[Federal Register Volume 63, Number 16 (Monday, January 26, 1998)]
[Proposed Rules]
[Pages 3667-3670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1813]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 63, No. 16 / Monday, January 26, 1998 / 
Proposed Rules

[[Page 3667]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part(s) 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.

[Docket No. AO-14-A68, et al.; DA-98-01]


Milk in the New England and Other Marketing Areas; Notice of 
Hearing on Proposed Amendments to Tentative Marketing Agreements and 
Orders

------------------------------------------------------------------------
    7 CFR part              Marketing area                 AO Nos.      
------------------------------------------------------------------------
1001.............  New England....................  AO-14-A68           
1002.............  New York-New Jersey............  AO-71-A83           
1004.............  Middle Atlantic................  AO-160-A72          
1005.............  Carolina.......................  AO-388-A10          
1006.............  Upper Florida..................  AO-356-A33          
1007.............  Southeast......................  AO-366-A39          
1012.............  Tampa Bay......................  AO-347-A36          
1013.............  Southeastern Florida...........  AO-286-A43          
1030.............  Chicago Regional...............  AO-361-A33          
1032.............  Southern Illinois-Eastern        AO-313-A42          
                    Missouri.                                           
1033.............  Ohio Valley....................  AO-166-A66          
1036.............  Eastern Ohio-Western             AO-179-A60          
                    Pennsylvania.                                       
1040.............  Southern Michigan..............  AO-225-A47          
1044.............  Michigan Upper Peninsula.......  AO-299-A30          
1046.............  Louisville-Lexington-Evansville  AO-123-A68          
1049.............  Indiana........................  AO-319-A43          
1050.............  Central Illinois...............  AO-355-A30          
1064.............  Greater Kansas City............  AO-23-A63           
1065.............  Nebraska-Western Iowa..........  AO-86-A52           
1068.............  Upper Midwest..................  AO-178-A50          
1076.............  Eastern South Dakota...........  AO-260-A34          
1079.............  Iowa...........................  AO-295-A46          
1106.............  Southwest Plains...............  AO-210-A56          
1124.............  Pacific Northwest..............  AO-368-A26          
1126.............  Texas..........................  AO-231-A64          
1131.............  Central Arizona................  AO-271-A34          
1134.............  Western Colorado...............  AO-301-A25          
1135.............  Southwestern Idaho-Eastern       AO-380-A16          
                    Oregon.                                             
1137.............  Eastern Colorado...............  AO-326-A29          
1138.............  New Mexico-West Texas..........  AO-335-A40          
1139.............  Great Basin....................  AO-309-A34          
------------------------------------------------------------------------

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Notice of public hearing on proposed rulemaking.

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

SUMMARY: A public hearing is being held in response to industry 
requests to consider flooring the level of the basic formula price for 
the purpose of determining Class I and Class II prices through December 
1998. Mid-America Dairymen, Inc., the proponent of the proposed 
amendment, has requested

[[Page 3668]]

that this issue be handled on an emergency basis.

DATES: The hearing will convene at 9:30 a.m. on February 17, 1998.

ADDRESSES: The hearing will be held at the Jefferson Auditorium, South 
Agriculture Building, 1400 Independence Avenue, S.W., Washington, D.C. 
20250.

FOR FURTHER INFORMATION CONTACT: Constance M. Brenner, Marketing 
Specialist, Order Formulation Branch, USDA/AMS/Dairy Division, Room 
2971, South Building, P.O. Box 96456, Washington, D.C. 20090-6456, 
(202) 720-2357, e-mail address Connie__M__B<a href="/cdn-cgi/l/email-protection#087a6d66666d7a487d7b6c69266f677e"><span class="__cf_email__" data-cfemail="8cfee9e2e2e9feccf9ffe8eda2ebe3fa">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This administrative action is governed by 
the provisions of sections 556 and 557 of Title 5 of the United States 
Code and, therefore, is excluded from the requirements of Executive 
Order 12866.
    Notice is hereby given of a public hearing to be held at the 
Jefferson Auditorium, South Agriculture Building, 1400 Independence 
Avenue S.W., Washington, D.C. 20250, beginning at 9:30 a.m., on 
Tuesday, February 17, 1998, with respect to proposed amendments to the 
tentative marketing agreements and to the orders regulating the 
handling of milk in the New England and other marketing areas.
    The hearing is called pursuant to the provisions of the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), and the applicable rules of practice and procedure governing the 
formulation of marketing agreements and marketing orders (7 CFR Part 
900).
    The purpose of the hearing is to receive evidence with respect to 
the economic and marketing conditions which relate to the proposed 
flooring of the basic formula price, with the proposed amendments set 
forth hereinafter, and any appropriate modifications thereof, to the 
tentative marketing agreements and to the orders. In addition to 
considering the specific proposal submitted by Mid-America Dairymen, 
Inc. (now part of Dairy Farmers of America), testimony should be 
addressed as to whether the $13.50 level proposed or some alternative 
level would be more appropriate.
    The proposed amendment, if adopted through December 1998, should be 
considered an interim action because the entire pricing structure of 
the Federal milk order program is under consideration as part of the 
Federal order reform process required by the 1996 Farm Bill.
    Evidence also will be taken to determine whether emergency 
marketing conditions exist that would warrant omission of a recommended 
decision under the rules of practice and procedure (7 CFR 900.12(d)) 
with respect to the proposal. Since this proposal will be heard on an 
urgent basis, it is necessary to provide interested parties with less 
than 15 days notice of the public hearing to ensure that the proposed 
amendments, if found to be appropriate, will be effective as soon as 
possible.

Initial Regulatory Flexibility Analysis

    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 amendment 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 anticipated 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.
    The cooperative association requesting the hearing observes that 
per capita milk production is declining in many states with the 
greatest declines in areas with high Class I utilization, that the 
number of dairy farms continues to decline at a rapid rate, and the 
milk-feed price relationships have dropped dramatically. The 
cooperative states that the price floor is needed to maintain 
productive capacity sufficient to meet current and anticipated future 
needs of milk for Class I and Class II uses.
    After receiving a hearing request and determining that the proposed 
amendment would not violate the provisions of the Act and that the 
issues raised for consideration warrant a public hearing, AMS is 
authorized to hold a public hearing to consider adoption of the 
proposed amendment.
    This Act seeks to ensure that, within the statutory authority of a 
program, the regulatory and informational requirements are tailored to 
the size and nature of small businesses. For the purpose of the Act, a 
dairy farm is a ``small business'' if it has an annual gross revenue of 
less than $500,000, and a dairy products manufacturer is a ``small 
business'' if it has fewer than 500 employees. For the purposes of 
determining which dairy farms are ``small businesses,'' the $500,000 
per year criterion was used to establish a production guideline of 
326,000 pounds per month. Although this guideline does not factor in 
additional monies that may be received by dairy producers, it should be 
an inclusive standard for most ``small'' dairy farmers. For purposes of 
determining a handler's size, if the plant is part of a larger company 
operating multiple plants that collectively exceed the 500-employee 
limit, the plant will be considered a large business even if the local 
plant has fewer than 500 employees.
    USDA has identified as small businesses approximately 80,000 of the 
83,000 dairy producers (farmers) that have their milk pooled under a 
Federal order. Thus, small businesses represent approximately 96 
percent of the dairy farmers 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, 134 
partially regulated handlers and 111 producer-handlers submitting 
reports under the Federal milk marketing order program. This volume of 
milk pooled under Federal orders 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. 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.
    In order to accomplish the goal of imposing no additional 
regulatory burdens on the industry, 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 amendment would have little or no impact on 
reporting, recordkeeping, or other compliance requirements because 
these would remain identical to the current Federal order program. No 
new forms have been proposed, and no additional reporting would be 
necessary.
    This notice does not require additional information collection that 
requires clearance by the OMB beyond the currently approved information 
collection. The primary sources of data used to complete the forms are 
routinely

[[Page 3669]]

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.
    No other burdens are expected to fall upon the dairy industry as a 
result of overlapping Federal rules. This proposed rulemaking does not 
duplicate, overlap or conflict with any existing Federal rules.
    To ensure that small businesses are not unduly or 
disproportionately burdened based on this proposed amendment, 
consideration was given to mitigating negative impacts. Flooring the 
BFP should not have any special impact on small handler entities. 
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 milk. Such 
handlers would also be subject to the same minimum prices to be paid to 
producers. These features of minimum pricing should not raise barriers 
to the ability of small handlers to compete in the marketplace. It is 
similarly expected that small producers would not experience any 
particular disadvantage to larger producers as a result of this 
proposed amendment.
    Interested parties are invited to present evidence on the probable 
regulatory and informational impact of the hearing proposals on small 
businesses. Also, parties may suggest modifications of these proposals 
for the purpose of tailoring their applicability to small businesses.

Preliminary Cost-Benefit Analysis

    To help fulfill the objectives of a Regulatory Impact Analysis, a 
preliminary cost-benefit analysis follows:
    The BFP is used as the basis for establishing class prices paid by 
handlers for milk in all Federal order markets and varies month-to-
month depending on market conditions for milk and milk products. The 
BFP is the average price paid for manufacturing grade (Grade B) milk in 
Minnesota and Wisconsin in the base month updated to the current month 
with a cheese-butter-nonfat dry milk product price formula. The Class I 
price is the BFP plus a Class I price differential that reflects the 
added value needed to attract milk to fluid milk processing plants, as 
well as the additional costs of producing and marketing milk for fluid 
use. As a result, Class I prices vary among markets, being generally 
higher in southern markets and lower in midwestern markets. The Class 
II price, like the Class I price, is based on the BFP with a 
differential of only thirty cents in all orders. The result of 
establishing a floor under the BFP for purposes of computing the Class 
I and II prices would be to maintain these prices at a level they 
otherwise might not reach.
    Dairy producers are expected to fare about the same in 1998 as they 
did in 1997, according to recent estimates of the Dairy Interagency 
Commodity Estimates Committee (ICEC). The 1998 all-milk price was 
projected in November 1997 to be slightly lower than the 1997 all-milk 
price; $13.10 per hundredweight in 1998 compared with $13.35 in 1997. 
This preliminary analysis was based on the $13.10 estimate. However, 
the 1998 estimate was updated in January 1998 to $13.35. As a result, 
the actual impact of a floor under the BFP could be expected to be less 
than shown in this preliminary analysis. Further analysis will be based 
on more recent price estimates.
    A BFP floor for computing Class I and II prices would apply only to 
the 70 percent of the milk marketed in the United States that is 
marketed under Federal milk orders. USDA's preliminary analysis 
indicated that flooring Class I and Class II prices with a $13.50 
minimum BFP would increase the U.S. all-milk price by $0.40 to $0.50 
per hundredweight. Prices to producers delivering to Federal order 
markets could increase by an average of $0.60 to $0.75 per 
hundredweight.
    Producers delivering to markets with higher Class I use, such as 
the three Florida markets and the Southeast market, would benefit more 
(as much as $1.10-$1.30 per hundredweight) than those delivering to 
markets with lower Class I utilization. The attached table provides 
estimates of change in the all-milk prices for all Federal order 
markets, assuming BFP floors of $13.50 and $12.83 per hundredweight 
(the October 1997 BFP).

  Change in the All-Milk Price.--Alternatives Flooring BFP at $13.50 or 
       $12.83 for Class I and Class II Pricing Calendar Year 1998       
------------------------------------------------------------------------
                                           Change in all-milk price per 
                                                   hundredweight        
             Marketing area              -------------------------------
                                           $13.50 Floor    $12.83 Floor 
------------------------------------------------------------------------
New England.............................           $0.20           $0.11
New York-New Jersey.....................             .74             .40
Middle Atlantic.........................             .81             .45
Carolina................................            1.28             .70
Louis.-Lex.-Evans.......................            1.22             .67
Southeast...............................            1.21             .66
Upper Florida...........................            1.18             .64
Tampa Bay...............................            1.28             .70
Southeastern Florida....................            1.30             .71
Michigan Upper Peninsula................            1.13             .62
Southern Michigan.......................             .90             .49
E. Ohio--W. Pennsylvania................             .88             .48
Ohio Valley.............................            1.14             .63
Indiana.................................            1.20             .66
Chicago Regional........................             .29             .16
Upper Midwest...........................             .26             .14
Iowa....................................             .50             .27
Nebraska-Western Iowa...................             .64             .35
Eastern South Dakota....................             .93             .51
Central Illinois........................            1.09             .60
S. Illinois-E. Missouri.................            1.05             .57

[[Page 3670]]

                                                                        
Southwest Plains........................             .75             .41
Eastern Colorado........................             .72             .39
Greater Kansas City.....................            1.10             .60
Texas...................................             .89             .48
New Mexico-West Texas...................             .42             .23
Southwestern Idaho-E. Oregon............             .11             .06
Great Basin.............................             .60             .33
Western Colorado........................            1.23             .67
Central Arizona.........................             .65             .35
Pacific Northwest.......................             .42             .23
Federal Order Average...................         .65-.75         .35-.45
------------------------------------------------------------------------

    In addition to increasing income to dairy producers, adoption of a 
BFP floor would also result in increased prices of fluid milk products 
to consumers. Increased Class I milk prices would be reflected in 
retail prices for fluid milk, which may result in reduced per capita 
consumption and an increase in total consumer expenditures for dairy 
products.

Legislative and Background Requirements

    The amendments to the rules proposed herein have been reviewed 
under Executive Order 12988, Civil Justice Reform. They are not 
intended to have a retroactive effect. If adopted, the proposed 
amendments would not preempt any state or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Agricultural Marketing Agreement Act provides that 
administrative proceedings must be exhausted before parties may file 
suit in court. Under section 8c(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 the 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.

Request for Public Input

    Interested parties who wish to introduce exhibits should provide 
the Presiding Officer at the hearing with 6 copies of such exhibits for 
the Official Record. Also, it would be helpful if additional copies are 
available for the use of other participants at the hearing.

List of Subjects in 7 CFR Parts 1001 through 1139

    Milk marketing orders.

    The authority citation for 7 CFR Parts 1001 through 1139 continues 
to read as follows:

    Authority: 7 U.S.C. 601-674.
    The proposed amendments, as set forth below, have not received the 
approval of the Secretary of Agriculture.
    Proposed by Mid-America Dairymen, Inc.:
    Proposal No. 1: Through December 1998, amend the introductory text 
of Sec. ____.51 of 7 CFR Parts 1001 through 1139 to read as follows:


Sec. ____.51  Basic formula price.

    * * * For the purpose of computing the Class I and Class II prices, 
the resulting price shall be not less than $13.50.
* * * * *
    Proposed by Dairy Programs, Agricultural Marketing Service:
    Proposal No. 2: Make such changes as may be necessary to make the 
entire marketing agreements and the orders conform with any amendments 
thereto, that may result from this hearing.
    Copies of this notice of hearing and the orders may be procured 
from the Market Administrator of each of the aforesaid marketing areas, 
or from the Hearing Clerk, Room 1083, South Building, United States 
Department of Agriculture, Washington, D.C. 20250, or may be inspected 
there.
    Copies of the transcript of testimony taken at the hearing will not 
be available for distribution through the Hearing Clerk's Office. If 
you wish to purchase a copy, arrangements may be made with the reporter 
at the hearing.
    From the time that a hearing notice is issued and until the 
issuance of a final decision in a proceeding, Department employees 
involved in the decisionmaking process are prohibited from discussing 
the merits of the hearing issues on an ex parte basis with any person 
having an interest in the proceeding. For this particular proceeding, 
the prohibition applies to employees in the following organizational 
units:

Office of the Secretary of Agriculture
Office of the Administrator, Agricultural Marketing Service
Office of the General Counsel
Dairy Programs, Agricultural Marketing Service (Washington office) and 
the Offices of all Market Administrators.

    Procedural matters are not subject to the above prohibition and may 
be discussed at any time.

    Dated: January 21, 1998.
Enrique E. Figueroa,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 98-1813 Filed 1-23-98; 8:45 am]
BILLING CODE 3410-02-U


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