58086 Federal Register / Vol. 70, No. 192 / Wednesday, October 5, 2005 / Proposed Rules 

(2) The field is tilled at least once per 

year for a total of 5 years (the years need 

not be consecutive). After tilling, the 

field may be planted with a crop or left 

fallow. If the field is planted with a host 

crop, the crop must test negative, 

through the absence of bunted kernels, 

for Karnal bunt. 

* * * * * 

Done in Washington, DC, this 29th day of 

September 2005. 

Elizabeth E. Gaston, 

Acting Administrator, Animal and Plant 

Health Inspection Service. 

[FR Doc. 05–19943 Filed 10–4–05; 8:45 am] 

BILLING CODE 3410–34–P 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 1030 

[Docket No. AO–361–A39; DA–04–03A] 

Milk in the Upper Midwest Marketing 

Area; Final Partial Decision on 

Proposed Amendments to Marketing 

Agreement and to Order 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Proposed rule. 

SUMMARY: This document proposes to 

adopt as a final rule, order language 

contained in the interim final rule 

published in the Federal Register on 

June 1, 2005, concerning pooling 

standards and transportation credit 

provisions of the Upper Midwest 

(UMW) milk marketing order. This 

document also sets forth the final 

decision of the Department and is 

subject to approval by producers. A 

separate decision will be issued that 

will address proposals concerning 

pooling and repooling of milk, 

temporary loss of Grade A status, and 

increasing the maximum administrative 

assessment. 

FOR FURTHER INFORMATION CONTACT: 

Gino Tosi, Marketing Specialist, Order 

Formulation and Enforcement Branch, 

USDA/AMS/Dairy Programs, STOP 

0231-Room 2971, 1400 Independence 

Avenue, SW., Washington, DC 20250–

0231, (202) 690–3465, e-mail address: 

gino.tosi@usda.gov. 

SUPPLEMENTARY INFORMATION: This final 

partial decision permanently adopts 

amendments to Pool plant provisions to 

ensure that producer milk originating 

outside the states that comprise the 

UMW order (Illinois, Iowa, Minnesota, 

North Dakota, South Dakota, Wisconsin, 

and the Upper Peninsula of Michigan) is 

providing consistent service to the 

order’s Class I market, and to Producer 

milk provisions to eliminate the ability 

to pool, as producer milk, diversions to 

nonpool plants outside of the states that 

comprise the UMW marketing area. 

Additionally, this final partial decision 

permanently adopts a proposal to limit 

the transportation credit received by 

handlers to the first 400 miles of 

applicable milk movements. 

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. 

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 of 1937 (the Act), 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 

Department of Agriculture (Department) 

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 Department 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 Department’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. 

Regulatory Flexibility Act and 

Paperwork Reduction Act 

In accordance with the Regulatory 

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

Agricultural Marketing Service has 

considered the economic impact of this 

action on small entities and has certified 

that this proposed rule will not have a 

significant economic impact on a 

substantial number of small entities. For 

the purpose of the Regulatory Flexibility 

Act, a dairy farm is considered a ‘‘small 

business’’ if it has an annual gross 

revenue of less than $750,000, 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 $750,000 per year 

criterion was used to establish a 

production guideline of 500,000 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 August 2004, the month 

during which the hearing occurred, 

there were 15,608 dairy producers 

pooled on, and 60 handlers regulated 

by, the UMW order. Approximately 

15,082 producers, or 97 percent, were 

considered small businesses based on 

the above criteria. Of the 60 handlers 

regulated by the UMW order during 

August 2004, approximately 49 

handlers, or 82 percent, were 

considered ‘‘small businesses.’’

The adoption of the proposed pooling 

standards serve to revise established 

criteria that determine those producers, 

producer milk and plants that have a 

reasonable association with and are 

consistently serving the fluid needs of 

the UMW milk marketing area. Criteria 

for pooling are established on the basis 

of performance levels that are 

considered adequate to meet the Class I 

fluid milk needs of the market and by 

doing so, determine those producers 

who are eligible to share in the revenue 

that arises from the classified pricing of 

milk. Criteria for pooling are established 

without regard to the size of any dairy 

industry organization or entity. The 

criteria established are applied in an 

identical fashion to both large and small 

businesses and do not have any 

different economic impact on small 

entities as opposed to large entities. The 

criteria established for transportation 

credits are also applied in an identical 

fashion to both large and small 

businesses and do not have any 

different economic impact on small 

entities as opposed to large entities. 

Therefore, the proposed amendments 

will not have a significant economic 

impact on a substantial number of small 

entities. 

A review of reporting requirements 

was completed under the Paperwork 

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

Chapter 35). It was determined that 

these proposed amendments would 

have no impact on reporting, 

recordkeeping, or other compliance 

requirements because they would 

Federal Register / Vol. 70, No. 192 / Wednesday, October 5, 2005 / Proposed Rules 58087 

remain identical to the current 

requirements. No new forms are 

proposed and no additional reporting 

requirements would be necessary. 

This decision does not require 

additional information collection that 

requires clearance by the Office of 

Management and Budget (OMB) beyond 

currently approved information 

collection. The primary sources of data 

used to complete the forms are routinely 

used in most business transactions. 

Forms require only a minimal amount of 

information which can be supplied 

without data processing equipment or a 

trained statistical staff. Thus, the 

information collection and reporting 

burden is relatively small. Requiring the 

same reports from all handlers does not 

significantly disadvantage any handler 

that is smaller than the industry 

average. 

No other burdens are expected to fall 

on the dairy industry as a result of 

overlapping Federal rules. This 

rulemaking proceeding does not 

duplicate, overlap, or conflict with any 

existing Federal rules. 

Prior documents in this proceeding: 

Notice of Hearing: Issued June 16, 

2004; published June 23, 2004 (69 FR 

34963). 

Notice of Hearing Delay: Issued July 

14, 2004; published July 21, 2004 (69 FR 

43538). 

Tentative Partial Decision: Issued 

April 8, 2005; published April 14, 2005 

(70 FR 19709). 

Interim Final Rule: Issued May 26, 

2005; published June 1, 2005 (70 FR 

31321). 

Preliminary Statement 

A public hearing was held upon 

proposed amendments to the marketing 

agreement and the order regulating the 

handling of milk in the Upper Midwest 

marketing area. The hearing was held, 

pursuant to the provisions of the 

Agricultural Marketing Agreement Act 

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

and the applicable rules of practice (7 

CFR part 900), at Bloomington, 

Minnesota, on August 16–19, 2004, 

pursuant to a notice of hearing issued 

June 16, 2004, published June 23, 2004 

(69 FR 34963), and a notice of a hearing 

delay issued July 14, 2004, published 

July 21, 2004 (69 FR 43538). 

The material issues, findings, 

conclusions and rulings of the tentative 

partial decision are hereby approved, 

adopted and are set forth herein. The 

material issues on the record of the 

hearing relate to: 

1. Pooling Standards—Changing 

performance standards and diversion 

limits. 

2. Transportation credits. 

3. Determination of whether 

emergency marketing conditions existed 

that warranted the omission of a 

recommended decision and the 

opportunity to file written exceptions. 

Findings and Conclusions 

This final partial decision specifically 

addresses Proposals 1, 6 and features of 

Proposal 2 that are intended to better 

identify the milk of those producers 

who provide a reasonable and 

consistent service to the Class I needs of 

the UMW marketing area and thereby 

become eligible to pool on the UMW 

order. This decision also limits 

transportation credits received by 

handlers to the first 400 miles of 

applicable milk movements. Proposals 

3, 4, 5, 7, a portion of Proposal 2 that 

addresses pooling and repooling, and a 

portion of Proposal 6 that addresses 

temporary loss of Grade A approval will 

be addressed in a separate decision. 

Hereinafter, any references to Proposal 2 

will only pertain to the portions of the 

proposal that would limit the pooling of 

‘‘distant’’ milk and amend 

transportation credit provisions, and 

references to Proposal 6 will only 

pertain to the ‘‘touch-base’’ standard 

portion of the proposal. 

The following findings and 

conclusions on the material issues are 

based on evidence presented at the 

hearing and the record thereof: 

1. Pooling Standards 

Several proposed changes to the 

pooling standards of the UMW order, 

previously adopted on an interim basis, 

are adopted on a permanent basis by 

this final partial decision. Certain 

inadequacies of the current pooling 

provisions are resulting in large 

volumes of milk pooled on the UMW 

order which do not demonstrate a 

reasonable and consistent servicing of 

the UMW Class I market. 

Specifically, the following 

amendments were adopted in the 

tentative partial decision and are 

adopted on a permanent basis in this 

final partial decision: (1) Only supply 

plants located in Illinois, Iowa, 

Minnesota, North Dakota, South Dakota, 

Wisconsin, and the Upper Peninsula of 

Michigan (hereinafter referred to as the 

‘‘7-state milkshed’’) may use milk 

delivered directly from producers’ farms 

for qualification purposes; and (2) Of 

diversions to nonpool plants, only 

diversions to those plants located in the 

7-state milkshed will be considered 

producer milk under the order. These 

amendments to the pooling standards 

were contained in Proposals 1 and 2, as 

published in the hearing notice and as 

modified at the hearing. 

Three proposals (Proposals 1, 2, and 

6) seeking to limit the pooling of 

‘‘distant’’ milk were considered in this 

proceeding. The proponents of these 

proposals are of the opinion that the 

current pooling provisions of the order 

enable milk to become pooled on the 

order that does not service the Class I 

needs of the UMW market. According to 

the proponents, such milk currently 

need only make an initial qualifying 

delivery to a pool plant to become 

pooled on the order. The witnesses 

assert that this is causing the 

unwarranted lowering of the order’s 

blend price. 

Proposal 1 was offered by Associated 

Milk Producers, Inc. (AMPI), Bongards’

Creameries, Ellsworth Cooperative 

Creameries, and First District 

Association. Hereinafter, this decision 

will refer to these proponents as ‘‘AMPI, 

et al.’’ All are cooperative associations 

whose members’ milk is pooled on the 

UMW order. 

Proposal 2 was offered by Mid-West 

Dairymen’s Company on behalf of CassClay Creamery, Inc. (Cass-Clay), Dairy 

Farmers of America, Inc. (DFA), 

Foremost Farms USA Cooperative 

(Foremost Farms), Land O’Lakes, Inc. 

(LOL), Manitowoc Milk Producers 

Cooperative (MMPC), Mid-West 

Dairymen’s Company, Milwaukee 

Cooperative Milk Producers (MCMP), 

Swiss Valley Farms Company (Swiss 

Valley), and Woodstock Progressive 

Milk Producers Association. 

Hereinafter, this decision will refer to 

these proponents as ‘‘Mid-West, et al.’’

Although Foremost Farms was a 

proponent of Proposal 2, no testimony 

was offered on their behalf. At the 

hearing, Plainview Milk Products 

Cooperative and Westby Cooperative 

Creamery also supported the testimony 

of Mid-West, et al. The proponents of 

Proposal 2 are qualified cooperatives 

representing producers whose milk 

supplies the milk needs of the 

marketing area and is pooled on the 

UMW order. 

Proposal 6, offered by Dean Foods 

Company (Dean), which also addresses 

the pooling of distant milk, is not 

adopted. Proposal 6 sought to increase 

the number of days that a dairy farmer’s 

milk production would need to be 

delivered to a UMW pool plant from the 

current 1 day to 2 days before the milk 

of the dairy farmer would be eligible for 

diversion to a nonpool plant and have 

such diverted milk pooled on the order. 

This is commonly referred to by the 

industry as a ‘‘touch-base’’ standard. If 

this standard was not met for each of the 

months of July through November, 

Proposal 6 would have required that the 

touch-base standard be increased to 2 

58088 Federal Register / Vol. 70, No. 192 / Wednesday, October 5, 2005 / Proposed Rules 

days for each of the months of December 

though June. If the July through 

November touch-base standard of 

Proposal 6 was met, there would be no 

touch-base standard applicable for the 

months of December through June. 

Additionally, Proposal 6 would also 

specify that if a producer lost 

association with the UMW order, except 

as caused by a loss in Grade A status, 

the producer would need to meet the 2- 

day touch-base standard in the intended 

month for qualifying as a producer on 

the order and for pooling eligibility. 

During the hearing, Dean’s witnesses 

made many modifications to their 

proposals which were further clarified 

in a post-hearing brief. In their brief, 

Dean explained that Proposal 6, as 

modified, intended that a dairy farmer’s 

qualifying shipment could be made 

anytime during the month. 

Currently, the UMW order provides 

that a supply plant can qualify as a pool 

plant of the order by delivering 10 

percent of its total monthly milk 

receipts to a pool distributing plant, a 

producer-handler, a partially regulated 

distributing plant, or a distributing plant 

regulated by another Federal order. A 

supply plant may meet this requirement 

by shipping milk directly from dairy 

farms regardless of their location. 

Additionally, producer milk can be 

diverted to any nonpool plant, without 

regard to location, as long as the 

producer met the touch-base standard 

during the first qualifying month. 

A witness appearing on behalf of 

AMPI, et al., testified in support of 

Proposal 1. The witness stated that since 

Federal order reform, and as a result of 

other Federal order hearings over the 

last several years, the UMW pooling 

provisions have allowed milk to be 

pooled on the order from as far as 

California, Idaho, Utah, Oregon, 

Colorado, Montana, Nebraska, Ohio, 

Indiana, and Georgia. The witness 

explained that a previous UMW 

decision, which became effective May 1, 

2002, only resulted in prohibiting the 

ability to simultaneously pool the same 

milk on the UMW order and on a Stateoperated milk order that had 

marketwide pooling. The witness noted 

that during the same time period, 

however, amendments to the pooling 

standards of the Central and Mideast 

milk marketing orders resulted in a 

tightening of their pooling standards, 

moving milk formerly pooled on those 

two orders onto the UMW marketwide 

pool which reduced the blend price and 

producer price differential (PPD) 

received by UMW dairy farmers. 

The AMPI, et al., witness testified that 

in December 2003, 263 million pounds, 

or 12.3 percent of producer milk, pooled 

on the UMW order was located in Idaho. 

The witness also noted that for the same 

month, Jerome County, Idaho, had the 

most producer milk of any county 

pooled on the UMW order. The witness 

was of the opinion that milk seeks to be 

pooled on the UMW order when it 

cannot qualify for pooling in its own 

geographic area. The witness explained 

that milk located far from the UMW area 

seeks to be pooled on the UMW order 

because the pooling provisions of the 

UMW order are so liberal and because 

it is economically advantageous to do 

so. 

The AMPI, et al., witness stated that 

current order provisions allow any 

handler whose producers have touched 

base at a UMW pool plant, to pool 10 

times the amount of milk shipped to a 

distributing plant and divert up to 90 

percent of its milk supply to any 

nonpool plant. The witness stressed that 

this has resulted in Idaho producers 

pooling their milk on the UMW order by 

simply meeting the one-day touch-base 

standard and then diverting future milk 

production to a nonpool plant nearer to 

their farms in Idaho. 

The AMPI, et al., witness compared 

the actual PPD versus a scenario in 

which a PPD was computed without 

Idaho milk. The witness noted that in 

2003 the actual PPD was a negative 5 

cents while under their scenario the 

estimated PPD without Idaho milk 

would have been a positive $0.19, a 

$0.24 total difference. The witness 

testified that UMW dairy farmers in 

effect received $36.5 million less for 

their milk in 2003 due to the $0.24 

average difference in the actual versus 

estimated PPD. The witness asserted 

that Idaho milk was not physically 

supplying the market and was never 

intended to supply the market. The 

witness also added that additional Idaho 

milk not previously pooled on the UMW 

order could be pooled on the UMW 

order because of the termination of the 

Western milk marketing order on April 

1, 2004. 

The AMPI, et al., witness stressed that 

Proposal 1 is not intended to prohibit 

the pooling of milk based on its distance 

from the UMW marketing area. The 

witness explained that any supply 

plant, regardless of its location, that 

delivers 10 percent of its producer 

receipts to a UMW distributing plant in 

the order would qualify their total 

receipts for pooling. The witness also 

explained that Proposal 1 would lessen 

the incentive to pool milk that does not 

demonstrate a consistent servicing of 

the UMW market’s Class I needs. 

A post-hearing brief submitted by 

AMPI asserted that $3 million per 

month is being siphoned off of the 

UMW marketwide pool by producers 

located long distances from the UMW 

and whose milk demonstrates no service 

to the UMW’s fluid market. Their brief 

also reiterated that the termination of 

the Western order has resulted in a 

further lowering of blend prices 

received by UMW dairy farmers as more 

unpooled milk seeks easy and profitable 

pooling opportunities. The brief 

explained that the loss of income to 

UMW dairy farmers merits the need for 

an emergency action. 

A witness appearing on behalf of MidWest, et al., testified in support of 

Proposal 2. The witness stated that milk 

located within the 7-state milkshed is 

already more than adequate to serve the 

fluid needs of the market. The witness 

asserted that Idaho milk is located too 

far from the market, in excess of 1,000 

miles, to serve as a reliable reserve 

supply. The witness concluded that 

such milk should not be considered a 

consistent supply for the UMW 

marketing area. The Mid-West, et al., 

witness explained that often when 

Idaho milk makes a pool qualifying oneday touch-base delivery to a distributing 

plant, milk produced and located within 

the marketing area has to be diverted 

from the distributing plant to 

accommodate the one-time physical 

receipt. The witness was of the opinion 

that this is tantamount to the local milk 

supply balancing the Idaho milk supply, 

rather than Idaho milk balancing the 

local milk supplies of the UMW market. 

Furthermore, the witness was of the 

opinion that if not for inadequate 

pooling provisions, milk located far 

from the market would not seek to be 

pooled because the cost of servicing the 

market would be prohibitive. 

The Mid-West, et al., witness said that 

typically the milk in Idaho pays a fee to 

a UMW handler for pooling and that 

these fees have become a significant 

revenue stream for some UMW handlers 

who seek to offset lower PPDs and 

increase their financial returns to 

producer members. The witness stated 

that in this way, milk located in the 

UMW marketing area is essentially used 

to qualify milk located in Idaho as 

UMW milk. Because Idaho milk is 

reported as a receipt by UMW handlers, 

it receives the benefit of the UMW PPD 

although it is never actually delivered to 

the UMW market except for the initial 

association. The witness said that in 

December 2003, more milk was pooled 

on the UMW order from Jerome County, 

Idaho, than from any other county in the 

country. The witness was of the opinion 

that the Idaho milk would not seek to 

be pooled if it had to meet the order’s 

performance standards on its own merit 

because the cost of transporting it to a 

Federal Register / Vol. 70, No. 192 / Wednesday, October 5, 2005 / Proposed Rules 58089 

UMW distributing plant would exceed 

the monetary benefit of being pooled on 

the order. The witness insisted that the 

only way that milk located far from the 

market could be considered a reliable 

supplier to the UMW market is if it 

consistently provided service to the 

UMW fluid market on its own merit. 

The Mid-West, et al., witness stated 

that the impact on the PPD from the 

growing amount of Idaho milk pooled 

on the order has become significant. For 

example, the witness estimated that in 

September 2003, the PPD was reduced 

by $0.73. The witness stressed that 

while some entities were benefiting 

from the pooling of such milk by 

collecting pooling fees, all of the 

market’s participants were being 

negatively affected because of the 

reduction in the PPD. The witness also 

noted that the termination of the 

Western order has only compounded 

the problem because milk once pooled 

and priced on the former Western order 

is seeking the price protection offered 

by another Federal milk order. 

The Mid-West, et al., witness 

maintained that it is the UMW’s lenient 

performance standards that have 

enabled milk to participate and benefit 

from the UMW marketwide pool 

without demonstrating consistent and 

reliable service to the market. The 

witness also stressed that Proposal 2 

does not treat in-area and out-of-area 

milk of a supply plant differently. The 

witness explained that both must ship 

10 percent of their total milk receipts to 

a distributing plant to qualify as a pool 

plant for the order. Requiring this as a 

pooling standard for all supply plants, 

the witness said, will end the practice 

of using local milk supplies to qualify 

milk for pooling that has no physical tie 

to the marketing area. 

A brief submitted by Mid-West, et al., 

noted that less than one tenth of one 

percent of Idaho milk pooled on the 

UMW order was delivered to a pool 

distributing plant from April 2001 

through May 2004 as evidence of such 

milk’s lack of reasonable and consistent 

service to the UMW market. 

Furthermore, the brief noted that only 

0.21 percent of the pooled Idaho milk 

pooled was delivered to a UMW pool 

plant of any type during the same time 

period. The brief contended that 

statistics prepared by the Market 

Administrator’s office indicated that the 

UMW order’s blend price had been 

reduced approximately 25 cents per 

hundredweight continuously since 2003 

by pooling Idaho milk. The Mid-West, et 

al., brief reiterated that Proposal 2 does 

not prevent milk located far from the 

marketing area from being pooled. 

Rather, explained the brief, it would 

establish an appropriate performance 

standard so that milk which does not 

consistently service the Class I needs of 

the UMW market could not be pooled 

on the order. 

Exceptions to the tentative partial 

decision from Mid-West, et al., 

commented that the adoption of 

standards to deter the pooling of out-ofarea milk that does not provide a 

reliable and consistent service to the 

Class I market is appropriate. 

A witness appearing on behalf of LOL 

testified in support of Proposal 2. The 

witness asserted that milk located in 

Idaho and pooled on the UMW market 

is lowering the UMW PPD, thereby 

negatively impacting LOL’s local 

producers. However, as a supporter of 

performance-based pooling, the witness 

was of the opinion that Proposal 2 

places additional standards on milk 

produced outside the 7-state milkshed. 

While the LOL witness was of the 

opinion that such pooling issues should 

be addressed at a national hearing, the 

witness nevertheless supported 

Proposal 2 because it addresses the low 

PPDs being received by UMW 

producers. 

A witness appearing on behalf of 

MMPC testified in support of Proposal 

2. The witness stated that MMPC has a 

small group of members located in 

Idaho that represent a significant 

amount of pooled milk on the UMW 

order. The witness explained that all 

members of MMPC pay a 2-cent per 

hundredweight checkoff on their milk 

for services provided by MMPC, and 

their Idaho members checkoff payment 

provides significant additional revenue 

to the cooperative. However, the witness 

said that all of the producer members of 

MMPC who pool their milk on the 

UMW order would be better off without 

pooling the milk from Idaho. According 

to the witness, the reduction in the PPD 

is greater than the 2-cent per 

hundredweight checkoff payment they 

receive for pooling Idaho milk. 

A witness appearing on behalf of DFA 

also testified in support of Proposal 2. 

The DFA witness stated that the 

performance standards of the UMW 

order should limit the amount of milk 

pooled on the order to only that milk 

which can be reasonably considered a 

regular and consistent supply of the 

market. 

The DFA witness offered various 

pooling scenarios to illustrate that milk 

located in Idaho would not seek to be 

pooled on the UMW order if such milk 

were expected to make regular and 

consistent deliveries to pool plants. For 

all the scenarios, the witness assumed a 

hauling rate of $2.10 per loaded mile, a 

$1.60 Class I differential, and a 

transportation credit of 400 miles. The 

witness said that under these 

assumptions, milk would likely not seek 

to be pooled on the UMW order because 

the costs incurred would exceed the 

revenue received by being pooled on the 

UMW order. Additionally, the witness 

said that if the pooling standards are not 

amended to establish an appropriate 

level of consistent service, more milk 

will seek to be pooled on the order and 

would result in a continued lowering of 

the order’s blend price. 

The DFA witness stressed that the 

order’s performance standards must 

more clearly define what milk can 

reasonably be considered a consistent 

supply to the market. According to the 

witness, the underpinning logic of 

Federal order pricing is that milk 

supplies located closer to the market 

have a higher value than those farther 

away. Predecessor orders had location 

adjustments that were a mechanism for 

assigning differing values to milk 

depending on its distance to the market, 

explained the witness. Milk located 

farther from the marketing area was less 

valuable to the market, thus recognizing 

that more local milk supplies had a 

higher value because it cost much less 

to transport local milk supplies to the 

market, the witness said. The witness 

stated that location adjustments were 

once an important method of achieving 

pooling discipline. While there were no 

proposals regarding location 

adjustments under consideration, the 

witness explained, adoption of Proposal 

2 would achieve a similar economic 

result—establishing a relationship 

between the value of milk and its 

distance from the market. The witness 

stressed that Proposal 2 would provide 

the framework to more accurately 

identify the milk of those producers 

which can reasonably be considered as 

reliable suppliers to the UMW fluid 

market. 

A witness appearing on behalf of 

Cass-Clay testified in support of 

Proposal 2. Cass-Clay is a dairy farmerowned cooperative located in the UMW 

marketing order that processes 45 

percent of its total milk receipts into 

Class I products. The witness explained 

that Cass-Clay does pool distant milk for 

a fee which generates revenue to offset 

some of the negative PPDs received by 

UMW dairy farmers. According to the 

witness, the revenue generated from 

pooling fees has enabled Cass-Clay to 

support their members’ mailbox price 

and retain membership in a highly 

competitive market. The witness also 

stated that Cass-Clay does not favor 

pooling Idaho milk and supports 

Proposal 2 because it would limit the 

58090 Federal Register / Vol. 70, No. 192 / Wednesday, October 5, 2005 / Proposed Rules 

ability to pool milk that is located far 

from the UMW marketing area. 

A witness appearing on behalf of 

MCMP testified in support of Proposal 

2. The witness was of the opinion that 

if distant producers want to collect 

money from the UMW marketwide pool, 

they should be regularly and 

consistently serving the UMW market. It 

was MCMP’s position that Proposal 2 is 

fair and right for the market as a whole. 

A witness appearing on behalf of the 

Galloway Company testified in support 

of Proposal 2. Galloway Company owns 

and operates a Class II manufacturing 

plant regulated by the UMW order. The 

witness was of the opinion that Proposal 

2 would reduce the amount of milk 

pooled on the UMW order that is not 

actually serving the fluid market. 

A witness appearing on behalf of the 

Wisconsin, North Dakota, and 

Minnesota Farmers Unions (Farmers 

Unions) testified in support of limiting 

the ability of milk to pool on the UMW 

order that is located far from the 

marketing area. However, the witness 

did not express support for any 

particular proposal. The witness said 

that pooling milk from far outside the 

UMW marketing area has had an 

adverse economic effect on producers 

who do regularly supply the UMW 

market. The witness stated that pooling 

such milk was placing an undue 

hardship on UMW dairy producers who 

regularly and consistently serve the 

Class I needs of the UMW market by 

reducing their revenue. 

A dairy farmer, who is a Director on 

the DFA Central Area Council, testified 

in support of Proposal 2. The witness 

testified that milk produced far from the 

marketing area, such as Idaho, cannot 

regularly service the UMW market while 

still returning a profit to those dairy 

farmers. The witness was of the opinion 

that the UMW order should be modified 

to ensure that producer milk receiving 

the UMW blend price is actually serving 

the UMW market. 

A witness appearing on behalf of 

Dean testified in opposition to Proposals 

1 and 2. Dean owns and operates 

distributing plants regulated by the 

UMW order as well as UMW nonpool 

plants. The witness explained that Dean 

opposed the proposals because of the 

limitation on the transportation credit to 

400 miles. Dean’s post-hearing brief 

maintained its opposition to Proposal 1 

stating that the proponents only want to 

address the problem of distant milk, not 

the issue of depooling. Furthermore, 

Dean’s brief stressed its opposition to 

Proposal 2, insisting that it is a 

compromise position among the 

proponents and does not go far enough 

to ensure that all milk pooled on the 

order is consistently servicing the 

order’s Class I market. 

A Dean witness also testified in 

support of Proposal 6. The witness said 

the proposal would increase the current 

one time 1-day touch-base provision to 

2 days in each of the months of July 

through November and if that standard 

was not met, the producer must deliver 

2 days milk production in each of the 

months of December through June. 

Furthermore, the witness said that 

Proposal 6 also would establish a 2-day 

touch-base provision for a dairy farmer 

who lost producer status with the UMW 

order, except as a result of loss of Grade 

A status for less than 21 days, or who 

became a dairy farmer for other markets. 

The Dean witness asserted that 

increasing the touch-base standard to 2 

days would ensure that more milk 

would be consistently available at pool 

plants to serve the fluid market. A 

second Dean witness also testified in 

support of Proposal 6. The witness 

asserted that the intent of the Federal 

order system is to ensure a sufficient 

supply of milk for fluid use and provide 

for uniform payments to producers who 

stand ready, willing, and able to serve 

the fluid market, regardless of how the 

milk of any individual is utilized. While 

some entities are of the opinion that the 

order system should ensure a sufficient 

milk supply to all plants, the Dean 

witness was of the opinion that the 

order system addresses only the need 

for ensuring a milk supply to 

distributing plants. The witness 

elaborated on this opinion by citing 

examples of order language that stress 

providing for a regular supply of milk to 

distributing plants as a priority of the 

Federal milk order program. 

The Dean witness testified that for the 

Federal milk order system to ensure 

orderly marketing, orders need to 

provide adequate economic incentives 

that will attract milk to fluid plants and 

need to properly define regulations to 

determine the milk of those producers 

who can participate in the marketwide 

pool. The witness further opined that 

features are missing from the terms of 

the UMW order. In this regard, the 

witness said current pooling standards 

have allowed milk to become pooled on 

the order without demonstrating regular 

service to the Class I needs of the 

market. 

Dean explained further in their posthearing brief that when distant milk 

attaches to the UMW pool and dilutes 

the blend price, Class I handlers have to 

increase their premiums in an effort to 

offset the negative PPD so that they can 

retain their producers. This, argued 

Dean, results in inconsistent product 

costs between handlers. In conclusion, 

the Dean brief stressed that Proposal 6 

does not establish different standards 

for in-area and out-of-area milk. Rather, 

the brief explained, it ensures that all 

milk will demonstrate regular and 

consistent service to the fluid market as 

a criterion for being pooled on the UMW 

order. 

Exceptions to the tentative partial 

decision received from Dean expressed 

support for the adoption of pooling 

requirements that result in actual fluid 

milk deliveries to fluid milk plants. 

A witness appearing on behalf of 

AMPI, et al., testified in opposition to 

Proposal 6. According to the witness, 

the 2-day touch base provision 

contained in Proposal 6 would only 

result in additional and unwarranted 

expense to UMW producers and 

promote the uneconomic movement of 

milk for the sole purpose of meeting an 

unneeded standard. Furthermore, the 

witness asserted, in a low Class I 

utilization order like the UMW, a 2-day 

touch-base standard is unreasonable. 

The AMPI, et al., witness also testified 

that much of AMPI’s Grade A milk is 

commingled with Grade B milk when it 

is picked up from the farm. Proposal 6 

would require AMPI to pick up their 

Grade A and Grade B milk separately, 

explained the witness, and thus would 

be extremely costly and inefficient. The 

witness was of the opinion that the 

current order’s one-time touch-base 

provision is sufficient for ensuring an 

adequate supply of milk for fluid use. 

Additionally, the witness said that the 

Market Administrator already has the 

authority to adjust supply plant 

shipping standards in the event that 

distributing plants have difficulty in 

obtaining adequate milk supplies to 

meet the market’s Class I demands. 

A post-hearing brief submitted by 

AMPI, et al., reiterated their opposition 

to Proposal 6. The brief contended that 

if Proposal 6 were adopted, select 

handlers would face increased handling 

and transportation costs to meet the new 

performance standard. The brief further 

argued that Proposal 6 would 

necessitate that supply plants invest 

more capital to build additional silo 

capacity used only to accommodate the 

increased volumes of producer milk 

needing to touch base. 

A witness appearing on behalf of 

Wisconsin Cheesemakers Association 

(WCMA), also testified in opposition to 

Proposal 6. WCMA represents a group of 

dairy manufacturers and marketers in 

Wisconsin. According to the witness, 32 

of WCMA’s members operate 42 dairy 

facilities pooled on the UMW order. The 

witness was of the opinion that the 

implementation of Proposal 6 would not 

result in orderly marketing within the 

Federal Register / Vol. 70, No. 192 / Wednesday, October 5, 2005 / Proposed Rules 58091 

UMW order because the 2-day touchbase standard would cause uneconomic 

and inefficient shipments of milk solely 

for the purpose of meeting the new 

higher standard. Furthermore, the 

witness said the additional milk needed 

to be shipped to a pool supply plant 

would necessitate that additional silo 

capacity be built at plants to receive the 

additional milk volumes arising from 

establishing a higher touch-base 

standard. 

A witness appearing on behalf of the 

National Family Farm Coalition, an 

organization which represents family 

farms located in 32 states, including 

those states comprising the UMW 

marketing area, testified in opposition to 

all proposals at the hearing. The witness 

was of the opinion that the entire 

Federal order system was in need of 

complete reform. The witness asserted 

that proponents of the proposals being 

heard were entities whose actions have 

lowered prices received by family 

farmers. 

A post-hearing brief submitted by 

Alto Dairy (Alto), a cooperative with 

580 members in Wisconsin and 

Michigan, expressed their opposition to 

Proposals 1, 2, and 6. The brief argued 

that the pooling of milk located far from 

the marketing area serves to equalize the 

blend prices between Federal orders and 

contended that a ban on such pooling in 

the UWM order would lead to similar 

bans in other Federal orders. The brief 

concluded that this would widen blend 

price differences among all Federal 

orders. 

A brief submitted on behalf of Family 

Dairies USA (Family Dairies), expressed 

their opposition to Proposals 1, 2, and 

6. Family Dairies is a cooperative 

handler regulated by the UMW order 

that operates a pool supply plant 

located in the marketing area. The brief 

expressed the opinion that these 

proposals essentially establish 

performance standards for out-of-area 

milk that are different from performance 

standards for in-area milk. The brief 

contended that establishing different 

standards based on location is 

discriminatory, is designed to erect 

trade barriers to distant milk, and is 

illegal. In their brief they argued that 

producers who bear large transportation 

costs to supply the fluid market, in 

effect, are not receiving uniform prices. 

In this regard, the brief asserted that 

Proposals 1, 2, and 6 violated uniform 

producer prices because of the 

transportation cost burden on distant 

producers. 

Exceptions to the tentative partial 

decision from Grande Cheese Company 

(Grande) noted that the States of 

Indiana, Ohio and the southern 

peninsula of Michigan should be added 

to the states to which pooled milk may 

be diverted. 

In exceptions to the tentative partial 

decision, Lamers Dairy, Inc. argued that 

the decision is a step in the right 

direction but does not go far enough in 

preventing disorderly marketing. 

Lamers was of the view that the order 

permits the pooling of far more milk on 

the order than that which could be 

considered a legitimate reserve supply 

of distributing plants. Supply plants 

which meet the performance standards 

of the order necessarily qualify all of the 

receipts of the supply plant for pooling. 

Accordingly, all of the receipts, 

including diversions of the supply 

plant, can reasonably be considered a 

legitimate reserve supply of those 

distributing plants. 

2. Transportation Credits 

Two proposals seeking an identical 

mileage limit for handlers receiving 

transportation credits for moving milk 

for Class I uses were adopted in the 

tentative partial decision and are 

adopted permanently in this final 

partial decision. While no handler is 

currently receiving a transportation 

credit for milk transported distances 

greater than 400 miles, the proposed 

400-mile limit is reasonable to ensure 

that milk used in fluid products will be 

acquired from sources nearest to the 

distributing plants. Specifically, a 

transportation credit for milk delivered 

to distributing plants on the first 400 

miles between the transferring and 

receiving plant was adopted in the 

tentative partial decision and is thereby 

adopted in this final partial decision on 

a permanent basis. 

Currently, the UMW order provides 

for a transportation credit on bulk milk 

transferred from a pool plant to a pool 

distributing plant. The transportation 

credit is calculated by multiplying 

$0.0028 times the number of miles 

between the transferring plant and the 

receiving plant and is applied on a per 

hundredweight basis. An adjustment is 

made for the different Class I prices 

between the transferring and receiving 

plants. The transportation credit is paid 

to the receiving distributing plant to 

partially offset the cost of transporting 

milk. 

A witness appearing on behalf of 

AMPI, et al., testified in support of the 

transportation credit limit contained in 

Proposal 1. The witness said that in 

2003 no pooled milk received a 

transportation credit that was 

transported over 400 miles. The AMPI, 

et al., witness also testified that very 

little milk which did receive a 

transportation credit was shipped 

between 300 and 399 miles to the 

receiving distributing plant. The witness 

stressed that limiting the transportation 

credit to 400 miles would not 

disadvantage any handler currently 

delivering milk to a distributing plant. 

A witness appearing on behalf of MidWest, et al., testified in support of the 

transportation credit limit contained in 

Proposal 2. The witness was of the 

opinion that milk located within the 

marketing area is more than adequate to 

supply the order’s distributing plants. 

The witness said that adopting the 

proposed limit of 400 miles would not 

affect any current pool handlers 

receiving the credit. However, noted the 

witness, a mileage limit on the 

transportation credit would prevent any 

new supply plants that were located 

great distances from distributing plants 

from draining money from the producer 

settlement fund (PSF) in the future. 

A brief submitted on behalf of MidWest, et al., maintained their position 

that placing a mileage limitation on 

receiving a transportation credit would 

avoid the potential of the UMW pool 

subsidizing the delivery of milk to 

UMW distributing plants from 

unneeded areas. 

The witness appearing on behalf of 

LOL also expressed their support for 

establishing a transportation credit 

limit. 

A witness appearing on behalf of 

Dean testified in opposition to limiting 

receipt of the transportation credit. The 

witness was of the opinion that the 

purpose of limiting receipt of the 

transportation credit was only to 

prevent distant milk from pooling on 

the UMW order. If milk is needed to 

supply distributing plants, the witness 

argued, then it should be pooled 

without regard to the distance it needs 

to be transported. 

Exceptions to the tentative partial 

decision from Grande expressed 

opposition to limiting the transportation 

credit to 400 miles. They stated that 

such a limitation would create 

geographical barriers to dairy farmers 

seeking to sell milk to UMW 

distributing plants. 

The record of this proceeding finds 

that several amendments to the pooling 

standards of the UMW order should be 

adopted on a permanent basis to more 

properly identify the milk of those 

producers that should share in the 

order’s marketwide pool proceeds. 

Currently, milk located far from the 

UMW marketing area that demonstrates 

no consistent service to the Class I 

needs of the market is able to qualify for 

pooling on the UMW order. The 

addition of this milk to the order at 

lower classified use-values results in a 

58092 Federal Register / Vol. 70, No. 192 / Wednesday, October 5, 2005 / Proposed Rules 

lower blend price returned to those 

producers who consistently supply the 

Class I needs of the UMW market. Such 

milk does not demonstrate a reasonable 

level of performance in servicing the 

Class I milk needs of the UMW 

marketing area and therefore should not 

be pooled. 

The pooling standards of all Federal 

milk marketing orders, including the 

UMW order, are intended to ensure that 

an adequate supply of milk is available 

to meet the Class I needs of the market 

and to provide the criteria for 

identifying the milk of those producers 

who are reasonably associated with the 

market as a condition for receiving the 

order’s blend price. The pooling 

standards of the UMW order are 

represented in the Pool Plant, Producer, 

and the Producer milk provisions of the 

order and are performance based. Taken 

as a whole, these provisions are 

intended to ensure that an adequate 

supply of milk is available to meet the 

Class I needs of the market and provide 

the criteria for determining the producer 

milk that has demonstrated service to 

the Class I market and thereby should 

share in the marketwide distribution of 

pool proceeds. 

Pooling standards that are 

performance based provide the only 

viable method for determining those 

eligible to share in the marketwide pool. 

It is primarily the additional revenue 

generated from the higher-valued Class 

I use of milk that adds additional 

income, and it is reasonable to expect 

that only those producers who 

consistently bear the costs of supplying 

the market’s fluid needs should be the 

ones to share in the returns arising from 

higher-valued Class I sales so that costs 

can be recovered. 

Pooling standards are needed to 

identify the milk of those producers 

who are providing service in meeting 

the Class I needs of the market. If a 

pooling provision does not reasonably 

accomplish this end, the proceeds that 

accrue to the marketwide pool from 

fluid milk sales are not properly shared 

with the appropriate producers. The 

result is the unwarranted lowering of 

returns to those producers who actually 

incur the costs of servicing and 

supplying the fluid needs of the market. 

Pool plant standards, specifically 

standards that provide for the pooling of 

milk through supply plants, need to 

reflect the supply and demand 

conditions of the marketing area. This is 

important because producers whose 

milk is pooled on the order, regardless 

of utilization, receive the order’s blend 

price. When a pooling feature’s use 

deviates from its intended purpose, and 

its use results in pooling milk that 

cannot reasonably be considered as 

serving the fluid needs of the market, it 

is appropriate to re-examine the 

standard in light of current marketing 

conditions. 

Unlike other consolidated orders 

established as a part of Federal milk 

order reform on the basis of the area in 

which Class I handlers compete with 

each other for the majority of their sales, 

the current consolidated UMW 

marketing area also was based primarily 

on a common procurement area. In this 

regard, it would be unreasonable to 

conclude that areas far from the UMW 

area, such as Idaho, are part of a 

common procurement area with those 

states that comprise the current UMW 

marketing area. The same is true for the 

states of Indiana, Ohio and the southern 

peninsula of Michigan. While it is the 

Class I use of milk by regulated handlers 

in the marketing area that provides 

additional revenue to the pool and not 

the procurement area, the procurement 

area was nevertheless envisioned to be 

the primary area relied upon by the 

order’s distributing plants for a supply 

of milk. 

The geographic boundaries of the 

UMW order were not intended to limit 

or define which producers, which milk 

of those producers, or which handlers 

could enjoy the benefits of being pooled 

on the order. What is important and 

fundamental to all Federal orders, 

including the UMW order, is the proper 

identification of those producers and 

the milk of those producers that should 

share in the proceeds arising from Class 

I sales. The UMW order’s current 

pooling standards do not reasonably 

accomplish this. 

The hearing record clearly indicates 

that the milk of producers located in 

areas distant from the marketing area is 

pooled on and receives the UMW 

order’s blend price. Current inadequate 

supply plant performance standards 

enable milk which has de minimis 

physical association with the market 

and which demonstrates no consistent 

service to the market’s Class I needs to 

be pooled on the UMW order. The 

inappropriate pooling of milk occurs 

because the order has inadequate 

diversion provisions that allow for milk 

to be diverted to a manufacturing plant 

located far from the marketing area. The 

ability for such milk to pool on the 

UMW order is made possible by distant 

handlers working out an arrangement 

with pooled handlers located within the 

UMW to pool the milk of the distant 

handler, often for a fee. The milk is 

included as part of the total receipts of 

the pooled handler even though such 

milk is diverted to plants located far 

from the marketing area. 

Requiring milk originating outside of 

the 7-state milkshed to qualify for 

pooling separately by delivering milk to 

a UMW distributing plant or 

distributing plant unit is not needed to 

ensure that such milk is actually 

servicing the Class I needs of the 

market. The adopted changes of limiting 

diversions to plants physically located 

within the 7-state milkshed in 

conjunction with not permitting 

handlers to use in-area milk to qualify 

milk located outside the 7-state 

milkshed essentially accomplishes the 

intent of ensuring the proper 

identification of milk that services the 

Class I needs of the market. In their 

exceptions to the tentative decision, 

Mid-West, et al., continued to endorse 

qualifying milk for pooling separately 

by delivering milk to a UMW 

distributing plant or distributing plant 

unit. This final partial decision 

maintains the conclusion that such a 

measure is not needed for the same 

reasons cited above. 

Some entities on brief argued that 

requiring out-of-area milk to perform 

separately is a form of location 

discrimination and is a means of 

erecting trade barriers. This argument is 

without merit. Pooling standards for 

plants located outside the 7-state 

milkshed will not prohibit milk from 

being pooled if it meets the UMW’s 

order pooling standards. The amended 

pooling provisions provide identical 

pooling standards to both in-area and 

out-of-area supply plants, as both must 

ship 10 percent to the Class I market. 

Nevertheless, for the reasons stated 

above, other changes to the pooling 

standards negate the need to provide for 

separate pooling standards for out-ofarea milk. 

The Federal milk order system has 

consistently recognized that there is a 

cost incurred by producers in servicing 

an order’s Class I market, and the 

primary reward to producers for 

performing such service is receiving the 

order’s blend price. The amended 

pooling provisions will ensure that milk 

seeking to be pooled and receive the 

order’s blend price is consistently 

servicing the order’s Class I needs. 

Consequently, the adopted pooling 

provisions will ensure the more 

equitable sharing of revenue generated 

from Class I sales among producers who 

bear the costs. 

Changes to the order’s diversion 

provisions are needed to ensure that 

milk pooled on the order not used for 

Class I purposes is part of the legitimate 

reserve supply of Class I handlers. 

Providing for the diversion of milk is a 

desirable and needed feature of an order 

because it facilitates the orderly and 

Federal Register / Vol. 70, No. 192 / Wednesday, October 5, 2005 / Proposed Rules 58093 

efficient disposition of milk when not 

needed for fluid use. However, it is 

necessary to safeguard against excessive 

milk supplies becoming associated with 

the market through the diversion 

process. Associating more milk than is 

actually part of the legitimate reserve 

supply of the diverting plant 

unnecessarily reduces the potential 

blend price paid to dairy farmers who 

service the market’s Class I needs. 

Without reasonable diversion 

provisions, the order’s performance 

standards are weakened and give rise to 

disorderly marketing conditions. 

The hearing record clearly indicates 

that milk located far from the marketing 

area can be reported as diverted milk by 

a pooled handler and receive the order’s 

blend price. Under the current pooling 

provisions, this can occur after a onetime delivery to a UMW pool plant. 

After the initial delivery, such milk 

need never again be delivered to a UMW 

pool plant. The record evidence 

confirms that usually this milk is 

delivered to a nonpool plant located as 

far from the marketing area as the 

diverted milk. This milk is never again 

physically associated with a plant in the 

marketing area, nor does it serve the 

Class I needs of the market. 

Despite the comments by Grande, it is 

appropriate to permanently amend the 

order’s diversion provisions so that 

diversions can be made only to plants 

physically located within the 7-state 

milkshed. Milk diverted to such plants 

better ensures that this milk is a 

legitimate reserve supply of the 

diverting handler and is readily 

available to service the Class I market 

when needed. 

The Agricultural Marketing 

Agreement Act of 1937 (the Act) was 

amended by the Food Security Act of 

1985 to provide authority for the 

establishment of marketwide service 

payments. Under the Act, as amended, 

marketwide service payments can be 

established to partially reimburse 

handlers for services provided of 

marketwide benefit by using money out 

of the PSF before a blend price is 

computed. 

Class I sales add additional revenue to 

the marketwide pool, so ensuring an 

adequate supply of milk to distributing 

plants benefits, in general, all market 

participants. Consequently, a 

transportation credit was established in 

the pre-reform Chicago Regional order 

to reimburse a portion of the cost of 

transporting milk to a distributing plant 

for use in Class I products. The 

transportation credit provision was 

carried into the consolidated UMW 

order as part of Federal order reform. 

Transportation credits in the current 

UMW order assist plants in obtaining a 

milk supply to fulfill Class I demand 

and promote the orderly marketing of 

milk. However, it is important that the 

transportation credit provision not be 

used as a method of circumventing the 

intent of other performance-based 

pooling standards. Establishing a 

mileage limit on the transportation 

credit will encourage distributing plants 

to use milk located in the nearby 

procurement area. The UMW has an 

abundance of milk within the marketing 

area beyond Class I demands and there 

should be no incentive given to attract 

milk for Class I use beyond that 

available within 400 miles of a 

distributing plant, a reasonable proxy 

for describing the common procurement 

area of the order’s distributing plants. A 

handler may acquire a milk supply from 

far distances; however, the 

transportation credit would apply only 

to the first 400 miles of milk movement. 

Evidence presented at the hearing, 

despite the comments by Grande, 

revealed that currently no distributing 

plant is receiving a transportation credit 

for milk located farther than 400 miles 

from their plant. Therefore, the adopted 

amendment should not alter any current 

UMW handler’s business practices. The 

ability of handlers to use the 

transportation credit as a means of 

having milk that is not part of the 

procurement area meet the performance 

standards of the order will be limited. 

This limitation is consistent with the 

UMW order boundaries that were 

established based, in part, on the 

commonality of a milk procurement 

area. This is consistent with other 

changes adopted in this decision that 

stress meeting performance-based 

standards as a condition for receiving 

the order’s blend price. 

A proposal seeking to increase the 

order’s touch-base standard as a means 

of ensuring that the Class I needs of the 

market are met is not adopted. While 

the touch-base standard is an important 

feature of an order’s pooling standards, 

increasing the standard is not 

appropriate given the marketing 

conditions of the UMW marketing area. 

The UMW marketing area has an 

abundance of milk located within the 

marketing area and as a result, it’s Class 

I utilization is relatively low. For 

example, during 2003, the order’s Class 

I utilization averaged 24.2 percent. 

Increasing the touch-base standard is 

unwarranted because it would likely 

cause the uneconomic movement of 

milk for the sole purpose of meeting a 

higher standard. 

3. Determination of Emergency 

Marketing Conditions 

Record evidence established that 

pooling standards of the UMW order 

were inadequate and were resulting in 

the erosion of the blend price received 

by producers who were serving the 

Class I needs of the market and were 

changed on an emergency basis. The 

unwarranted erosion of such producer 

blend prices stemmed from improper 

supply plant standards and the lack of 

appropriate limits on diversions of milk 

to only plants located within the 7-state 

milkshed. 

It was also appropriate to establish a 

mileage limit on the transportation 

credit on an emergency basis to prevent 

the credit from being used to 

circumvent the amended pooling 

provisions contained in the interim 

decision regarding supply plant 

performance standards and diverted 

milk. Establishing a mileage limit 

ensured that other changes made to 

ensure consistent performance to the 

Class I market before milk was eligible 

to be pooled and receive the order’s 

blend price were not weakened. 

Consequently, it was determined that 

emergency marketing conditions existed 

in the Upper Midwest marketing area 

and the issuance of a recommended 

decision was omitted. As stated in the 

tentative partial decision, a separate 

decision will be issued addressing 

proposals concerning pooling and 

repooling of milk, temporary loss of 

Grade A status and increasing the 

maximum administrative assessment. 

Rulings on Proposed Findings and 

Conclusions 

Briefs, proposed findings and 

conclusions were filed on behalf of 

certain interested parties. These briefs, 

proposed findings and conclusions, and 

the evidence in the record were 

considered in making the findings and 

conclusions set forth above. To the 

extent that the suggested findings and 

conclusions filed by interested parties 

are inconsistent with the findings and 

conclusions set forth herein, the 

requests to make such findings or reach 

such conclusions are denied for the 

reasons previously stated in this 

decision. 

General Findings 

The findings and determinations 

hereinafter set forth supplement those 

that were made when the Upper 

Midwest order was first issued and 

when it was amended. The previous 

findings and determinations are hereby 

ratified and confirmed, except where 

they may conflict with those set forth 

herein. 

58094 Federal Register / Vol. 70, No. 192 / Wednesday, October 5, 2005 / Proposed Rules 

(a) The tentative marketing agreement 

and the order, as hereby proposed to be 

amended, and all of the terms and 

conditions thereof, will tend to 

effectuate the declared policy of the Act; 

(b) The parity prices of milk as 

determined pursuant to section 2 of the 

Act are not reasonable with respect to 

the price of feeds, available supplies of 

feeds, and other economic conditions 

which affect market supply and demand 

for milk in the marketing area, and the 

minimum prices specified in the 

tentative marketing agreement and the 

order, 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; and 

(c) The tentative marketing agreement 

and the order, 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 agreement upon which a 

hearing has been held. 

Rulings on Exceptions 

In arriving at the findings and 

conclusions, and the regulatory 

provisions of this decision, each of the 

exceptions received was carefully and 

fully considered in conjunction with the 

record evidence. To the extent that the 

findings and conclusions and the 

regulatory provisions of this decision 

are at variance with any of the 

exceptions, such exceptions are hereby 

overruled for the reasons previously 

stated in this decision. 

Marketing Agreement and Order 

Annexed hereto and made a part 

hereof is one document: A Marketing 

Agreement regulating the handling of 

milk. The order amending the order 

regulating the handling of milk in the 

Upper Midwest marketing area was 

approved by producers and published 

in the Federal Register on June 1, 2005 

(70 FR 31321), as an Interim Final Rule. 

Both of these documents have been 

decided upon as the detailed and 

appropriate means of effectuating the 

foregoing conclusions. 

It is hereby ordered that this entire 

final decision and the Marketing 

Agreement annexed hereto be published 

in the Federal Register. 

Determination of Producer Approval 

and Representative Period 

March 2005 is hereby determined to 

be the representative period for the 

purpose of ascertaining whether the 

issuance of the order, as amended in the 

Interim Final Rule published in the 

Federal Register on June 1, 2005 (70 FR 

31321), regulating the handling of milk 

in the Upper Midwest marketing area is 

approved or favored by producers, as 

defined under the terms of the order (as 

amended and as hereby proposed to be 

amended) who during such 

representative period were engaged in 

the production of milk for sale within 

the aforesaid marketing area. 

List of Subjects in 7 CFR Part 1030 

Milk Marketing order. 

Dated: September 29, 2005. 

Kenneth C. Clayton, 

Acting Administrator, Agricultural Marketing 

Service. 

Order Amending the Order Regulating 

the Handling of Milk in the Upper 

Midwest Marketing Area 

This order shall not become effective 

unless and until the requirements of 

§ 900.14 of the rules of practice and 

procedure governing proceedings to 

formulate marketing agreements and 

marketing orders have been met. 

Findings and Determinations 

The findings and determinations 

hereinafter set forth supplement those 

that were made when the order was first 

issued and when it was amended. The 

previous findings and determinations 

are hereby ratified and confirmed, 

except where they may conflict with 

those set forth herein. 

(a) Findings. A public hearing was 

held upon certain proposed 

amendments to the tentative marketing 

agreement and to the order regulating 

the handling of milk in the Upper 

Midwest marketing area. The hearing 

was held pursuant to the provisions of 

the Agricultural Marketing Agreement 

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

674), and the applicable rules of 

practice and procedure (7 CFR part 900). 

Upon the basis of the evidence 

introduced at such hearing and the 

record thereof, it is found that: 

(1) The said order as hereby 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 the aforesaid marketing area. 

The minimum prices specified in the 

order as hereby 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; and 

(3) The said order as hereby amended 

regulates the handling of milk in the 

same manner as, and is applicable only 

to persons in the respective classes of 

industrial or commercial activity 

specified in, a marketing agreement 

upon which a hearing has been held. 

Order Relative to Handling 

It is therefore ordered, that on and 

after the effective date hereof, the 

handling of milk in the Upper Midwest 

marketing area shall be in conformity to 

and in compliance with the terms and 

conditions of the order, as amended, 

and as hereby amended, as follows: 

The provisions of the order amending 

the order contained in the interim 

amendment of the order issued by the 

Administrator, Agricultural Marketing 

Service, on May 26, 2005, and 

published in the Federal Register on 

June 1, 2005 (70 FR 31321), are adopted 

without change and shall be and are the 

terms and provisions of this order. 

[This marketing agreement will not 

appear in the Code of Federal 

Regulations] 

Marketing Agreement Regulating the 

Handling of Milk in Certain Marketing 

Areas 

The parties hereto, in order to 

effectuate the declared policy of the Act, 

and in accordance with the rules of 

practice and procedure effective 

thereunder (7 CFR part 900), desire to 

enter into this marketing agreement and 

do hereby agree that the provisions 

referred to in paragraph I hereof as 

augmented by the provisions specified 

in paragraph II hereof, shall be and are 

the provisions of this marketing 

agreement as if set out in full herein. 

I. The findings and determinations, 

order relative to handling, and the 

provisions of §§ 1030.1 to 1030.86 all 

inclusive, of the order regulating the 

handling of milk in the Upper Midwest 

marketing area (7 CFR part 1030) which 

is annexed hereto; and 

II. The following provisions: Record 

of milk handled and authorization to 

correct typographical errors. 

(a) Record of milk handled. The 

undersigned certifies that he/she 

handled during the month of March 

2005,llllllllll

hundredweight of milk covered by this 

marketing agreement. 

(b) Authorization to correct 

typographical errors. The undersigned 

hereby authorizes the Deputy 

Administrator, or Acting Deputy 

Administrator, Dairy Programs, 

Agricultural Marketing Service, to 

correct any typographical errors which 

may have been made in this marketing 

agreement. 

Federal Register / Vol. 70, No. 192 / Wednesday, October 5, 2005 / Proposed Rules 58095 

Effective date. This marketing 

agreement shall become effective upon 

the execution of a counterpart hereof by 

the Department in accordance with 

section 900.14(a) of the aforesaid rules 

of practice and procedure. 

In Witness Whereof, The contracting 

handlers, acting under the provisions of 

the Act, for the purposes and subject to 

the limitations herein contained and not 

otherwise, have hereunto set their 

respective hands and seals. 

Signature By (Name) 

(Title) lllllllllllllll

(Address) lllllllllllll

(Seal) 

Attest 

[FR Doc. 05–20017 Filed 10–4–05; 8:45 am] 

BILLING CODE 3410–02–P 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 1260 

[No. LS–01–06] 

Amendment to the Beef Promotion and 

Research Rules and Regulations 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

amend the Beef Promotion and Research 

Order (Order) established under the 

Beef Promotion and Research Act of 

1985 (Act) to reduce assessment levels 

for imported beef and beef products 

based on revised determinations of live 

animal equivalencies and to update and 

expand the Harmonized Tariff System 

numbers and categories, which identify 

imported live cattle, beef, and beef 

products to conform with recent 

updates in the numbers and categories 

used by the U.S. Customs and Border 

Protection (USCBP). 

DATES: Written comments regarding 

changes to this proposed rule must be 

received by December 5, 2005. 

ADDRESSES: Send any written comments 

to Kenneth R. Payne, Chief; Marketing 

Programs Branch, Room 2638–S; 

Livestock and Seed Program; 

Agricultural Marketing Service (AMS), 

USDA; STOP 0251; 1400 Independence 

Avenue, SW.; Washington, DC 20250–

0251. Comments may be sent by 

facsimile to 202/720–1125 and by 

electronic mail to 

BeefComments@usda.gov or 

www.regulations.gov. State that your 

comments refer to Docket No. LS–01–

06. Comments received may be 

inspected at this location between 8 

a.m. and 4:30 p.m., Monday through 

Friday, except holidays, or on the 

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

lsg/mpb/rp-beef.htm. 

FOR FURTHER INFORMATION CONTACT: 

Kenneth R. Payne, Chief, Marketing 

Programs Branch on 202/720–1115, fax 

202/720–1125, or by e-mail at 

Kenneth.Payne@usda.gov. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866 

The Office of Management and Budget 

(OMB) has waived the review process 

required by Executive Order 12866 for 

this action. 

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. 

Section 11 of the Act provides that 

nothing in the Act may be construed to 

preempt or supersede any other program 

relating to beef promotion organized 

and operated under the laws of the 

United States or any State. There are no 

administrative proceedings that must be 

exhausted prior to any judicial 

challenge to the provisions of this rule. 

Regulatory Flexibility Act 

Pursuant to requirements set forth in 

the Regulatory Flexibility Act (RFA) (5 

U.S.C. 601 et seq.), the Administration 

has considered the economic effect of 

this action on small entities and has 

determined that this proposed rule will 

not have a significant economic impact 

on a substantial number of small 

business entities. The effect of the Order 

upon small entities was discussed in the 

July 18, 1986 Federal Register [51 FR 

26132]. The purpose of RFA is to fit 

regulatory actions to the scale of 

businesses subject to such actions in 

order that small businesses will not be 

unduly burdened. 

There are approximately 270 

importers who import beef or edible 

beef products into the United States and 

198 importers who import live cattle 

into the United States. The majority of 

these operations subject to the Order are 

considered small businesses under the 

criteria established by the Small 

Business Administration (SBA) [13 CFR 

121.201]. SBA defines small agricultural 

businesses as those with annual receipts 

of less than $5 million. 

The proposed rule imposes no 

significant burden on the industry. It 

would merely update and expand the 

HTS numbers and categories to conform 

to recent updates in the numbers and 

categories used by USCBP. This 

proposed rule also adjusts the live 

animal equivalencies used to determine 

the amount of assessments collected on 

imported beef and beef products. This 

adjustment reflects an increase in the 

average dressed weight of cows 

slaughtered under Federal inspection 

that has occurred since the inception of 

the Beef Checkoff Program. Total import 

assessments collected under the Beef 

Checkoff Program in 2004 were 

$8,322,145 including both live cattle 

and beef and beef products. The 

Department estimates that the proposed 

adjustment for 2005 could result in a 

decrease in importer assessment of 

approximately $800,000. Accordingly, 

the Administrator of AMS has 

determined that this action will not 

have a significant impact on a 

substantial number of small entities. 

Paperwork Reduction Act 

In accordance with OMB regulations 

[5 CFR part 1320] that implement the 

Paperwork Reduction Act of 1995 [44 

U.S.C. Chapter 35], the information 

collection and recordkeeping 

requirements contained in the Order 

and Rules and Regulations have 

previously been approved by OMB 

under OMB control number 0581–0202 

and merged into OMB control number 

0581–0093. 

Background and Proposed Change 

The Act authorized the establishment 

of a national beef promotion and 

research program. The final Order was 

published in the Federal Register on 

July 18, 1986, (51 FR 21632) and the 

collection of assessments began on 

October 1, 1986. The program is 

administered by the Cattlemen’s Beef 

Promotion and Research Board (Board) 

appointed by the Secretary of 

Agriculture (Secretary) from industry 

nominations composed of 104 cattle 

producers and importers. The program 

is funded by a $1-per-head assessment 

on producer marketing of cattle in the 

United States and on imported cattle as 

well as an equivalent amount on 

imported beef and beef products. 

Importers pay assessments on 

imported cattle, beef, and beef products. 

USCBP collects and remits the 

assessment to the Board. The term 

‘‘importer’’ is defined as ‘‘any person 

who imports cattle, beef, or beef 

products from outside the United 

States.’’ Imported beef or beef products 

is defined as ‘‘products which are 

imported into the United States which 

the Secretary determines contain a 

substantial amount of beef including 

those products which have been 

assigned one or more of the following