkt.    Consol. Mkt.    Current Mkt.    Consol. Mkt. 
                                                            Utilization     Utilization     Utilization     Utilization     Utilization     Utilization 
                                                              ($/cwt)         ($/cwt)         ($/cwt)         ($/cwt)         ($/cwt)         ($/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

[[Page 4807]]

                                                                                                                                                        
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.
---------------------------------------------------------------------------

    \7\ The 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.
---------------------------------------------------------------------------

    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:
---------------------------------------------------------------------------

    \8\ Copies 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/.
---------------------------------------------------------------------------

    ``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\
---------------------------------------------------------------------------

    \9\ Copies 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.
---------------------------------------------------------------------------

    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

[[Page 4808]]

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.
---------------------------------------------------------------------------

    \10\ It was assumed that the current BFP successfully reflects 
the supply and demand for milk used in manufactured products.
---------------------------------------------------------------------------

    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 Sec. 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

[[Page 4809]]

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.
---------------------------------------------------------------------------

    \11\ See 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.''
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \12\ The 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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \13\ Bishop, 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.
---------------------------------------------------------------------------

    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

[[Page 4810]]

option were adopted compared with Class I differentials under the 
baseline. Fluid processors in four of the Federal order markets and in 
the previously-unregulated 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' producer-settlement 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 phase-in 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 Mexico-West 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), Nebraska-Western 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

[[Page 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.

[[Page 4812]]

    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 market-clearing 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

[[Page 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,

[[Page 4814]]

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 ($/cwt)]                                                      
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Consolidated Market                      Marketing Areas in Initial      Marketing Areas in Revised      Marketing Areas in Proposed 
---------------------------------------------------------    Consol. Report (Dec. 96)         Consol. Report (May 97)            Rule  (Option 3)       
                                                                    (Option 1)                      (Option 2)           -------------------------------
                                                         ----------------------------------------------------------------   Consol. Mkt. WAUV  ($/cwt)  
                                                            Consol. Mkt. WAUV  ($/cwt)      Consol. Mkt. WAUV  ($/cwt)   -------------------------------
                                                         ----------------------------------------------------------------                               
                     Current Markets                        WAUV using      WAUV using      WAUV using      WAUV using      WAUV using      WAUV using  
                                                           Current Mkt.    Consol. Mkt.    Current Mkt.    Consol. Mkt.    Current Mkt.    Consol. Mkt. 
                                                            Utilization     Utilization     Utilization     Utilization     Utilization     Utilization 
                                                              ($/cwt)         ($/cwt)         ($/cwt)         ($/cwt)         ($/cwt)         ($/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

[[Page 4815]]

                                                                                                                                                        
    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

[[Page 4816]]

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 Louisville-
Lexington-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 
Ohio-Western Pennsylvania, Southern Michigan, and Indiana Federal milk 
orders, plus most of the current marketing area of the Louisville-
Lexington-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 Illinois-Eastern 
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 currently-unregulated 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-Lexington-Evansville 
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 currently-unregulated 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 Louisville-
Lexington-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

[[Page 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 currently-unregulated 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 currently-unregulated 
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 York-New Jersey producers would 
remain unchanged. In the Appalachian market, Carolina producers should 
expect some negative impacts due to consolidation, while Tennessee 
Valley and Louisville-Lexington-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 Nebraska-Western 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 
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. 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

[[Page 4818]]

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, Nebraska-Western Iowa 
Federal order areas; CENTRAL--Addition of the Iowa, Eastern South 
Dakota, Nebraska-Western 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 York-New 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 Louisville-Lexington-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 Nebraska-
Western 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 Mexico-West 
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 in-area 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.
---------------------------------------------------------------------------

    \14\ The 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.
---------------------------------------------------------------------------

    Although 150,000 pounds of fluid milk disposition per month may

[[Page 4819]]

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 
under-500-employee definition of a small business assures that nearly 
all single-plant 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 
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. 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\
---------------------------------------------------------------------------

    \15\ These 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.
---------------------------------------------------------------------------

    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

[[Page 4820]]

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

[[Page 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 order-to-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]                                                              
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Relative use      + $1.60 =       Weighted      Maximum diff.                                
                   Proposed order \1\                        ratio \2\     class I diff.   average diff.   range  (75%-    New diff  ($/     Change in  
                                                             (percent)        ($/cwt)       ($/cwt) \3\        125%)           cwt)       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 
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Based on the 11 proposed orders contained in this proposed rule.                                                                                    
\2\ Relative use ratio = Class I <divide>all other uses.                                                                                                
\3\ Weighted 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

[[Page 4822]]

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)                                          
----------------------------------------------------------------------------------------------------------------
                                                                                     Weighted                   
                                                                       Flat           average       Change  ($/ 
                Suggested consolidated order \1\                   differential    differential        cwt)     
                                                                      ($/cwt)       ($/cwt) \2\                 
----------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------
\1\ Based on the 11 proposed orders contained in this proposed rule.                                            
\2\ Weighted 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\
---------------------------------------------------------------------------

    \16\ Table 35--1996 Annual Average Announced Cooperative Class I 
Prices in Selected Cities, Dairy Market Statistics, 1996 Annual 
Summary, USDA, AMS.
---------------------------------------------------------------------------

    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.

[[Page 4823]]

    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 
location-specific.

                             Modified Flat Class I Differentials in Proposed Orders                             
                                          [Based on October 1995 Data]                                          
----------------------------------------------------------------------------------------------------------------
                                                                                   Weighted  avg                
               Proposed order \1\                   Class I use      Mod. flat     diff.\2\  ($/    Change  ($/ 
                                                     (percent)    diff.  ($/cwt)       cwt)            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 
----------------------------------------------------------------------------------------------------------------
\1\ Based on the eleven proposed orders contained in this proposed rule.                                        
\2\ Weighted 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.
---------------------------------------------------------------------------

    \17\ Table 35--1996 Annual Average Announced Cooperative Class I 
Prices in Selected Cities, Dairy Market Statistics, 1996 Annual 
Summary, USDA, AMS.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \18\ The 70 percent figure was merely selected for illustrative 
purposes and no analysis has been conducted to determine if this is 
an appropriate percentage.
---------------------------------------------------------------------------

    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.

[[Page 4824]]

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.
---------------------------------------------------------------------------

    \19\ US 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.

                             Demand-Based Class I Differentials for Selected Cities                             
----------------------------------------------------------------------------------------------------------------
                                                                      Current      Demand-based                 
                        Selected location                          differential    differential     Change  ($/ 
                                                                      ($/cwt)         ($/cwt)          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

[[Page 4825]]

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, demand-based 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                                                
----------------------------------------------------------------------------------------------------------------
                                                                     Weighted      Initial class                
                                                                      average            I           Change in  
                         Proposed order                            differential    differential    differential 
                                                                    ($/cwt) \1\       ($/cwt)         ($/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 
----------------------------------------------------------------------------------------------------------------
\1\ Weighted 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 multi-regional ERS model \20\ indicates 
that the increase in prices experienced would

[[Page 4826]]

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.
---------------------------------------------------------------------------

    \20\ Economic Research Service multi-regional model of the dairy 
industry.
---------------------------------------------------------------------------

    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 Sec. 1000.52, as contained in the discussion on 
price structure, set forth the location adjusted differentials in every 
county.
---------------------------------------------------------------------------

    \21\ USDSS results using May and October 1996 data.

                     Comparative Location-Specific Class I Differentials at Selected Cities                     
----------------------------------------------------------------------------------------------------------------
                                                                       Class I differential                     
                                                                 --------------------------------               
                              City                                                 Loc.-specific    Difference  
                                                                      Current          diff                     
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(2)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

[[Page 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 Sec. 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                  
----------------------------------------------------------------------------------------------------------------
                                                                                    Rel. value-                 
                              City                                 Current diff.  specific diff.    Difference  
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(2)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 
market-oriented 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 value-specific 
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                 
----------------------------------------------------------------------------------------------------------------
                                                          Relative Value-Specific Base Differentials \1\        
               City                   Current   ----------------------------------------------------------------
                                                     1999         2000         2001         2002         2003   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(5) 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

[[Page 4828]]

                                                                                                                
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
----------------------------------------------------------------------------------------------------------------
\1\ Base 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 market-determined Class I pricing. The following table 
sets forth the adjusted Class I differentials under this revenue-
neutral phase-in option for selected cities.

              Relative Value-Specific Class I Differentials With Revenue Neutral Phase-In Payments              
----------------------------------------------------------------------------------------------------------------
                                                           Class I diff. with revenue neutral phase-in          
               City                   Current   ----------------------------------------------------------------
                                                   1999 \1\     2000 \2\     2001 \3\     2002 \4\     2003 \5\ 
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(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.                                       
\5\ Final 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 all-milk 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 value-specific differentials. 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 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

[[Page 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            
----------------------------------------------------------------------------------------------------------------
                                                              Class I diff. with revenue enhancement            
               City                   Current   ----------------------------------------------------------------
                                                   1999 \1\     2000 \2\     2001 \3\     2002 \4\     2003 \5\ 
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(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.                                      
\5\ Final 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 market-oriented 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 over-order 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 market-clearing 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

[[Page 4830]]

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

[[Page 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 producer-settlement 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

[[Page 4832]]

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 initially-suggested 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

[[Page 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 non-Federally 
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 Federally-regulated 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 in-area 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.

[[Page 4834]]

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

[[Page 4835]]

[GRAPHIC] [TIFF OMITTED] TP30JA98.000



[[Page 4836]]

[GRAPHIC] [TIFF OMITTED] TP30JA98.001



BILLING CODE 3410-02-C

[[Page 4837]]

Proposed Eleven Marketing Areas

    * 1. Northeast--current marketing areas of the New England, New 
York-New Jersey and Middle Atlantic Federal milk orders, with the 
addition of: the contiguous unregulated areas of New Hampshire, 
northern New York and Vermont; 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 
Louisville-Lexington-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 Louisville-Lexington-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 fine-tuning 
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 
Ohio-Western 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 currently-unregulated 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

[[Page 4838]]

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 currently-unregulated Texas counties will 
result in the regulation of no additional handlers, and will reduce 
handlers' recordkeeping and reporting burden and the market 
administrator's administrative costs.
    9. Arizona-Las Vegas--current marketing area of Central Arizona, 
plus the Clark County, Nevada, portion of the current Great Basin 
marketing area, plus eight currently-unregulated Arizona counties.
    The major criterion on which the 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 currently-unregulated county in 
Oregon. The degree of association with other marketing areas is 
insufficient to warrant consolidation.

   Table 1.--Market Information: Population, Utilization, Producer Milk and Weighted Average Utilization Value  
                                       (WAUV) in Proposed Marketing Areas                                       
----------------------------------------------------------------------------------------------------------------
                                                                      Class I     Producer  milk                
                     Market                       Population \1\    utilization     \2\  (1000     WAUV \2\<SUP>,\3\ 
                                                     (millions)   \2\  (percent)       lbs.)         (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
----------------------------------------------------------------------------------------------------------------
\1\ Based on July 1, 1996 estimates.                                                                            
\2\ Based 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                   
----------------------------------------------------------------------------------------------------------------
                                                              Distributing plants \1\                           
                                                 ------------------------------------------------  Manufacturing
                     Market                            Fully                         FR small       and supply  
                                                  regulated (FR)    Exempt \2\      businesses      plants \3\  
----------------------------------------------------------------------------------------------------------------
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

[[Page 4839]]

                                                                                                                
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
----------------------------------------------------------------------------------------------------------------
\1\ Based on October 1995 information. Excludes: (1) out-of-business plants through May 1997; and (2) new plants
  since October 1995.                                                                                           
\2\ Exempt based on size (less than 150,000 lbs. route distribution per month).                                 
\3\ Based 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<SUP></SUP> 
Encarta<SUP></SUP> 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

[[Page 4840]]

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 State-regulated area in Pennsylvania just 
to the west of the Northeast marketing area; and most of the State of 
Virginia to the south of the marketing area also is regulated under a 
State order. The 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 near-continuous strip 
along the east coast of the area, from northeast Massachusetts 
southwest to the Baltimore area, is a major industrial area and is 
heavily populated.
Population
    According to July 1, 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 River-Warwick, 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-
Wilmington-Atlantic City, Pennsylvania/New Jersey/Delaware/Maryland 
MSA, with a population of 6 million. Some counties of these two MSAs 
are adjacent. Southwest of the Philadelphia MSA and separated from it 
by only one county is the Washington, DC/Baltimore, Maryland/northern 
Virginia MSA, with a population in the 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 producer-handlers 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

[[Page 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-Wilmington-Atlantic 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 higher-than-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 
Providence-Fall River-Warwick area), 7 in Connecticut (3 in the 
Hartford area and 4 in the New York-Northern New Jersey-Long Island 
area), 12 in New Jersey (all in the New York-Northern New Jersey-Long 
Island area), 2 in Delaware (one in the Philadelphia-Wilmington-
Atlantic City area), 7 in Maryland (four in the Washington-Baltimore 
area), 13 in Pennsylvania (5 in the Philadelphia-Wilmington-Atlantic 
City area), and 40 in New York (9 in the New York-Northern 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

[[Page 4842]]

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 York-New Jersey, and Middle Atlantic 
Federal milk order marketing areas (Orders 1, 2, and 4) should be 
consolidated because of the interrelationship between Orders 1 and 2 
and between Orders 2 and 4 regarding route disposition and milk supply. 
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 
non-regulated 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

[[Page 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 currently-unregulated 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 Louisville-Lexington-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 currently-unregulated 
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

[[Page 4844]]

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 second-largest 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 Tennessee-Georgia 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 second-largest Kentucky MSA, is located in the 
center of the state and has just under half a million people. 
Generally, the Kentucky counties in the 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 City-Kingsport-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.

[[Page 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 lock-in 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 Louisville-Lexington-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); Louisville-Lexington-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-Gastonia-Rock 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

[[Page 4846]]

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. Petersburg-Clearwater (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,

[[Page 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 Louisville-Lexington-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

[[Page 4848]]

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

[[Page 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 (Louisville-
Lexington-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

[[Page 4850]]

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. 
Mid-Am 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

[[Page 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-Lexington-
Evansville 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 State-regulated 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 north-south 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 Rapids-Muskegon-
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. Eighty-four percent of the population of

[[Page 4852]]

Michigan is located in these 7 MSAs, all in the lower half of southern 
Michigan.
    Four of the 8 largest Mideast MSAs are located in the State of 
Ohio. These are: (1) Cleveland-Akron, the second-largest, with a 
population of 2.9 million, located on Lake Erie in northwestern Ohio; 
(2) Cincinnati-Hamilton, OH-KY-IN, the 4th largest, with a population 
of 1.9 million, located in the southwest corner of Ohio; (3) Columbus, 
the 6th largest, with a population of 1.4 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. Forty-five 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 
producer-handlers (all currently producer-handlers). 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 producer-handlers, 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 producer-handler in Ohio; 5 pool plants in Indiana; 4 pool plants in 
Michigan; 2

[[Page 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 non-Federally 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

[[Page 4854]]

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-
Gary-Kenosha 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.

[[Page 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.'' 
Eighty-five of the 105 pool plants (1 in Iowa, 4 in Illinois, 16 in 
Minnesota and 64 in Wisconsin) are ``split plants;'' that is, one side 
of a plant is a manufacturing facility and the other side receives and 
ships Grade A milk, and accounting is done separately. In most cases, 
the nonpool portion of such a plant is a manufacturing operation, 
primarily cheese-making. Most of the other pool plants are pool supply 
plants, located primarily in Wisconsin, that ship milk to pool 
distributing plants.
    The 196 nonpool plants in the 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. Seventy-six 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

[[Page 4856]]

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 Illinois-Eastern Missouri marketing area and 
8 currently-unregulated adjacent counties in southern Illinois, and 6 
currently-unregulated counties in western Illinois located between the 
current Central Illinois and Southern Illinois-Eastern Missouri order 
areas and the Mississippi River.
    Iowa--93 counties 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

[[Page 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 Illinois-Eastern 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 currently-unregulated 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 wheat-growing 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-
Boulder-Greeley, Colorado, area is next with approximately 2.3 million. 
Kansas City, Missouri/Kansas, has a population of 1.7 million, and 
Oklahoma City, Oklahoma, is just over 1 million. Approximately 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 previously-unregulated 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 producer-handlers 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

[[Page 4858]]

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 producer-handler 
in Colorado; 2 pool plants in Illinois; 4 pool plants, 1 producer-
handler and 1 exempt plant in Iowa; 1 pool plant in Kansas; 3 pool 
plants in Nebraska; 1 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

[[Page 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

[[Page 4860]]

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. 
Mid-America 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 Nebraska-Western 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 Nebraska-
Western 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 
revenue-producing agricultural commodities in New Mexico and Texas, 
respectively, in 1996, accounting for nearly one-third of agricultural 
receipts in New Mexico, but less than 10 percent in Texas.
Population
    According to July 1, 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.

[[Page 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 producer-handlers) 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 non-operational 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 
producer-handlers 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. producer-handlers) 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.

[[Page 4862]]

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 Mid-Am'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 Arizona-Las Vegas marketing area is 
comprised of the current Central Arizona (Order 131) marketing area, 
one county in Nevada which currently is in the Great Basin (Order 139) 
marketing area, and currently unregulated counties in Arizona. There 
are 16 counties in this 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 Mexico-West 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

[[Page 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 
second-largest 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 Arizona-Las 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 producer-handler definition upon order consolidation and market 
area expansion. Two other producer-handlers are located in the Yuma, 
Arizona, MSA (located in southwestern Arizona on the California-
Arizona-Mexico 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 Nevada-Arizona border. Rapid population growth in the area 
between the two areas has greatly increased competition between the 
handlers in Phoenix and Las Vegas. In addition, both areas exchange 
significant volumes of bulk and packaged milk with Southern California. 
At the same time, the strength of the earlier relationship between the 
Las Vegas area and Utah clearly has declined since the merger of the 
Lake Mead and Great Basin order areas in 1988, which was based on data 
compiled up to 1986.
    The Grand Canyon serves as a natural barrier in northwestern 
Arizona between this area and Great Basin. Although the actual 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

[[Page 4864]]

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. Provo-Orem, 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

[[Page 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 producer-handlers).
    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 Idaho-Eastern 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 Idaho-Eastern Oregon and 
Great Basin markets (minus the Clark County, Nevada, portion of the 
Great Basin area). Sales overlap exists between Southwestern Idaho-
Eastern Oregon and Great Basin, as well as a significant overlap in 
procurement for the two orders in Idaho. The two orders also share 
similar multiple component pricing plans. The Western Colorado order 
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 Idaho-
Eastern 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

[[Page 4866]]

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 currently-
unregulated 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 north-to-south from Washington's northern border with the 
Canadian province of British Columbia to Oregon's southern border with 
California and Nevada. East-to-west, the market ranges from about 450 
miles in the northern half of the market (covering territory from 
Washington's western boundary with the Pacific Ocean to the eastern 
border of Idaho with Montana) to about 250 miles in the southern half 
of the market (covering approximately two-thirds of Oregon from the 
state's western border with the Pacific Ocean to central Oregon).
    The 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

[[Page 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 producer-handlers 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.

[[Page 4868]]



                                      List of Plants and Regulatory Status                                      
----------------------------------------------------------------------------------------------------------------
                                                                                                      Expected  
           Plant name                   City            State     October 1995 order   Status \1\    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.    KINGSTON..........  NY           NY-NJ.............  1             1           
 BOICE).                                                                                                        
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       WHITESBORO........  NY           NY-NJ.............  1             1           
 DAIRY).                                                                                                        
DAVID NICHOLS..................  CHESTERFIELD......  MA           ..................  ............  3B \2\      
DELLWOOD FOODS, INC. (TUSCAN     YONKERS...........  NY           NY-NJ.............  1             OOB         
 DAIRY FARMS, INC.).                                                                                            
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 &       GLOVERSVILLE......  NY           NY-NJ.............  4             4           
 KEITH--MODEL DAIRY FARM).                                                                                      
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      WALLINGTON........  NJ           NY-NJ.............  1             1           
 FAIRDALE MILK COMPANY, INC.                                                                                    
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   MORAVIA...........  NY           NY-NJ.............  4             4           
 J. JANAS).                                                                                                     
HOGAN, FRANCIS J. (& ANDREW J.   HUDSON FALLS......  NY           NY-NJ.............  4             4           
 & SEAN P.--HOGAN'S DAIRY).                                                                                     
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           

[[Page 4869]]

                                                                                                                
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       CAMPBELL HALL.....  NY           NY-NJ.............  4             4           
 FARMS).                                                                                                        
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        SHREWSBURY........  MA           New England.......  1             1           
 FARMS, INC. (WHITTIER CREAMERY                                                                                 
 CO., INC.).                                                                                                    
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         FRANKFORT.........  NY           NY-NJ.............  4             4           
 (RIVERSIDE FARMS) (NICASTRO                                                                                    
 FARMS, INC.).                                                                                                  
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 &      GHENT.............  NY           NY-NJ.............  4             4           
 FARMING ASSOC., INC.                                                                                           
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  SARATOGA SPRINGS..  NY           NY-NJ.............  1             1           
 PROCESSING CORP.).                                                                                             
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          

[[Page 4870]]

                                                                                                                
SULOMAN'S MILK.................  GILBERTSVILLE.....  PA           Mid Atlantic......  4             4           
SUNNYDALE FARMS, INC...........  BROOKLYN..........  NY           NY-NJ.............  1             1           
SYNAKOWSKI WALTER J (VALLEY      REMSEN............  NY           NY-NJ.............  4             4           
 SIDE FARM).                                                                                                    
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.              CLARKSVILLE.......  NY           NY-NJ.............  4             4           
 (MEADOWBROOK FARMS DAIRY).                                                                                     
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       MIAMI.............  FL           Southeast Florida.  1             1           
 DAIRY PLANT ASSOCIATES dba                                                                                     
 FARM STORES).                                                                                                  
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      ORANGE CITY.......  FL           Upper Florida.....  1             1           
 (T.G. LEE FOODS).                                                                                              
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,  WINTER HAVEN......  FL           Tampa Bay.........  1             1           
 INC.).                                                                                                         

[[Page 4871]]

                                                                                                                
MORNINGSTAR FOODS, INC. (VELDA,  MIAMI.............  FL           Southeast Florida.  1             1           
 INC.).                                                                                                         
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       NEW ORLEANS.......  LA           Southeast.........  1             1           
 (SOUTHERN FOODS GROUP, LP dba                                                                                  
 BROWN'S VELVET).                                                                                               
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      NASHVILLE.........  TN           Southeast.........  1             1           
 COMPANIES, INC.                                                                                                
MEADOW GOLD DAIRIES, INC. (TRI-  HUNTSVILLE........  AL           Southeast.........  1             1           
 STATE DAIRY).                                                                                                  
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           

[[Page 4872]]

                                                                                                                
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      LANSING...........  MI           Southern Michigan.  1             1           
 FARMS, INC.).                                                                                                  
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.     MAUMEE............  OH           Ohio Valley.......  1             1           
 (COUNTRY FRESH OF OHIO).                                                                                       
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           

[[Page 4873]]

                                                                                                                
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.     WYOMING...........  MI           Southern Michigan.  1             1           
 (PARMALAT WHITE KNIGHT                                                                                         
 PACKAGING CORP.).                                                                                              
YOUNG'S JERSEY DAIRY, INC......  YELLOW SPRINGS....  OH           Ohio Valley.......  4             4           
----------------------------------------------------------------------------------------------------------------
                                                  UPPER MIDWEST                                                 
----------------------------------------------------------------------------------------------------------------
ASSOC. MILK PRODUCERS, INC.      DEPERE............  WI           Chicago Regional..  1             1           
 (FOREMOST FARMS COOPERATIVE).                                                                                  
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   BISMARCK..........  ND           Upper Midwest.....  2             2           
 O'LAKES, INC.).                                                                                                
COUNTRY LAKE FOODS, INC. (LAND   THIEF RIVER.......  MN           Upper Midwest.....  1             1           
 O'LAKES, INC.).                                                                                                
COUNTRY LAKE FOODS, INC. (LAND   WOODBURY..........  MN           Upper Midwest.....  1             1           
 O'LAKES, INC.).                                                                                                
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.       MADISON...........  WI           Chicago Regional..  1             2           
 (MORNINGSTAR FOODS, INC.).                                                                                     
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      TUTTLE............  OK           Southwest Plains..  1             1           
 (W.H. BRAUM, INC.).                                                                                            
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   SIOUX FALLS.......  SD           E South Dakota....  1             1           
 O'LAKES, INC.).                                                                                                
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      6A            6B          
                                                                   City.                                        
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      4             4           
                                                                   City.                                        

[[Page 4874]]

                                                                                                                
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.        CHAMPAIGN.........  IL           S Ill-E Missouri..  1             OOB         
 (MODERN DAIRY OF CHAMPAIGN,                                                                                    
 INC.).                                                                                                         
MEADOW GOLD DAIRIES, INC.        TULSA.............  OK           Southwest Plains..  1             OOB         
 (MODERN DAIRY OF CHAMPAIGN,                                                                                    
 INC.).                                                                                                         
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. (FAIRMONT-     KANSAS CITY.......  MO           Greater Kansas      1             1           
 ZARDA DAIRY, DIVISION OF                                          City.                                        
 ROBERTS DAIRY CO.).                                                                                            
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           WINSIDE...........  NE           Nebraska-W Iowa...  4             4           
 (ROADSIDE DAIRY).                                                                                              
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           

[[Page 4875]]

                                                                                                                
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,     TOLLESON..........  AZ           Central Arizona...  1             1           
 INC.                                                                                                           
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        OGDEN.............  UT           Great Basin.......  3A            6B          
 LATTER-DAY.                                                                                                    
CHURCH OF JESUS CHRIST OF        SALT LAKE CITY....  UT           Great Basin.......  3A            6B          
 LATTER-DAY.                                                                                                    
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    SALEM.............  OR           Pacific Northwest.  1             3B          
 OREGON.                                                                                                        
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         

[[Page 4876]]

                                                                                                                
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

[[Page 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 long-range 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 market-clearing. 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.

[[Page 4878]]

    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 commodity-
weighted 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, re-specification, 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

[[Page 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 
price-setting 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.

[[Page 4880]]

    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, over-
order 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

[[Page 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 Minnesota-Wisconsin 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

[[Page 4882]]

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

[[Page 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 easily-tracked 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

[[Page 4884]]

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 seven-year 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 Mesa-Dishington, 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

[[Page 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

[[Page 4886]]

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 administratively-
established 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

[[Page 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

[[Page 4888]]

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 lowest-priced 
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

[[Page 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]                                                          
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Proposed                                                                  
                                                                  Basic       Class I      Proposed   Class III-A    Proposed     Class II     Proposed 
                        Year and month                           formula    price mover   Class III      price       Class IV      price       Class II 
                                                                  price          *          price                     price                     price   
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                        
(6)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

[[Page 4890]]

                                                                                                                                                        
    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 non-refrigerated 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 non-
refrigerated 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\
---------------------------------------------------------------------------

    \22\ Earlier 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.

---------------------------------------------------------------------------

[[Page 4891]]

    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.
---------------------------------------------------------------------------

    \23\ Any 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).
---------------------------------------------------------------------------

    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

[[Page 4892]]

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 value-specific 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

[[Page 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--Demand-Based 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 utilization-based 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 location-specific 
for the consolidated orders.

                       Table 1.--Class I Differentials in Proposed Orders Based on October 1995 Data Under Option 2--Relative Use                       
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           + $1.60=Class     Weighted      Maximum diff.                                
                   Proposed order \1\                      Relative use    I diff.  ($/    average diff.   range  (75%-   New diff.  ($/     Change in  
                                                           ratio \2\ (%)     cwt) \3\       ($/cwt) \3\        125%)           cwt)       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

[[Page 4894]]

                                                                                                                                                        
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
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Based on the 11 proposed orders contained in this proposed rule.                                                                                    
\2\ Relative use ratio = Class I<divide>all other uses.                                                                                                 
\3\ Weighted 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

[[Page 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 over-
order 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.

[[Page 4896]]



       Table 2.--Class I Differentials in Proposed Orders Based on October 1995 Data Under Option 3A--Flat      
                                                  Differentials                                                 
----------------------------------------------------------------------------------------------------------------
                                                                                     Weighted                   
                                                                        New           average       Change  ($/ 
                Suggested consolidated order \1\                   differential    differential        cwt)     
                                                                      ($/cwt)       ($/cwt) \2\                 
----------------------------------------------------------------------------------------------------------------
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 
----------------------------------------------------------------------------------------------------------------
\1\ Based on the 11 proposed orders contained in this proposed rule.                                            
\2\ Weighted 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

[[Page 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

[[Page 4898]]

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 Sec. 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                                            
----------------------------------------------------------------------------------------------------------------
                                                                        New        Weighted  avg                
               Proposed order \1\                   Class I use    differential    diff \2\ ($/   Change ($/cwt)
                                                     (percent)        ($/cwt)          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 
----------------------------------------------------------------------------------------------------------------
\1\ Based on the 11 proposed orders contained in this proposed rule.                                            
\2\ Weighted 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-

[[Page 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 inter-market 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 demand-based 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.

[[Page 4900]]

    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         
----------------------------------------------------------------------------------------------------------------
                                                                      Current      Demand-based                 
                        Selected location                          differential    differential     Change  ($/ 
                                                                      ($/cwt)         ($/cwt)          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

[[Page 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 self-adjusting. 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 over-order 
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

[[Page 4902]]

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\
---------------------------------------------------------------------------

    \24\ Copies 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/.
---------------------------------------------------------------------------

    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

[[Page 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                                          
----------------------------------------------------------------------------------------------------------------
                                                                     Weighted                                   
                                                                      average         Initial        Change in  
                       Proposed order \1\                          differential    differential    differential 
                                                                    ($/cwt) \2\       ($/cwt)         ($/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
----------------------------------------------------------------------------------------------------------------
\1\ Based on the 11 proposed orders contained in this proposed rule.                                            
\2\ Weighted 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

[[Page 4904]]

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

[[Page 4905]]

marketing practices to develop a national Class I price structure.
---------------------------------------------------------------------------

    \25\ Pratt, 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.
---------------------------------------------------------------------------

    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, over-order 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

[[Page 4906]]

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 mid-Mississippi River basins, and reaches into 
the southwestern United States. This zone is populated with a mix of 
rural areas plus a number of medium-sized 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                                             
----------------------------------------------------------------------------------------------------------------
                                                                       Class I differential                     
                              City                               --------------------------------   Difference  
                                                                      Current        Option 1A                  
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(2) 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 

[[Page 4907]]

                                                                                                                
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

[[Page 4908]]

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.
---------------------------------------------------------------------------

    \26\ Milk Production, Disposition and Income, 1996 Summary, 
National Agricultural Statistics Service, USDA, DA 1-2 (97).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \27\ References: 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.
    \28\ This 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \29\ Federal 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                                           
----------------------------------------------------------------------------------------------------------------
                                                             Minnesota                       Wisconsin          
                                                 ---------------------------------------------------------------
           Year/Month             Basic  formula    Grade A pay    Diff. between    Grade A pay    Diff. between
                                       price       price @ 3.5%    BFP and grade   price @ 3.5%    BFP and grade
                                                        \1\         A pay price         \1\         A pay price 
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(4)$ /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

[[Page 4909]]

                                                                                                                
    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 
----------------------------------------------------------------------------------------------------------------
\1\ Fluid 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.
---------------------------------------------------------------------------

    \30\ Table 35--1996 Annual Average Announced Cooperative Class I 
Prices in Selected Cities, Dairy Market Statistics, 1996 Annual 
Summary, USDA, AMS.
    \31\ Federal Milk Order Statistics, 1996 Annual Summary, USDA, 
Marketing and Regulatory Programs, Agricultural Marketing Service, 
Dairy Division, Statistical Bulletin 938.
---------------------------------------------------------------------------

    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

[[Page 4910]]

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 Sec. 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  
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(2) 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 market-
determined 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                                     
----------------------------------------------------------------------------------------------------------------
                                                                Option 1B--Base differentials \1\               
               City                   Current   ----------------------------------------------------------------
                                                     1999         2000         2001         2002         2003   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(5) 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

[[Page 4911]]

                                                                                                                
Seattle, WA.......................         1.90         1.72         1.54         1.36         1.18        1.00 
----------------------------------------------------------------------------------------------------------------
\1\ Base 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 market-determined 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               
----------------------------------------------------------------------------------------------------------------
                                                                Class I diff. with revenue neutral              
               City                   Current   ----------------------------------------------------------------
                                                   1999 \1\     2000 \2\     2001 \3\     2002 \4\     2003 \5\ 
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(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.                                                  
\5\ Final 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 revenue-enhanced alternative for selected cities.

[[Page 4912]]



                    Table 11.--Option 1B Class I Differentials With Revenue Enhanced Payments                   
----------------------------------------------------------------------------------------------------------------
                                                              Class I diff. with revenue enhancement            
               City                   Current   ----------------------------------------------------------------
                                                   1999 \1\     2000 \2\     2001 \3\     2002 \4\     2003 \5\ 
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(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.                                                  
\5\ Final 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 market-oriented 
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 market-oriented 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

[[Page 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

[[Page 4914]]

$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                                          
----------------------------------------------------------------------------------------------------------------
                                              Estimated uniform price                 Difference between pool   
                                 ------------------------------------------------  impacts of consolidation plus
                                                                                        options 1A & 1B and     
         Proposed order                             Cons. plus      Cons. plus             consolidation        
                                   Consolidation     option 1A       option 1B   -------------------------------
                                  only  (Col. 1)     (Col. 2)        (Col. 3)     Col. 2 -  Col.  Col. 3 -  Col.
                                                                                         1               1      
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(4) $/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

[[Page 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 market-oriented 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 
market-oriented 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 market-oriented, 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?

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BILLING CODE 3410-02-C

[[Page 4923]]

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 (Sec. 1000.15)
    The new orders would include a modified fluid milk product 
definition in Sec. 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

[[Page 4924]]

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 (Sec. 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 (Sec. 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 (Sec. 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

[[Page 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 sub-section 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 market-clearing 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

[[Page 4926]]

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 hermetically-sealed, 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

[[Page 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 Secs. 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, all-metal 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-to-produce 
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:
    <bullet> Class III-A has resulted in lower uniform prices under 
Federal milk orders;
    <bullet> A significant amount of milk was not pooled when the Class 
III-A price exceeded the uniform price adjusted for location;
    <bullet> The wide gap between the Class II price and the Class III-
A price was destroying the market for bulk sweetened condensed milk; 
and
    <bullet> 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 Agri-Mark'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,

[[Page 4928]]

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 demand-driven 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\
---------------------------------------------------------------------------

    \32\ See Issue Number 3 of this proposed rule for a 
comprehensive discussion of Class III and IV prices.
---------------------------------------------------------------------------

    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/

[[Page 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 multi-class 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

[[Page 4930]]

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 (Sec. 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-by-market 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

[[Page 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 Sec. 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 Sec. 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 (Sec. 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 (Sec. 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 plant-by-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.

[[Page 4932]]

    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 over-assignment 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 Sec. 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 producer-handler 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 producer-handlers 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 down-allocated 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, producer-handlers 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 producer-handler 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 (Secs. ________.14, 
________.41, and ________.60)
    Paragraph (b) of Sec. ________.14 should be removed to reflect the 
fact that all packaged fluid cream products now would be accounted for 
on a used-to-produce 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 half-gallon 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

[[Page 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, Secs. 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

[[Page 4934]]

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 ``lock-
in'' or ``lock-out'' provisions that, as proposed, would have the 
effect of regulating producers. They are not recommended. The 
provisions

[[Page 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 Sec. 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 
low-molecular 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

[[Page 4936]]

RO and UF retentate received will be priced according to the skim-
equivalent pounds of such milk. The skim-equivalent pounds for RO 
retentate will be determined by dividing the solids-not-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

[[Page 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

[[Page 4938]]

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.

[[Page 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 producer-handler 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. Producer-handlers 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 producer-handler 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 producer-handler 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 producer-handlers. 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 producer-handlers 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

[[Page 4940]]

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 
producer-handler 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 higher-use 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 producer-settlement 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

[[Page 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 Capper-Volstead 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: Sec. 100__.45, Market administrator's reports and 
announcements concerning classification; Sec. 100__.53, Announcement of 
class prices and component prices; Sec. 100__.54, Equivalent price; and 
Sec. 100____.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, 
Sec. 100____.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

[[Page 4942]]

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 producer-settlement 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 Sec. 1000.90 of the General 
Provisions.
    Payments from the producer-settlement 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, Louisville-Lexington-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

[[Page 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. (Mid-Am) 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, Mid-Am 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 Sec. 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.

[[Page 4944]]

    Charges on overdue accounts. All current orders provide for an 
additional charge to handlers who fail to make required payments to the 
producer-settlement 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 ``farm-point'' 
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 New-York-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

[[Page 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

[[Page 4946]]

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), 
farm-point 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 farm-point 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 farm-point 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

[[Page 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

[[Page 4948]]

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 inter-market 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 plant-point 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 Sec. 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 direct-shipped 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

[[Page 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 county-based 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 state-regulated 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 non-distributing 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 ADCNE-proposed 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

[[Page 4950]]

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, Agri-Mark 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 Agri-Mark 
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 plant-point pricing 
on producers as part of recommending the adoption of plant-point 
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

[[Page 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 York-New 
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 non-cooperative 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

[[Page 4952]]

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

[[Page 4953]]

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\
---------------------------------------------------------------------------

    \33\ The Tennessee Valley order, as amended, was not approved by 
producers. The order was terminated effective October 1, 1997.
---------------------------------------------------------------------------

    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 Secs. 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 year-round 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, Mid-
America 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

[[Page 4954]]

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

[[Page 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 Secs. 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

[[Page 4956]]

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 producer-
settlement 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

[[Page 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

[[Page 4958]]

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 
Sec. 1030.9(c), the cooperative must deliver at least 10 percent of the 
milk for which it is the handler pursuant to Sec. 1030.9(c) to pool 
distributing plants, units of pool distributing plants, plants of 
producer-handlers, 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 
Sec. 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

[[Page 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 Sec. 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 State-
regulated 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 Ohio-Western 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 in-area 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

[[Page 4960]]

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, Nebraska-Western Iowa, Southern Illinois-
Eastern Missouri, and Southwest Plains orders contain cooperative 
balancing plant provisions, allowing cooperative-operated 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

[[Page 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 Mexico-West 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

[[Page 4962]]

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 Mexico-West 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

[[Page 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.

[[Page 4964]]

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

[[Page 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, producer-handlers 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

[[Page 4966]]

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 Louisville-
Lexington-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

[[Page 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 
producer-settlement 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 
individual-handler pool market, no producer-settlement fund is 
provided. The remaining balance in the producer-settlement 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 
Louisville-Lexington-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

[[Page 4968]]

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 Sec. 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 producer-settlement fund.
1000.72  Payments from the producer-settlement 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


Sec. 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


Sec. 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.


Sec. 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.


Sec. 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

[[Page 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.


Sec. 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.


Sec. 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.


Sec. 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.


Sec. 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 
Secs. ____.70, ____.71, ____.72, ____.73, ____.76, and ____.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 Sec. __.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.


Sec. 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 
Sec. 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.


Sec. 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, fat-free 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.


Sec. 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.


Sec. 1000.17  [Reserved]


Sec. 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.


Sec. 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

[[Page 4970]]

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 consumer-type 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, Secs. ____.13 and 
____.52 of each Federal milk order in 7 CFR, chapter X.

Subpart C--Rules of Practice and Procedure Governing Market 
Administrators


Sec. 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 
Sec. 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


Sec. 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


Sec. 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

[[Page 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 highest-priced 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.


Sec. 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


Sec. 1000.40  Classes of utilization.

    Except as provided in Sec. 1000.42, all skim milk and butterfat 
required to be reported pursuant to Sec. ____.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 Sec. 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, high-moisture 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

[[Page 4972]]

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 Sec. 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 Sec. 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 Sec. 1000.43(b).


Sec. 1000.41  [Reserved]


Sec. 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 Sec. 1000.44(a)(9) and the corresponding step of 
Sec. 1000.44(b);
    (2) If the transferring plant received during the month other 
source milk to be allocated pursuant to Sec. 1000.44(a)(3) or the 
corresponding step of Sec. 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 Sec. 1000.44(a)(8) or (9) or 
the corresponding steps of Sec. 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

[[Page 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 Sec. ____.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.


Sec. 1000.43  General classification rules.

    In determining the classification of producer milk pursuant to 
Sec. 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 
Sec. ____.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 Sec. 1000.9(c) the pounds of skim milk and butterfat, respectively, 
in each class in accordance with Secs. 1000.40 and 1000.42, and 
paragraph (b) of this section.
    (b) For purposes of classifying all milk reported by a handler 
pursuant to Sec. ____.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 Sec. 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 
Sec. 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

[[Page 4974]]

of specific concentrated receipts that is established by the handler) 
prior to any assignments under Sec. 1000.44. Any remaining skim milk 
and butterfat in concentrated receipts shall be assigned to uses under 
Sec. 1000.44 on a pro rata basis, unless a specific use of such 
receipts is established by the handler.


Sec. 1000.44  Classification of producer milk.

    For each month the market administrator shall determine for each 
handler described in Sec. 1000.9(a) for each pool plant of the handler 
separately and for each handler described in Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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

[[Page 4975]]

computations pursuant to paragraphs (a) and (b) of this section.


Sec. 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 Sec. 1000.44(a)(9) and the 
corresponding step of Sec. 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 
Secs. 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


Sec. 1000.50  Class prices and component prices.

    Subject to the provisions of Sec. 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 
Sec. 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 
Sec. 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 one-hundredth 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 one-hundredth 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.


Sec. 1000.51  [Reserved]


Sec. 1000.52  Adjusted Class I differentials.

    The Class I differential adjusted for location to be used in 
Sec. 1000.50(g) and (k) shall be as follows, except that:
    (1) Under the Option 1B Revenue-Enhancement 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:

[[Page 4976]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        OPTION 1B DIFFERENTIAL (Per Year)               
                                                                             OPTION 1A  ----------------------------------------------------------------
               COUNTY/PARISH                             STATE             DIFFERENTIAL                                                         2003 &  
                                                                                             1999         2000         2001         2002        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

[[Page 4977]]

                                                                                                                                                        
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

[[Page 4978]]

                                                                                                                                                        
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

[[Page 4979]]

                                                                                                                                                        
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

[[Page 4980]]

                                                                                                                                                        
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

[[Page 4981]]

                                                                                                                                                        
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

[[Page 4982]]

                                                                                                                                                        
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

[[Page 4983]]

                                                                                                                                                        
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

[[Page 4984]]

                                                                                                                                                        
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

[[Page 4985]]

                                                                                                                                                        
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

[[Page 4986]]

                                                                                                                                                        
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

[[Page 4987]]

                                                                                                                                                        
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

[[Page 4988]]

                                                                                                                                                        
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

[[Page 4989]]

                                                                                                                                                        
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

[[Page 4990]]

                                                                                                                                                        
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

[[Page 4991]]

                                                                                                                                                        
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

[[Page 4992]]

                                                                                                                                                        
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

[[Page 4993]]

                                                                                                                                                        
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

[[Page 4994]]

                                                                                                                                                        
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

[[Page 4995]]

                                                                                                                                                        
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

[[Page 4996]]

                                                                                                                                                        
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

[[Page 4997]]

                                                                                                                                                        
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

[[Page 4998]]

                                                                                                                                                        
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

[[Page 4999]]

                                                                                                                                                        
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

[[Page 5000]]

                                                                                                                                                        
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

[[Page 5001]]

                                                                                                                                                        
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

[[Page 5002]]

                                                                                                                                                        
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

[[Page 5003]]

                                                                                                                                                        
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

[[Page 5004]]

                                                                                                                                                        
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

[[Page 5005]]

                                                                                                                                                        
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

[[Page 5006]]

                                                                                                                                                        
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

[[Page 5007]]

                                                                                                                                                        
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

[[Page 5008]]

                                                                                                                                                        
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

[[Page 5009]]

                                                                                                                                                        
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

[[Page 5010]]

                                                                                                                                                        
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

[[Page 5011]]

                                                                                                                                                        
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

[[Page 5012]]

                                                                                                                                                        
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

[[Page 5013]]

                                                                                                                                                        
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

[[Page 5014]]

                                                                                                                                                        
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

[[Page 5015]]

                                                                                                                                                        
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

[[Page 5016]]

                                                                                                                                                        
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

[[Page 5017]]

                                                                                                                                                        
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

[[Page 5018]]

                                                                                                                                                        
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

[[Page 5019]]

                                                                                                                                                        
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

[[Page 5020]]

                                                                                                                                                        
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
--------------------------------------------------------------------------------------------------------------------------------------------------------

Sec. 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.


Sec. 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


Sec. 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 
Secs. ____.71, ____.76, and ____.77 of each Federal milk order in 7 
CFR, chapter X, and out of which the market administrator shall make 
all payments pursuant to Secs. ____.72 and ____.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.


Sec. 1000.71  Payments to the producer-settlement 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 Sec. ____.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 Sec. ____.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 Sec. 1000.44(c) by the producer 
price differential, adjusted pursuant to Sec. ____.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 Sec. ____.60(i) of 
the order by the producer price differential as adjusted pursuant to 
Sec. ____.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

[[Page 5021]]

handler's receipts of producer milk; and the value at the uniform price 
as adjusted pursuant to Sec. ____.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 Sec. ____.60(e) of the order.


Sec. 1000.72  Payments from the producer-settlement fund.

    No later than one day after the date of payment receipt required 
under Sec. 1000.71, the market administrator shall pay to each handler 
the amount, if any, by which the amount computed pursuant to 
Sec. 1000.71(b) or (c), as the case may be, exceeds the amount computed 
pursuant to Sec. 1000.71(a). If, at such time, the balance in the 
producer-settlement 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.


Sec. 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 Secs. ____.30(b) and ____.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 
Sec. ____.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 Sec. ____.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 
Sec. ____.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 Secs. ____.30(b) and 
____.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 Sec. ____.60 for the

[[Page 5022]]

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 Sec. 1000.43(d). 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 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 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.


Sec. 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.


Sec. 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


Sec. 1000.85  Assessment for order administration.

    On or before the payment receipt date specified under Sec. ____.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 
Sec. 1000.9(c) that were delivered to pool plants of other handlers;
    (b) Receipts from a handler described in Sec. 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 Sec. 1000.43(d) and other source milk allocated to 
Class I pursuant to Sec. 1000.44(a)(3) and (8) and the corresponding 
steps of Sec. 1000.44(b), except other source milk that is excluded 
from the computations pursuant to Sec. ____.60(d) and (e) of Parts 
1005, 1006, and 1007 or Sec. ____.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 Sec. 1000.76(a)(1)(i)and (ii).


Sec. 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 Sec. ____.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 Sec. ____.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


Sec. 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,

[[Page 5023]]

or announcement will be on the next day that the market administrator's 
office is open for public business.


Secs. 1000.91--1000.92  [Reserved]


Sec. 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 producer-settlement fund.
1001.72  Payments from the producer-settlement 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


Sec. 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


Sec. 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.


Sec. 1001.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 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.


Sec. 1001.5  Distributing plant.

    See Sec. 1000.5 of this chapter.


Sec. 1001.6  Supply plant.

    See Sec. 1000.6 of this chapter.


Sec. 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,

[[Page 5024]]

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 in-area 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 next-to-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 Sec. 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

[[Page 5025]]

be requested in writing by the handler and must be approved by the 
market administrator.


Sec. 1001.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1001.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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 producer-handler so requests that 
the two be operated as separate entities with the distributing plant 
regulated under Sec. 1001.7(a) and the farm operated as a producer 
under Sec. 1001.12.


Sec. 1001.11  [Reserved]


Sec. 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 Sec. 1001.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 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 Sec. 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 Sec. 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.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 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 Sec. 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]


Sec. 1001.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1001.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


1001.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1001.17  [Reserved]


Sec. 1001.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1001.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

[[Page 5026]]

Handler Reports


Sec. 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 
Sec. 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 Sec. 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.


Sec. 1001.31  Payroll reports.

    (a) On or before the 22nd day after the end of each month, each 
handler described in Sec. 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 Sec. 1001.73(e);
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 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.


Sec. 1001.32  Other reports.

    In addition to the reports required pursuant to Secs. 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


Sec. 1001.40  Classes of utilization.

    See Sec. 1000.40 of this chapter.


Sec. 1001.41  [Reserved]


Sec. 1001.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1001.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1001.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1001.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1001.50  Class prices and component prices.

    See Sec. 1000.50 of this chapter.


Sec. 1001.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Suffolk County, Massachusetts, which is reported in Sec. 1000.52. The 
Class I price shall be the price computed pursuant to Sec. 1000.50(a) 
for Suffolk County, Massachusetts.


Sec. 1001.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1001.53  Announcement of class and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1001.54  Equivalent price.

    See Sec. 1000.54 of this chapter.

Producer Price Differential


Sec. 1001.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c) as follows:
    (a) Class I value. (1) Multiply the pounds of skim milk in Class I 
as determined pursuant to Sec. 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 Sec. 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 
Sec. 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 Sec. 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 Sec. 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 
Sec. 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 Sec. 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 Sec. 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 
Sec. 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 Sec. 1000.44(b) by the butterfat 
price.
    (e) Add an adjustment for somatic cell content as determined by 
multiplying the value reported pursuant to

[[Page 5027]]

Sec. 1001.30(a)(1) by the percentage of the total producer milk 
allocated to Class II, Class III, and Class IV pursuant to 
Sec. 1000.44(c).
    (f) Add the amounts obtained from multiplying the pounds of skim 
milk and butterfat overage assigned to each class pursuant to 
Sec. 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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of 
Sec. 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 
Secs. 1000.43(d) and 1000.44(a)(3)(i) and the pounds of skim milk and 
butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8) and 
the corresponding step of Sec. 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 Sec. 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 producer-settlement fund of 
another Federal order under Sec. 1000.76(a)(5) or (c).


Sec. 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 
producer-settlement 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 
Sec. 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 
Sec. 1001.60 for all handlers required to file reports prescribed in 
Sec. 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 
Sec. 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 Sec. 1001.60(e);
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 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 Sec. 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.


Sec. 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


Sec. 1001.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1001.71  Payments to the producer-settlement fund.

    The payments to the producer-settlement fund specified in 
Sec. 1000.71 are due no later than the 15th day after the end of the 
month.


Sec. 1001.72  Payments from the producer-settlement fund.

    See Sec. 1000.72 of this chapter.


Sec. 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 Sec. 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 
Sec. 1001.75;

[[Page 5028]]

    (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 
Sec. 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 Sec. 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 Sec. 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.


Sec. 1001.74  [Reserved]


Sec. 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 Sec. 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 Sec. 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.


Sec. 1001.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1001.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1001.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

[[Page 5029]]

Administrative Assessment and Marketing Service Deduction


Sec. 1001.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.


Sec. 1001.86  Deduction for marketing services.

    See Sec. 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 producer-settlement fund.
1005.72  Payments from the producer-settlement 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


Sec. 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


Sec. 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.


Sec. 1005.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 1005.4  Plant.

    See Sec. 1000.4 of this chapter.


Sec. 1005.5  Distributing plant.

    See Sec. 1000.5 of this chapter.


Sec. 1005.6  Supply plant.

    See Sec. 1000.6 of this chapter.


Sec. 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

[[Page 5030]]

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 Sec. 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 Sec. 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.


Sec. 1005.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1005.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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 Sec. 1005.7(a) and 
the farm operated as a producer under Sec. 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.


Sec. 1005.11  [Reserved]


Sec. 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 Sec. 1005.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 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.


Sec. 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 Sec. 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 Sec. 1000.9(c) but

[[Page 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 Sec. 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 Sec. 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 Sec. 1005.7(d)) during the 
month, excluding the quantity of producer milk received from a handler 
described in Sec. 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.


Sec. 1005.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1005.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


Sec. 1005.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1005.17  [Reserved]


Sec. 1005.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1005.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

Handler Reports


Sec. 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 Sec. 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 Sec. 1005.82;
    (6) Receipts of producer milk described in Sec. 1005.82(c)(2), 
including the identity of the individual producers whose milk is 
eligible for the transportation credit pursuant to 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 Sec. 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 Sec. 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.


Sec. 1005.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler described in Sec. 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 Sec. 1005.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 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.

[[Page 5032]]

Sec. 1005.32  Other reports.

    (a) On or before the 20th day after the end of each month, each 
handler described in Sec. 1000.9(a) and (c) shall report to the market 
administrator any adjustments to transportation credit requests as 
reported pursuant to Sec. 1005.30(a)(5), (6), and (7).
    (b) In addition to the reports required pursuant to Secs. 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


Sec. 1005.40  Classes of utilization.

    See Sec. 1000.40 of this chapter.


Sec. 1005.41  [Reserved]


Sec. 1005.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1005.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1005.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1005.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1005.50  Class prices, component prices, Class I differential and 
price.

    Class prices and component prices are described in Sec. 1000.50. 
The Class I differential shall be the differential established for 
Meklenburg County, North Carolina, which is reported in Sec. 1000.52. 
The Class I price shall be the price computed pursuant to 
Sec. 1000.50(a) for Meklenburg County, North Carolina.


Sec. 1005.51  [Reserved]


Sec. 1005.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1005.53  Announcement of class prices and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1005.54  Equivalent price.

    See Sec. 1000.54 of this chapter.

Uniform Price


Sec. 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 Sec. 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 Sec. 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 
Sec. 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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of 
Sec. 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 Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and 
the pounds of skim milk and butterfat subtracted from Class I pursuant 
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 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 Sec. 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 producer-settlement fund of 
another Federal order under Sec. 1000.76(a)(5) or (c).


Sec. 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 producer-settlement 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 Sec. 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 
Sec. 1005.60 for all handlers required to file reports prescribed in 
Sec. 1005.30;
    (2) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 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 Sec. 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,

[[Page 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 Sec. 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.


Sec. 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 Sec. 1005.61 for such month;
    (b) The uniform butterfat price pursuant to Sec. 1005.61(b) for 
such month; and
    (c) The uniform skim milk price pursuant to Sec. 1005.61(c) for 
such month.

Payments for Milk


Sec. 1005.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1005.71  Payments to the producer-settlement fund.

    The payments to the producer-settlement fund specified in 
Sec. 1000.71 are due no later than the 12th day after the end of the 
month.


Sec. 1005.72  Payments from the producer-settlement fund.

    See Sec. 1000.72 of this chapter.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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;

[[Page 5034]]

    (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.


Sec. 1005.74  [Reserved]


Sec. 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 Sec. 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 Sec. 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.


Sec. 1005.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1005.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1005.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

Marketwide Service Payments


Sec. 1005.80  Transportation credit balancing fund.

    The market administrator shall maintain a separate fund known as 
the Transportation Credit Balancing Fund into which shall be deposited 
the payments made by handlers pursuant to Sec. 1005.81 and out of which 
shall be made the payments due handlers pursuant to Sec. 1005.82. 
Payments due a handler shall be offset against payments due from the 
handler.


Sec. 1005.81  Payments to the transportation credit balancing fund.

    (a) On or before the 12th day after the end of the month, each 
handler operating a pool plant and each handler specified in 
Sec. 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 
Sec. 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.


Sec. 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 Sec. 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 Sec. 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 
Sec. 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 Sec. 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 Sec. 1005.30(c)(3) prior to the date payment is due, the 
transportation credits for such milk computed pursuant to this section 
shall be made to such cooperative association rather than to the 
operator of the pool plant at which the milk was received.
    (b) The market administrator may extend the period during which 
transportation credits are in effect (i.e., the transportation credit 
period) to 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 Sec. 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

[[Page 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 Sec. 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 
Sec. 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 Sec. 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 
independently-operated 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 hard-surface 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


Sec. 1005.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.


Sec. 1005.86  Deduction for marketing services.

    See Sec. 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 producer-settlement fund.
1006.72  Payments from the producer-settlement 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.

[[Page 5036]]

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


Sec. 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


Sec. 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.


Sec. 1006.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 1006.4  Plant.

    See Sec. 1000.4 of this chapter.


Sec. 1006.5  Distributing plant.

    See Sec. 1000.5 of this chapter.


Sec. 1006.6  Supply plant.

    See Sec. 1000.6 of this chapter.


Sec. 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 Sec. 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 Sec. 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.


Sec. 1006.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1006.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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 Sec. 1006.7(a) and 
the farm operated as a producer under Sec. 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

[[Page 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.


Sec. 1006.11  [Reserved]


Sec. 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 Sec. 1006.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 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.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 1006.7(d)) during the 
month, excluding the quantity of producer milk received from a handler 
described in Sec. 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.


Sec. 1006.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1006.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


Sec. 1006.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1006.17  [Reserved]


Sec. 1006.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1006.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

Handler Reports


Sec. 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 Sec. 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

[[Page 5038]]

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 Sec. 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.


Sec. 1006.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler described in Sec. 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 Sec. 1006.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 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.


Sec. 1006.32  Other reports.

    (a) In addition to the reports required pursuant to Secs. 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


Sec. 1006.40  Classes of utilization.

    See Sec. 1000.40 of this chapter.


Sec. 1006.41  [Reserved]


Sec. 1006.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1006.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1006.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1006.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1006.50  Class prices, component prices, Class I differential and 
price.

    Class prices and component prices are described in Sec. 1000.50.
    The Class I differential shall be the differential established for 
Hillsborough County, Florida, which is reported in Sec. 1000.52. The 
Class I price shall be the price computed pursuant to Sec. 1000.50(a) 
for Hillsborough County, Florida.


Sec. 1006.51  [Reserved]


Sec. 1006.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1006.53  Announcement of class prices and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1006.54  Equivalent price.

    See Sec. 1000.54 of this chapter.

Uniform Price


Sec. 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 Sec. 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 Sec. 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 
Sec. 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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3) (i) through (iii) and the corresponding step of 
Sec. 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 Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and 
the pounds of skim milk and butterfat subtracted from Class I pursuant 
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 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 Sec. 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 producer-settlement fund of 
another Federal order under Sec. 1000.76(a)(5) or (c).


Sec. 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 producer-settlement 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 Sec. 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

[[Page 5039]]

administrator shall compute the uniform price in the following manner:
    (1) Combine into one total the values computed pursuant to 
Sec. 1006.60 for all handlers required to file reports prescribed in 
Sec. 1006.30;
    (2) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 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 Sec. 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 Sec. 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.


Sec. 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 Sec. 1006.61 for such month;
    (b) The uniform butterfat price pursuant to Sec. 1006.61(b) for 
such month; and
    (c) The uniform skim milk price pursuant to Sec. 1006.61(c) for 
such month.

Payments for Milk


Sec. 1006.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1006.71  Payments to the producer-settlement fund.

    The payments to the producer-settlement fund specified in 
Sec. 1000.71 are due no later than the 12th day after the end of the 
month.


Sec. 1006.72  Payments from the producer-settlement fund.

    See Sec. 1000.72 of this chapter.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 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 Sec. 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 Sec. 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

[[Page 5040]]

pursuant to Sec. 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 Sec. 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.


Sec. 1006.74  [Reserved]


Sec. 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 Sec. 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 Sec. 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.


Sec. 1006.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1006.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1006.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

Adminstrative Assessment and Marketing Service Deduction


Sec. 1006.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.


Sec. 1006.86  Deduction for marketing services.

    See Sec. 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 producer-settlement fund.
1007.72 Payments from the producer-settlement 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


Sec. 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


Sec. 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

[[Page 5041]]

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.


Sec. 1007.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 1007.4  Plant.

    See Sec. 1000.4 of this chapter.


Sec. 1007.5  Distributing plant.

    See Sec. 1000.5 of this chapter.


Sec. 1007.6  Supply plant.

    See Sec. 1000.6 of this chapter.


Sec. 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 Sec. 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 Sec. 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.


Sec. 1007.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1007.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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 Sec. 1007.7(a) and

[[Page 5042]]

the farm operated as a producer under Sec. 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.


Sec. 1007.11  [Reserved]


Sec. 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 Sec. 1007.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 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.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 1007.7(e)) during the month, excluding the quantity of producer 
milk received from a handler described in Sec. 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.


Sec. 1007.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1007.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


Sec. 1007.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1007.17  [Reserved]


Sec. 1007.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1007.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

Handler Reports


Sec. 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 Sec. 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,

[[Page 5043]]

except Federal Order 1005, for which a transportation credit is 
requested pursuant to Sec. 1007.82;
    (6) Receipts of producer milk described in Sec. 1007.82(c)(2), 
including the identity of the individual producers whose milk is 
eligible for the transportation credit pursuant to 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 Sec. 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 Sec. 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.


Sec. 1007.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler described in Sec. 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 Sec. 1007.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 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.


Sec. 1007.32  Other reports.

    (a) On or before the 20th day after the end of each month, each 
handler described in Sec. 1000.9(a) and (c) shall report to the market 
administrator any adjustments to transportation credit requests as 
reported pursuant to Sec. 1007.30(a)(5), (6), and (7).
    (b) In addition to the reports required pursuant to Secs. 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


Sec. 1007.40  Classes of utilization.

    See Sec. 1000.40 of this chapter.


Sec. 1007.41  [Reserved]


Sec. 1007.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1007.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1007.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1007.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1007.50  Class prices, component prices, Class I differential and 
price.

    Class prices and component prices are described in Sec. 1000.50. 
The Class I differential shall be the differential established for 
Fulton County, Georgia, which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for 
Fulton County, Georgia.


Sec. 1007.51  [Reserved]


Sec. 1007.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1007.53  Announcement of class prices and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1007.54  Equivalent price.

    See Sec. 1000.54 of this chapter.

Uniform Price


Sec. 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 Sec. 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 Sec. 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 
Sec. 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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of 
Sec. 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 Sec. 1000.43(d) and Sec.  1000.44(a)(3)(i) and 
the pounds of skim milk and butterfat subtracted from Class I pursuant 
to Sec. 1000.44(a)(8) and the corresponding step of Sec. 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

[[Page 5044]]

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 Sec. 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 producer-settlement fund of 
another Federal order under Sec. 1000.76(a)(5) or (c).


Sec. 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 producer-settlement 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 Sec. 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 
Sec. 1007.60 for all handlers required to file reports prescribed in 
Sec. 1007.30;
    (2) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 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 Sec. 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 Sec. 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.


Sec. 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 Sec. 1007.61 for such month;
    (b) The uniform butterfat price pursuant to Sec. 1007.61(b) for 
such month; and
    (c) The uniform skim milk price pursuant to Sec. 1007.61(c) for 
such month.

Payments for Milk


Sec. 1007.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1007.71  Payments to the producer-settlement fund.

    The payments to the producer-settlement fund specified in 
Sec. 1000.71 are due no later than the 12th day after the end of the 
month.


Sec. 1007.72  Payments from the producer-settlement fund.

    See Sec. 1000.72 of this chapter.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 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 Sec. 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

[[Page 5045]]

payment shall be the classified value of such milk as determined by 
multiplying the pounds of milk assigned to each class pursuant to 
Sec. 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 Sec. 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 Sec. 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.


Sec. 1007.74  [Reserved]


Sec. 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 Sec. 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 Sec. 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.


Sec. 1007.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1007.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1007.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

Marketwide Service Payments


Sec. 1007.80  Transportation credit balancing fund.

    The market administrator shall maintain a separate fund known as 
the Transportation Credit Balancing Fund into which shall be deposited 
the payments made by handlers pursuant to Sec. 1007.81 and out of which 
shall be made the payments due handlers pursuant to Sec. 1007.82. 
Payments due a handler shall be offset against payments due from the 
handler.


Sec. 1007.81  Payments to the transportation credit balancing fund.

    (a) On or before the 12th day after the end of the month, each 
handler operating a pool plant and each handler specified in 
Sec. 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 
Sec. 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.


Sec. 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 Sec. 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 Sec. 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 
Sec. 1007.32(a). After

[[Page 5046]]

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 Sec. 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 Sec. 1007.30(c)(3) prior to the date payment is due, the 
transportation credits for such milk computed pursuant to this section 
shall be made to such cooperative association rather than to the 
operator of the pool plant at which the milk was received.
    (b) The market administrator may extend the period during which 
transportation credits are in effect (i.e., the transportation credit 
period) to 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 Sec. 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 Sec. 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 
Sec. 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 Sec. 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 
independently-operated 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 hard-surface 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


Sec. 1007.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.

[[Page 5047]]

Sec. 1007.86  Deduction for marketing services.

    See Sec. 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 producer-settlement fund.
1030.72  Payments from the producer-settlement 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


Sec. 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


Sec. 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.


Sec. 1030.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 1030.4  Plant.

    See Sec. 1000.4 of this chapter.


Sec. 1030.5  Distributing plant.

    See Sec. 1000.5 of this chapter.


Sec. 1000.6  Supply plant.

    See Sec. 1000.6 of this chapter.


Sec. 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 Sec. 1030.12(b)) and handlers described in 
Sec. 1000.9(c), as reported in Sec. 1030.30(a), is not less than 10 
percent of the milk received from dairy farmers, including milk 
diverted pursuant to Sec. 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 Sec. 1030.7(a) and (b), and units described in 
Sec. 1030.7(e) shall count as qualifying shipments for the purpose of 
meeting the increased shipments:

[[Page 5048]]

    (i) Pool plants described in Sec. 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 Sec. 1030.7(e) directly from farms of producers 
pursuant to Sec. 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 Sec. 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 Sec. 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 Sec. 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

[[Page 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.


Sec. 1030.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1030.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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 producer-handler so requests that 
the two be operated as separate entities with the distributing plant 
regulated under Sec. 1030.7(a) and the farm operated as a producer 
under Sec. 1030.12.


Sec. 1030.11  [Reserved]


Sec. 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 Sec. 1030.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 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.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 re-
associated with the market;
    (2) The quantity of milk delivered to plants described in 
Sec. 1030.7(c)(1) as a percentage of the total milk accounted for by 
the cooperative association described in Sec. 1000.9(c) must be at 
least 10 percent, subject to Sec. 1030.7(g);
    (3) Diverted milk shall be priced at the location of the plant to 
which diverted.


Sec. 1030.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1030.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


Sec. 1030.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1030.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1030.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

Handler Reports


Sec. 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 Sec. 1030.7 
and each handler described in Sec. 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 Sec. 1000.50(p), contained in 
or represented by:

[[Page 5050]]

    (i) Receipts of producer milk, including producer milk diverted by 
the handler; and
    (ii) Receipts of milk from handlers described in Sec. 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.


Sec. 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 Sec. 1030.7 and each 
handler described in Sec. 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 Sec. 1030.73(f).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 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.


Sec. 1030.32  Other reports.

    In addition to the reports required pursuant to Secs. 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


Sec. 1030.40  Classes of utilization.

    See Sec. 1000.40 of this chapter.


Sec. 1030.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1000.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1000.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1000.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1030.50  Class prices and component prices.

    See Sec. 1000.50 of this chapter.


Sec. 1030.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Cook County, Illinois, which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for Cook 
County, Illinois.


Sec. 1030.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1030.53  Announcement of class prices and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1030.54  Equivalent price.

    See Sec. 1000.54 of this chapter.


Sec. 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 Sec. 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 Sec. 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


Sec. 1030.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of its pool plants, and of 
each handler described in Sec. 1000.9(c) as follows:
    (a) Class I value.
    (1) Multiply the hundredweight of skim milk in Class I as 
determined pursuant to Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 1000.44(b) by the butterfat 
price;
    (c) Add the Class III value computed as follows:

[[Page 5051]]

    (1) Multiply the pounds of skim milk in Class III as determined 
pursuant to Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 1030.30(a)(1) by the percentage of the total producer milk 
allocated to Class II, Class III, and Class IV pursuant to 
Sec. 1000.44(c);
    (f) Add the amounts obtained from multiplying the pounds of skim 
milk and butterfat overage assigned to each class pursuant to 
Sec. 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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of 
Sec. 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 
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk 
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8) 
and the corresponding step of Sec. 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 
Sec. 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 Sec. 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 producer-settlement fund of 
another order under Sec. 1000.76(a)(5) or (c).


Sec. 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 
producer-settlement 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 
Sec. 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 
Sec. 1030.60 for all handlers required to file reports prescribed in 
Sec. 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 
Sec. 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 Sec. 1030.30(a)(1);
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 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 Sec. 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.


Sec. 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


Sec. 1030.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1030.71  Payments to the producer-settlement fund.

    Each handler shall make payment to the producer-settlement fund in 
a manner that provides receipt of the

[[Page 5052]]

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 Sec. 1030.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 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 Sec. 1030.60(i) by 
the producer price differential as adjusted pursuant to Sec. 1030.75 
for the location of the plant from which received.


Sec. 1030.72  Payments from the producer-settlement 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 Sec. 1030.71(b) exceeds the amount 
computed pursuant to Sec. 1030.71(a). If, at such time, the balance in 
the producer-settlement 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.


Sec. 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 Sec. 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 
Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 1000.9(c) as follows:
    (i) The hundredweight of producer milk received times the producer 
price differential as adjusted pursuant to Sec. 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.

[[Page 5053]]

    (d) If a handler has not received full payment from the market 
administrator pursuant to Sec. 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 
Sec. 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.


Sec. 1030.74  [Reserved]


Sec. 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 Sec. 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 Sec. 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.


Sec. 1030.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1030.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1030.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction


Sec. 1030.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.


Sec. 1030.86  Deduction for marketing services.

    See Sec. 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 producer-settlement fund.
1032.72  Payments from the producer-settlement 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


Sec. 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


Sec. 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,

[[Page 5054]]

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.


Sec. 1032.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 1032.4  Plant.

    See Sec. 1000.4 of this chapter.


Sec. 1032.5  Distributing plant.

    Sec. 1000.5 of this chapter.


Sec. 1032.6  Supply plant.

    Sec. 1000.6 of this chapter.


Sec. 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 Sec. 1032.12(b)) and handlers described in Sec. 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 Sec. 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

[[Page 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 Sec. 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.


Sec. 1032.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1032.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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

[[Page 5056]]

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-handler so requests that 
the two be operated as separate entities with the distributing plant 
regulated under Sec. 1032.7(a) and the farm operated as a producer 
under Sec. 1032.12.


Sec. 1032.11  [Reserved]


Sec. 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 Sec. 1032.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 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.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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.


Sec. 1032.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1032.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


Sec. 1032.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1032.17  [Reserved]


Sec. 1032.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1032.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

Handler Reports


Sec. 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 Sec. 1032.7 
and each handler described in Sec. 1000.9(c) shall report for each of 
its operations the following information:
    (1) Product pounds, pounds of butterfat, pounds of protein, pounds 
of

[[Page 5057]]

solids-not-fat other than protein (other solids), and the value of the 
somatic cell adjustment pursuant to Sec. 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 Sec. 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.


Sec. 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 Sec. 1032.7 and each 
handler described in Sec. 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 Sec. 1032.73(f).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 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.


Sec. 1032.32  Other reports.

    In addition to the reports required pursuant to Secs. 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


Sec. 1032.40  Classes of utilization.

    See Sec. 1000.40 of this chapter.


Sec. 1032.41  [Reserved]


Sec. 1032.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1032.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1032.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1032.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1032.50  Class prices and component prices.

    See Sec. 1000.50 of this chapter.


Sec. 1032.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Jackson County, Missouri, which is reported in Sec. 1000.52. The Class 
I price shall be the price computed pursuant to Sec. 1000.50(a) for 
Jackson County, Missouri.


Sec. 1032.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1032.53  Announcement of class prices and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1032.54  Equivalent price.

    See Sec. 1000.54 of this chapter.

Producer Price Differential


Sec. 1032.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of its pool plants, and of 
each handler described in Sec. 1000.9(c) as follows:
    (a) Class I value.
    (1) Multiply the hundredweight of skim milk in Class I as 
determined pursuant to Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 1032.30(a)(1) by the percentage of the total producer milk 
allocated to Class II, Class III, and Class IV pursuant to 
Sec. 1000.44(c);
    (f) Add the amounts obtained from multiplying the pounds of skim 
milk and butterfat overage assigned to each class pursuant to 
Sec. 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

[[Page 5058]]

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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of 
Sec. 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 
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk 
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8) 
and the corresponding step of Sec. 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 Sec. 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 producer-settlement fund of 
another order under Sec. 1000.76(a)(5) or (c).


Sec. 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 
producer-settlement 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 
Sec. 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 
Sec. 1032.60 for all handlers required to file reports prescribed in 
Sec. 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 
Sec. 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 Sec. 1032.30(a)(1);
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 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 Sec. 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.


Sec. 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


Sec. 1032.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1032.71  Payments to the producer-settlement 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 Sec. 1032.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 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 Sec. 1032.60(i) by 
the producer price differential as adjusted pursuant to Sec. 1032.75 
for the location of the plant from which received.


Sec. 1032.72  Payments from the producer-settlement 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 Sec. 1032.71(b) exceeds the amount 
computed pursuant to Sec. 1032.71(a). If, at such time, the balance in 
the producer-settlement 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.

[[Page 5059]]

Sec. 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 Sec. 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 
Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 1000.9(c) as follows:
    (i) The hundredweight of producer milk received times the producer 
price differential as adjusted pursuant to Sec. 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 Sec. 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 
Sec. 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;

[[Page 5060]]

    (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.


Sec. 1032.74  [Reserved]


Sec. 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 Sec. 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 Sec. 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.


Sec. 1032.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1032.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1032.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction


Sec. 1032.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.


Sec. 1032.86  Deduction for marketing services.

    See Sec. 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 producer-settlement fund.
1033.72  Payments from the producer-settlement 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


Sec. 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


Sec. 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.

[[Page 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.


Sec. 1033.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 1033.4  Plant.

    See Sec. 1000.4 of this chapter.


Sec. 1033.5  Distributing plant.

    See Sec. 1000.5 of this chapter.


Sec. 1033.6  Supply plant.

    See Sec. 1000.6 of this chapter.


Sec. 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 Sec. 1033.12(b)) and handlers described in 
Sec. 1033.9(c), as reported in Sec. 1033.30(a), is not less than 30 
percent of the milk received from dairy farmers, including milk 
diverted pursuant to Sec. 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 Sec. 1033.7(a) and (b), and units described in 
Sec. 1033.7(e) shall count as qualifying shipments for the purpose of 
meeting the increased shipments:
    (i) Pool plants described in Sec. 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 
Sec. 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

[[Page 5062]]

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 Sec. 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 next-to-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 Sec. 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.


Sec. 1033.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1033.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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-

[[Page 5063]]

 handler so requests that the two be operated as separate entities with 
the distributing plant regulated under Sec. 1033.7(a) and the farm 
operated as a producer under Sec. 1033.12.


Sec. 1033.11  [Reserved]


Sec. 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 Sec. 1033.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 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.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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.


Sec. 1033.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1033.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


Sec. 1033.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1033.17  [Reserved]


Sec. 1033.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1033.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

Handler Reports


Sec. 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 Sec. 1033.7 
and each handler described in Sec. 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 Sec. 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 Sec. 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

[[Page 5064]]

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.


Sec. 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 Sec. 1033.7 and each 
handler described in Sec. 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 Sec. 1033.73(e).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 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.


Sec. 1033.32  Other reports.

    In addition to the reports required pursuant to Secs. 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


Sec. 1033.40  Classes of utilization.

    See Sec. 1000.40 of this chapter.


Sec. 1033.41  [Reserved]


Sec. 1033.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1033.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1033.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1033.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1033.50  Class prices and component prices.

    See Sec. 1000.50 of this chapter.


Sec. 1033.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Cuyahoga County, Ohio which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for 
Cuyahoga County, Ohio.


Sec. 1033.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1033.53  Announcement of class prices and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1033.54  Equivalent price.

    See Sec. 1000.54 of this chapter.

Producer Price Differential


Sec. 1033.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of its pool plants, and of 
each handler described in Sec. 1033.9(c) as follows:
    (a) Class I value.
    (1) Multiply the hundredweight of skim milk in Class I as 
determined pursuant to Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 1000.44(a) the pounds 
of protein determined in Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 1033.30(a)(1) by the percentage of the total producer milk 
allocated to Class II, Class III, and Class IV pursuant to 
Sec. 1000.44(c);
    (f) Add the amounts obtained from multiplying the pounds of skim 
milk and butterfat overage assigned to each class pursuant to 
Sec. 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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of 
Sec. 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;

[[Page 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 
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk 
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8) 
and the corresponding step of Sec. 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 Sec. 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 producer-settlement fund of 
another order under Sec. 1000.76(a)(5) or (c).


Sec. 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 
producer-settlement 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 
Sec. 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 
Sec. 1033.60 for all handlers required to file reports prescribed in 
Sec. 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 
Sec. 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 Sec. 1033.30(a)(1);
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 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 Sec. 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.


Sec. 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


Sec. 1033.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1033.71  Payments to the producer-settlement 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 Sec. 1033.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 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 Sec. 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 Sec. 1033.60(i) by 
the producer price differential as adjusted pursuant to Sec. 1033.75 
for the location of the plant from which received.


Sec. 1033.72  Payments from the producer-settlement 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 Sec. 1033.71(b) exceeds the amount 
computed pursuant to Sec. 1033.71(a). If, at such time, the balance in 
the producer-settlement 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.


Sec. 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

[[Page 5066]]

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 Sec. 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 
Sec. 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 Sec. 1000.44 by the value calculated pursuant to 
Sec. 1033.60(a) and location adjustments pursuant to Sec. 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 Sec. 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 
Sec. 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.


Sec. 1033.74  [Reserved]


Sec. 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 Sec. 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 Sec. 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.


Sec. 1033.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1033.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1033.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction


Sec. 1033.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.


Sec. 1033.86  Deduction for marketing services.

    See Sec. 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.

[[Page 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 producer-settlement fund.
1124.72  Payments from the producer-settlement 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


Sec. 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


Sec. 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.


Sec. 1124.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 1124.4  Plant.

    See Sec. 1000.4 of this chapter.


Sec. 1124.5  Distributing plant.

    See Sec. 1000.5 of this chapter.


Sec. 1124.6  Supply plant.

    See Sec. 1000.6 of this chapter.


Sec. 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 
Sec. 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 Sec. 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 Sec. 1000.9(c);
    (3) A pool plant operator may include as qualifying shipments milk 
diverted to pool distributing plants pursuant to Sec. 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

[[Page 5068]]

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 Sec. 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.


Sec. 1124.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1124.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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 
producer-handler, 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

[[Page 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 producer-handler'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 Sec. 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 producer-handler so requests that 
the two be operated as separate entities with the distributing plant 
regulated pursuant to Sec. 1124.7(a) and the farm operated as a 
producer pursuant to Sec. 1124.12.


Sec. 1124.11  Cooperative reserve supply unit.

    Cooperative reserve supply unit means any cooperative association 
or its agent that is a handler pursuant to Sec. 1000.9(c) that does not 
own or operate a plant, if such cooperative has been qualified to 
receive payments pursuant to Sec. 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 Sec. 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 
Sec. 1000.9(c) for at least 12 consecutive months.


Sec. 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 Sec. 1124.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 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.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 1000.9(c)) the handler 
diverts to nonpool plants not more than 65 percent during the months of

[[Page 5070]]

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.


Sec. 1124.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1124.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


Sec. 1124.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1124.17  [Reserved]


Sec. 1124.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1124.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

Handler Reports


Sec. 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 Sec. 1124.7 
and each handler described in Sec. 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 Sec. 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.


Sec. 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 Sec. 1124.7 and each 
handler described in Sec. 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 Sec. 1124.73(f).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 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.


Sec. 1124.32  Other reports.

    In addition to the reports required pursuant to Secs. 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


Sec. 1124.40  Classes of utilization.

    See Sec. 1000.40 of this chapter.


Sec. 1124.41  [Reserved]


Sec. 1124.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1124.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1124.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1124.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1124.50  Class prices and component prices.

    See Sec. 1000.50 of this chapter.


Sec. 1124.51  Class I differential and price.

    The Class I differential shall be the differential established for 
King County, Washington, which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for King 
County, Washington.


Sec. 1124.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1124.53  Announcement of class prices and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1124.54  Equivalent price.

    See Sec. 1000.54 of this chapter.

Producer Price Differential


Sec. 1124.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of its pool plants, and of 
each handler described in Sec. 1000.9(c) as follows:
    (a) Class I value.
    (1) Multiply the hundredweight of skim milk in Class I as 
determined pursuant to Sec. 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

[[Page 5071]]

Class I as determined pursuant to Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of 
Sec. 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 
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk 
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8) 
and the corresponding step of Sec. 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 Sec. 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 producer-settlement fund of 
another order under Sec. 1000.76(a)(5) or (c).


Sec. 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 
producer-settlement 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 
Sec. 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 
Sec. 1124.60 for all handlers required to file reports prescribed in 
Sec. 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 
Sec. 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 Sec. 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 Sec. 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.


Sec. 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.

[[Page 5072]]

Payment for Milk


Sec. 1124.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1124.71  Payments to the producer-settlement 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 Sec. 1124.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 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 Sec. 1124.60(i) by 
the producer price differential as adjusted pursuant to Sec. 1124.75 
for the location of the plant from which received.


Sec. 1124.72  Payments from the producer-settlement 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 Sec. 1124.71(b) exceeds the amount 
computed pursuant to Sec. 1124.71(a). If, at such time, the balance in 
the producer-settlement 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.


Sec. 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 Sec. 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 
Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 1000.9(c) as follows:
    (i) The hundredweight of producer milk received times the producer 
price differential as adjusted pursuant to Sec. 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

[[Page 5073]]

pursuant to paragraph (c)(1) of this section.
    (d) If a handler has not received full payment from the market 
administrator pursuant to Sec. 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 
Sec. 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.


Sec. 1124.74  [Reserved]


Sec. 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 Sec. 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 Sec. 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.


Sec. 1124.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1124.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1124.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction


Sec. 1124.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.


Sec. 1124.86  Deduction for marketing services.

    See Sec. 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 producer-settlement fund.
1126.72  Payments from the producer-settlement 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


Sec. 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


Sec. 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

[[Page 5074]]

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.


Sec. 1126.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 1126.4  Plant.

    See Sec. 1000.4 of this chapter.


Sec. 1126.5  Distributing plant.

    See Sec. 1000.5 of this chapter.


Sec. 1126.6  Supply plant.

    See Sec. 1000.6 of this chapter.


Sec. 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 Sec. 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 Sec. 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.


Sec. 1126.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1126.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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.

[[Page 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 producer-handler so requests that 
the two be operated as separate entities with the distributing plant 
regulated under Sec. 1126.7(a) and the farm operated as a producer 
under Sec. 1126.12.


Sec. 1126.11  [Reserved]


Sec. 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 Sec. 1126.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 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.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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.


Sec. 1126.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1126.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


Sec. 1126.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1126.17  [Reserved]


Sec. 1126.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1126.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

Handler Reports


Sec. 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 
Sec. 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 Sec. 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 Sec. 1000.9(c);
    (2) Product pounds and pounds of butterfat contained in:

[[Page 5076]]

    (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.


Sec. 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 Sec. 1126.7 and each 
handler described in Sec. 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 Sec. 1126.73(e);
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 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.


Sec. 1126.32  Other reports.

    In addition to the reports required pursuant to Secs. 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


Sec. 1126.40  Classes of utilization.

    See Sec. 1000.40 of this chapter.


Sec. 1126.41  [Reserved]


Sec. 1126.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1126.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1126.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1126.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1126.50  Class prices and component prices.

    See Sec. 1000.50 of this chapter.


Sec. 1126.51  Class I differential and price.

    The Class I differential shall be the differential established for 
Dallas County, Texas, which is reported in Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for 
Dallas County, Texas.


Sec. 1126.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1126.53  Announcement of class prices and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1126.54  Equivalent price.

    See Sec. 1000.54 of this chapter.

Producer Price Differential


Sec. 1126.60  Handler's value of milk.

    For the purpose of computing a handler's obligation for producer 
milk, the market administrator shall determine for each month the value 
of milk of each handler with respect to each of the handler's pool 
plants and of each handler described in Sec. 1000.9(c) as follows:
    (a) Class I value.
    (1) Multiply the hundredweight of skim milk in Class I as 
determined pursuant to Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 1126.30(a)(1) by the percentage of the total producer milk 
allocated to Class II, Class III, and Class IV pursuant to 
Sec. 1000.44(c).
    (f) Add the amounts obtained from multiplying the pounds of skim 
milk and butterfat overage assigned to each class pursuant to 
Sec. 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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 1000.44(b);

[[Page 5077]]

    (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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of 
Sec. 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 
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk 
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8) 
and the corresponding step of Sec. 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 Sec. 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 producer-settlement fund of 
another Federal order under Sec. 1000.76(a)(5) or (c).


Sec. 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 
producer-settlement 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 
Sec. 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 
Sec. 1126.60 for all handlers required to file reports prescribed in 
Sec. 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 
Sec. 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 Sec. 1126.30(a)(1);
    (c) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 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 Sec. 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.


Sec. 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


Sec. 1126.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1126.71  Payments to the producer-settlement 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 Sec. 1126.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 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 Sec. 1126.60(i) by 
the producer price differential as adjusted pursuant to Sec. 1126.75 
for the location of the plant from which received.


Sec. 1126.72  Payments from the producer-settlement 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 Sec. 1126.71(b) exceeds the amount 
computed pursuant to Sec. 1126.71(a). If, at such time, the balance in 
the producer-settlement 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.


Sec. 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

[[Page 5078]]

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 
Sec. 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 
Sec. 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 Sec. 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 Sec. 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.


Sec. 1126.74  [Reserved]


Sec. 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 Sec. 1126.51 exceeds the 
Class I price at the plant's location. If the

[[Page 5079]]

Class I price at the plant location exceeds the Class I price specified 
in Sec. 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.


Sec. 1126.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1126.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1126.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction


Sec. 1126.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.


Sec. 1126.86  Deduction for marketing services.

    See Sec. 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 producer-settlement fund.
1131.72  Payments from the producer-settlement 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


Sec. 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


Sec. 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.


Sec. 1131.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 1131.4  Plant.

    See Sec. 1000.4 of this chapter.


Sec. 1131.5  Distributing Plant.

    See Sec. 1000.5 of this chapter.


Sec. 1131.6  Supply Plant.

    See Sec. 1000.6 of this chapter.


Sec. 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 Sec. 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

[[Page 5080]]

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 Sec. 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.


Sec. 1131.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1131.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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 Sec. 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 producer-handler so requests that 
the two be operated as separate entities with the distributing plant 
regulated under Sec. 1131.7(a) and the farm operated as a producer 
under Sec. 1131.12.


Sec. 1131.11  [Reserved]


Sec. 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 Sec. 1131.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 1131.13(d);

[[Page 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.


Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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.


Sec. 1131.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1131.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


Sec. 1131.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1131.17  [Reserved]


Sec. 1131.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1131.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

Handler Reports


Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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.


Sec. 1131.31  Payroll reports.

    (a) On or before the 20th day after the end of each month, each 
handler

[[Page 5082]]

described in Sec. 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 Sec. 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.


Sec. 1131.32  Other reports.

    In addition to the reports required pursuant to Sec. 1131.30 and 
Sec. 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


Sec. 1131.40  Classes of utilization.

    See Sec. 1000.40 of this chapter.


Sec. 1131.41  [Reserved]


Sec. 1131.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1131.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1131.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1131.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1131.50  Class prices, component prices, Class I differential and 
price.

    Class prices and component prices are described in Sec. 1000.50. 
The Class I differential shall be the differential established for 
Maricopa County, Arizona, which is reported in Sec. 1000.52. The Class 
I price shall be the price computed pursuant to Sec. 1000.50(a) for 
Maricopa County, Arizona.


Sec. 1131.51  [Reserved]


Sec. 1131.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1131.53  Announcement of class prices and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1131.54  Equivalent price.

    See Sec. 1000.54 of this chapter.

Uniform Price


Sec. 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 Sec. 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 Sec. 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 
Sec. 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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3)(i) through (iii), and the corresponding step of 
Sec. 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 Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and 
the pounds of skim milk and butterfat subtracted from Class I pursuant 
to Sec. 1000.44(a)(8) and the corresponding steps of Sec. 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 Sec. 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 producer-settlement fund of 
another order under Sec. 1000.76(a)(5) or (c).


Sec. 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 
producer-settlement 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 
Sec. 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 
Sec. 1131.60 for all handlers required to file reports prescribed in 
Sec. 1131.30;
    (2) Add an amount equal to the sum of the location adjustments 
computed pursuant to Sec. 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

[[Page 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 Sec. 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 Sec. 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.


Sec. 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 Sec. 1131.61 for such 
month;
    (b) The uniform butterfat price computed pursuant to 
Sec. 1131.61(b) for such month; and
    (c) The uniform skim milk price computed pursuant to 
Sec. 1131.61(c) for such month.

Payments for Milk


Sec. 1131.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1131.71  Payments to the producer-settlement 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 Sec. 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 
Sec. 1131.75 applicable at the location of the plant from which 
received of other source milk for which a value is computed pursuant to 
Sec. 1131.60(e).


Sec. 1131.72  Payments from the producer-settlement 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 Sec. 1131.71(b) exceeds the amount 
computed pursuant to Sec. 1131.71(a). If, at such time, the balance in 
the producer-settlement 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.


Sec. 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 Sec. 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 Sec. 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 
Sec. 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 Sec. 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

[[Page 5084]]

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 Sec. 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.


Sec. 1131.74  [Reserved]


Sec. 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 Sec. 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 Sec. 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.


Sec. 1131.76  Payments by handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1131.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1131.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction


Sec. 1131.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.


Sec. 1131.86  Deduction for marketing services.

    See Sec. 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 producer-settlement fund.
1134.72  Payments from the producer-settlement 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


Sec. 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


Sec. 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.


Sec. 1134.3  Route disposition.

    See Sec. 1000.3 of this chapter.


Sec. 1134.4  Plant.

    See Sec. 1000.4 of this chapter.

[[Page 5085]]

Sec. 1134.5  Distributing plant.

    See Sec. 1000.5 of this chapter.


Sec. 1134.6  Supply plant.

    See Sec. 1000.6 of this chapter.


Sec. 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 Sec. 1134.12(b)) and handlers described in 
Sec. 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 Sec. 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

[[Page 5086]]

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.


Sec. 1134.8  Nonpool plant.

    See Sec. 1000.8 of this chapter.


Sec. 1134.9  Handler.

    See Sec. 1000.9 of this chapter.


Sec. 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 producer-handler so requests that 
the two be operated as separate entities with the distributing plant 
regulated under Sec. 1134.7(a)  and the farm operated as a producer 
under Sec. 1134.12.


Sec. 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 
Sec. 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.


Sec. 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 Sec. 1134.13; or
    (2) Received by a handler described in Sec. 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 
Sec. 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.


Sec. 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 Sec. 1000.9(c), or by a handler 
described in Sec. 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 Sec. 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 Sec. 1000.9(c) or in 
Sec. 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 Sec. 1000.9(c), or a proprietary bulk tank 
handler described in Sec. 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

[[Page 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 Sec. 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.


Sec. 1134.14  Other source milk.

    See Sec. 1000.14 of this chapter.


Sec. 1134.15  Fluid milk product.

    See Sec. 1000.15 of this chapter.


Sec. 1134.16  Fluid cream product.

    See Sec. 1000.16 of this chapter.


Sec. 1134.17  [Reserved]


Sec. 1134.18  Cooperative association.

    See Sec. 1000.18 of this chapter.


Sec. 1134.19  Commercial food processing establishment.

    See Sec. 1000.19 of this chapter.

Handler Reports


Sec. 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 
Sec. 1134.7, and each handler described in Sec. 1000.9(c) or in 
Sec. 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 Sec. 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.


Sec. 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 Sec. 1134.7 and each 
handler described in Sec. 1000.9(c) and in Sec. 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 Sec. 1134.73(f).
    (b) Each handler operating a partially regulated distributing plant 
who elects to make payment pursuant to Sec. 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.


Sec. 1134.32  Other reports.

    In addition to the reports required pursuant to Secs. 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


Sec. 1134.40  Classes of utilization.

    See Sec. 1134.40 of this chapter.


Sec. 1134.41  [Reserved]


Sec. 1134.42  Classification of transfers and diversions.

    See Sec. 1000.42 of this chapter.


Sec. 1134.43  General classification rules.

    See Sec. 1000.43 of this chapter.


Sec. 1134.44  Classification of producer milk.

    See Sec. 1000.44 of this chapter.


Sec. 1134.45  Market administrator's reports and announcements 
concerning classification.

    See Sec. 1000.45 of this chapter.

Class Prices


Sec. 1134.50  Class prices and component prices.

    See Sec. 1000.50 of this chapter.


Sec. 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 Sec. 1000.52. The Class I 
price shall be the price computed pursuant to Sec. 1000.50(a) for Salt 
Lake County, Utah.


Sec. 1134.52  Adjusted Class I differentials.

    See Sec. 1000.52 of this chapter.


Sec. 1134.53  Announcement of class prices and component prices.

    See Sec. 1000.53 of this chapter.


Sec. 1134.54  Equivalent price.

    See Sec. 1000.54 of this chapter.

Producer Price Differential


Sec. 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 Sec. 1000.9(c) and Sec. 1134.11 as follows:
    (a) Class I value.
    (1) Multiply the hundredweight of skim milk in Class I as 
determined pursuant to Sec. 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 Sec. 1000.44(b) by the Class I 
butterfat price applicable at the handler's location.

[[Page 5088]]

    (b) Add the Class II value, computed as follows:
    (1) Multiply the hundredweight of skim milk in Class II as 
determined pursuant to Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 
Sec. 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 
Sec. 1000.44(a)(7) and the corresponding step of Sec. 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 Sec. 1000.43(d) and the hundredweight 
of skim milk and butterfat subtracted from Class I pursuant to 
Sec. 1000.44(a)(3)(i) through (iii) and the corresponding step of 
Sec. 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 
Sec. 1000.43(d) and Sec. 1000.44(a)(3)(i) and the pounds of skim milk 
and butterfat subtracted from Class I pursuant to Sec. 1000.44(a)(8) 
and the corresponding step of Sec. 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 Sec. 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 producer-settlement fund of 
another order under Sec. 1000.76(a)(5) or (c).


Sec. 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 
producer-settlement 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 
Sec. 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 
Sec. 1134.60 for all handlers required to file reports prescribed in 
Sec. 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 
Sec. 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 Sec. 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 Sec. 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.


Sec. 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.

[[Page 5089]]

Payments for Milk


Sec. 1134.70  Producer-settlement fund.

    See Sec. 1000.70 of this chapter.


Sec. 1134.71  Payments to the producer-settlement 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 Sec. 1134.60.
    (b) The sum of:
    (1) An amount obtained by multiplying the total hundredweight of 
producer milk as determined pursuant to Sec. 1000.44(c) by the producer 
price differential as adjusted pursuant to Sec. 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 Sec. 1134.60(i) by 
the producer price differential as adjusted pursuant to Sec. 1134.75 
for the location of the plant from which received.


Sec. 1134.72  Payments from the producer-settlement 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 Sec. 1134.71(b) exceeds the amount 
computed pursuant to Sec. 1134.71(a). If, at such time, the balance in 
the producer-settlement 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.


Sec. 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 Sec. 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 
Sec. 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 Sec. 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 
Sec. 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.


Sec. 1134.74  [Reserved]


Sec. 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

[[Page 5090]]

which the milk was first physically received by subtracting from the 
price differential the amount by which the Class I price specified in 
Sec. 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 Sec. 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.


Sec. 1134.76  Payments by a handler operating a partially regulated 
distributing plant.

    See Sec. 1000.76 of this chapter.


Sec. 1134.77  Adjustment of accounts.

    See Sec. 1000.77 of this chapter.


Sec. 1134.78  Charges on overdue accounts.

    See Sec. 1000.78 of this chapter.

Administrative Assessment and Marketing Service Deduction


Sec. 1134.85  Assessment for order administration.

    See Sec. 1000.85 of this chapter.


Sec. 1134.86  Deduction for marketing services.

    See Sec. 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-Lexington-
Evansville 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-Lexington-
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. 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.

[[Page 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 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. 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]                      
------------------------------------------------------------------------
                                                 Number of              
                                     Total         fully       Combined 
       Consolidated order           producer     regulated     class I  
                                  milk (1,000  distributing  utilization
                                     lbs.)        plants       (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\ 1,140,9                           
                                           52            68         57.8
Upper Midwest...................  \2\ 1,046,5                           
                                           39        \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
------------------------------------------------------------------------
\1\ Producer 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.                          
\2\ Producer milk for F.O. 30 and F.O. 68 only.                         
\3\ Producer milk for a F.O. 32 handler that would be in the Mideast    
  consolidated market is included.                                      
\4\ A 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.                                                  
\5\ A 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

[[Page 5092]]

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:
    <bullet> Eggnog would be reclassified from Class II to Class I.
    <bullet> Any fluid beverage having less than 6.5 percent nonfat 
milk solids would be reclassified from Class II to Class I.
    <bullet> 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:
    <bullet> Place a floor beneath the Class III-A price;
    <bullet> Restrict III-A pricing to certain months or to certain 
markets;
    <bullet> Provide an up-charge for nonfat dry milk used in 
higher-valued products; or
    <bullet> 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:
    <bullet> Suggests a model for establishing the consolidated 
orders and provides suggestions on the order language that can be 
adopted uniformly throughout all orders.
    <bullet> Reviewed, simplified, modified, and eliminated 
differences in order provisions that:
    <bullet> Define various terms used in the orders
    <bullet> Establish regulatory standards for plants and handlers
    <bullet> Provide for uniform reporting dates of milk receipts 
and utilization
    <bullet> Provide for uniform dates for payment of milk
    <bullet> Provide for computation of a uniform price
    <bullet> 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:
    <bullet> 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).
    <bullet> 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).
    <bullet> 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
    <bullet> 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

[[Page 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 currently-
regulated 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 Louisville-
Lexington-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 currently-unregulated 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 
currently-unregulated counties in Michigan, Indiana, and Ohio *with 
the addition of: Pennsylvania Milk Marketing Board Area 6 (in 
western/central Pennsylvania) and 2 currently-unregulated 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 Louisville-
Lexington-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

[[Page 5094]]

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 currently-
unregulated counties in Kansas, Missouri, Illinois, Nebraska and 
Colorado, *plus the 12 counties in the current Southern Illinois-
Eastern 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]                                                              
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Number of fully         Total producer milk      Combined class I use        Weighted average    
                                                   regulated distributing          (1000 lbs.)                (percent)             utilization value   
                                                           plants          -----------------------------------------------------------------------------
               Consolidated order                --------------------------                                                                             
                                                    Initial      Revised      Initial      Revised      Initial      Revised      Initial      Revised  
                                                     report       report       report     report \1\     report       report       report       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\ 1,140,9                                                                 
                                                                                     52    1,103,366         57.8         57.2       $12.96       $12.94
Upper Midwest...................................           27           39  \6\ 1,046,5                                                                 
                                                                                     39    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\ 181,07                                                    
                                                                                                   5          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.                                                                                                                                   
\3\ Excludes 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.                                                                                                                                               
\5\ Producer 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.                                                                                                   
\6\ Producer milk for F.O. 30 and F.O. 68 only.                                                                                                         
\7\ A 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.                                                                                                                                          
\8\ A 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.                                               

[[Page 5095]]

                                                                                                                                                        
\10\ Excludes 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.                                                                                                   
\11\ A 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.                                                                                                                                          
\12\ A 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


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