Source: https://www.federalregister.gov/documents/2004/12/30/04-28630/milk-in-the-arizona-las-vegas-marketing-area-tentative-partial-decision-on-proposed-amendment-and
Timestamp: 2017-09-21 18:33:31
Document Index: 592780321

Matched Legal Cases: ['ART 1131', 'art 900', 'art 900', 'art 1131', '§\u20091131', 'art 1131']

Federal Register :: Milk in the Arizona-Las Vegas Marketing Area; Tentative Partial Decision on Proposed Amendment and Opportunity To File Written Exceptions to Tentative Marketing Agreement and to Order
Milk in the Arizona-Las Vegas Marketing Area; Tentative Partial Decision on Proposed Amendment and Opportunity To File Written Exceptions to Tentative Marketing Agreement and to Order
A Proposed Rule by the Agricultural Marketing Service on 12/30/2004
Comments should be submitted on or before February 28, 2005.
69 FR 78355
78355-78359 (5 pages)
04-28630
Prior Document in This Proceeding
Interim Order Amending the Order Regulating the Handling of Milk in the Arizona-Las Vegas Marketing Area
PART 1131—MILK IN THE ARIZONA—LAS VEGAS MARKETING AREA
https://www.federalregister.gov/d/04-28630 https://www.federalregister.gov/d/04-28630
This tentative partial decision adopts on an interim final and emergency basis, a proposal that would eliminate the ability to simultaneously pool the same milk on the Arizona-Las Vegas milk order and any State-operated milk order that has marketwide pooling. This decision requires determining if producers approve the issuance of the amended order on an interim basis. Other proposals considered at the public hearing regarding producer-handlers will be addressed in a separate decision.
Comments (6 copies) should be filed with the Hearing Clerk, Room 1083-STOP 9200, United States Department of Agriculture, 1400 Independence Avenue, SW., Washington, DC 20250-9200, and you may also send your comments by the electronic process available at Federal eRulemaking portal at http://www.regulations.gov.
Jack Rower, Marketing Specialist, Order Formulation and Enforcement Branch, USDA/AMS/Dairy Programs, Room 2971-STOP 0231, 1400 Independence Avenue, SW., Washington, DC 20250-0231, (202) 720-2357, e-mail address: jack.rower@usda.gov.
The amendment to the rules proposed herein has been reviewed under Executive Order 12988, Civil Justice Reform. It is not intended to have a retroactive effect. If adopted, the proposed rule would not preempt any state or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.
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 Start Printed Page 78356action 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 milk marketing 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 September 2003, the month during which the hearing began, there were 106 dairy producers pooled on, and 22 handlers regulated by, the Arizona-Las Vegas order. Approximately 18 producers, or 17 percent, were small businesses based on the above criteria. On the handler side, 7, or 32 percent were “small businesses''.
The adoption of the proposed producer milk provision, a part of the order's pooling standards, serves to revise established criteria that determine the producer milk that has a reasonable association with the Arizona-Las Vegas milk marketing area and is not associated with other marketwide pools concerning the same milk. Criteria for pooling milk are also established on the basis of performance standards that are considered adequate to meet the Class I fluid needs of the market and determine those that are eligible to share in the revenue arising 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 equal 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 amendment 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 the proposed amendment would have no impact on reporting, record keeping, or other compliance requirements because they would remain identical to the current requirements. No new forms are proposed and no additional reporting requirements would be necessary.
This tentative partial 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.
Notice is hereby given of the filing with the Hearing Clerk of this tentative partial decision with respect to the proposed amendment to the tentative marketing agreement and the order regulating the handling of milk in the Arizona-Las Vegas marketing area. This notice is issued pursuant to the provisions of the Agricultural Marketing Agreement Act and the applicable rules of practice and procedure governing the formulation of marketing agreements and marketing orders (7 CFR part 900).
Interested parties may file written exceptions to this decision with the Hearing Clerk, U.S. Department of Agriculture, Room 1083-STOP 9200, 1400 Independence Avenue, SW., Washington, DC 20250-9200, by February 28, 2005. Six (6) copies of the exceptions should be filed. All written submissions made pursuant to this notice will be made available for public inspection at the office of the Hearing Clerk during regular business hours (7 CFR 1.27(b)).
The hearing notice specifically invited interested persons to present evidence concerning the probable regulatory and informational impact of proposals on small businesses. While no evidence was received that specifically addressed this issue, some of the evidence encompassed entities of various size.
The proposed amendment set forth below is based on the record of a public hearing held at Tempe, Arizona, on September 23-25, 2003, pursuant to a notice of hearing issued July 31, 2003, and published August 6, 2003 (68 FR 46505); reconvened at Seattle, Washington, on November 17-21, 2003, pursuant to a notice of reconvened hearing issued October 27, 2003, and published October 31, 2003 (68 FR 62027); and reconvened at Alexandria, Virginia, on January 20-22, 2004, pursuant to a notice of reconvened hearing issued December 18, 2003, and published December 29, 2003 (68 FR 74874).
1. Simultaneous pooling of milk on the order and on a State-operated milk order providing for marketwide pooling.
2. Determination as to whether emergency marketing conditions exist that would warrant the omission of a recommended decision and the opportunity to file written exceptions.
A proposal, published in the hearing notice as Proposal 4, seeking to exclude the same milk from being simultaneously pooled on the Arizona-Las Vegas order and any State-operated order which provides for marketwide pooling, should be adopted immediately. The practice of pooling milk on a Federal order and simultaneously pooling the same milk on a State-operated order has come to be Start Printed Page 78357referred to as double-dipping. The Arizona-Las Vegas order does not currently prohibit milk from being simultaneously pooled on the order and a State-operated order that provides for marketwide pooling. Proposal 4 was offered by United Dairymen of Arizona, a cooperative association that markets the milk of their members in the Arizona-Las Vegas marketing area.
A witness appearing on behalf of the Alliance of Western Milk Producers, testified in support of Proposal 4. The witness testified that double-dipping creates a competitive advantage in both procuring milk and competing for markets for milk.
A witness appearing on behalf of Northwest Dairy Association (NDA), testified in support of Proposal 4, saying that double-dipping not only creates disorderly conditions in California, it also results in competitive inequities in Federal milk order areas. The NDA witness explained that once minimal pool qualification standards are met, milk pooled in this manner rarely is delivered to a Federal order marketing area. The witness noted that the implementation of similar provisions in Orders 30, 32, and 124, which effectively prevents the simultaneous pooling of milk in the California State-wide pool and in the Federal order, should also be adopted for the Arizona-Las Vegas order.
A witness testifying on behalf of Dairy Farmers of America (DFA), a dairy farmer cooperative that markets the milk of their members in Arizona-Las Vegas and in most of the other Federal milk orders, supported adoption of Proposal 4. The witness indicated that the regulatory language for this proposal is identical to what has been adopted for Orders 30, 32, 33, and 124. A witness representing Sarah Farms, a producer-handler located in Arizona, testified in opposition to adopting Proposal 4. The witness was of the opinion that the adoption of Proposal 4 would be a trade restriction and that Sarah Farms preferred freer trade rather than more restricted trade. The witness concluded by hypothesizing that Proposal 4 was proposed to hurt Sarah Farms.
A witness representing Edaleen Dairy, a producer-handler located in Lynden, Washington, also testified in opposition to adopting Proposal 4. The witness indicated that since Sarah Farms was opposed to Proposal 4, they would also be opposed to it.
The witness explained that California operates a quota and overbase payment system. Under this system, all producers receive a uniform blend price in the form of the overbase. Other producers are entitled to an additional payment of $1.70 per hundredweight for their “quota” milk. The witness noted that producers who have moved California milk into the Arizona market have lost their quota and if they were to participate in California again they would only be entitled to the overbase price. The witness indicated that the California Department of Food and Agriculture had issued a decision that required a producer participating in the state order to do so for a period of twelve months at a time, preventing participation in the Federal order program because California does not permit dual participation. As a result, the witness noted that benefits can not be obtained by double-dipping.
In post hearing briefs, Edaleen Dairy, Mallorie's Dairy, Smith Brothers Farm, and Sarah Farms concurred that a producer located in California, pooling milk in Arizona, would not be considered double-dipping.
For nearly 70 years, the Federal government has operated the milk marketing order program. The law authorizing the use of milk marketing orders, the Agricultural Marketing Agreement Act of 1937 (AMAA), as amended, provides authority for milk marketing orders as an instrument which dairy farmers may voluntarily use to achieve objectives consistent with the AMAA and that are in the public interest. An objective of the AMAA, as it relates to milk, was the stabilization of market conditions in the dairy industry. The declaration of the AMAA is specific: “the disruption of the orderly exchange of commodities in interstate commerce impairs the purchasing power of farmers and destroys the value of agricultural assets which support the national credit structure and that these conditions affect transactions in agricultural commodities with a national public interest, and burden and obstruct the normal channels of interstate commerce.”
The AMAA provides authority for employing several methods to achieve more stable marketing conditions. Among these is classified pricing, which entails pricing milk according to its use by charging processors differing prices on the basis of form and use. In addition, the AMAA provides for specifying when and how processors are to account for and make payments to dairy farmers. Plus, the AMAA requires that milk prices established by an order be uniform to all processors and that the price charged can be adjusted by, among other things, the location at which milk is delivered by producers (section 608c(5)).
As these features and constraints provided for in the AMAA were employed in establishing prices under Federal milk orders, some important market stabilization goals were achieved. The most often recognized goal was the near elimination of ruinous pricing practices of handlers competing with each other on the basis of the price they paid dairy farmers for milk and in price concessions made by dairy farmers. The need for processors to compete with each other on the price they paid for milk was significantly reduced because all processors are charged the same minimum amount for milk, and processors had assurance that their competitors were paying the same value-adjusted minimum price.
The AMAA also authorizes the establishment of uniform prices to producers as a method to achieve stable marketing conditions. Marketwide pooling has been adopted in all Federal orders because it provides equity to both processors and producers, thereby helping to prevent disorderly marketing conditions. A marketwide pool, using the mechanism of a producer settlement fund to equalize the use-value of milk pooled on an order, meets that objective of the AMAA, ensuring uniform prices to producers supplying a market.
Since the 1960's the Federal milk order program has recognized the harm and disorder that resulted to both producers and handlers when the same milk of a producer was simultaneously pooled on more than one Federal order. When this occurs, producers do not receive uniform minimum prices, and handlers receive unfair competitive advantages. The need to prevent “double pooling” became critically important as distribution areas expanded and orders merged. Milk already pooled under a State-operated program and able to simultaneously be pooled under a Federal order has essentially the same undesirable outcomes that Federal orders once experienced and subsequently corrected.
There are other State-operated milk order programs that provide for marketwide pooling. For example, New York operates a milk order program for the western region of that State. A key feature explaining why this State-operated program has operated for years alongside the Federal milk order program is the exclusion of milk from the State pool when the same milk is already pooled under a Federal order. Because of the impossibility of the same milk being pooled simultaneously, the Federal order program has had no reason to specifically address “double dipping” or “double pooling” issues, Start Printed Page 78358the disorderly marketing conditions that arise from such practice, or the primacy of one regulatory program over another. The other States with marketwide pooling similarly do not allow double-pooling of Federal order milk.
The record supports that the Arizona-Las Vegas order should be amended to preclude the ability to simultaneously pool the same milk on the order if the same milk is already pooled on a State-operated order that provides for marketwide pooling.
Proposal 4 offers a reasonable solution for prohibiting the same milk to draw pool funds from Federal and State marketwide pools simultaneously. It is consistent with the current prohibition against allowing the same milk to participate simultaneously in more than one Federal order pool. Adoption of Proposal 4 will not establish any barrier to the pooling of milk from any source that actually demonstrates performance in supplying the Arizona-Las Vegas market's Class I needs.
Evidence presented at the hearing establishes that California milk that can be pooled simultaneously on a State-operated order and a Federal order, a practice commonly referred to as double-dipping, would render the Arizona-Las Vegas milk order unable to establish prices that are uniform to producers and to handlers. This shortcoming of the pooling provisions could allow milk not providing a reasonable or consistent service to meeting the needs of the Class I market to be pooled on the Arizona-Las Vegas order.
In view of these findings, an interim final rule amending the order will be issued as soon as the procedures are completed to determine the approval of producers whose milk is pooled in the Arizona-Las Vegas order. Consequently, it is determined that emergency marketing conditions exist and the issuance of a recommended decision is therefore being omitted. The record clearly establishes a basis as noted above for amending the order on an interim basis. Other proposals considered at the public hearing regarding producer-handlers will be issued in a separate decision.
(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 interim 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
Annexed hereto and made a part hereof are two documents: an Interim Marketing Agreement regulating the handling of milk, and an Interim Order amending the order regulating the handling of milk in the Arizona-Las Vegas marketing area, which have been decided upon as the detailed and appropriate means of effectuating the foregoing conclusions.
It is hereby ordered, that this entire tentative partial decision and the interim order and the interim marketing agreement annexed hereto be published in the Federal Register.
The month of May 2004 is hereby determined to be the representative period for the purpose of ascertaining whether the issuance of the order, as amended and as hereby proposed to be amended, regulating the handling of milk in the Arizona-Las Vegas marketing area is approved or favored by producers, as defined under the terms of the order 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.
(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 Arizona-Las Vegas 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).
(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 Start Printed Page 78359for 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
It is therefore ordered, that on and after the effective date hereof, the handling of milk in the Arizona-Las Vegas 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 authority citation for 7 CFR part 1131 continues to read as follows:
I. The findings and determinations, order relative to handling, and the provisions of §§ 1131.1 to 1131.86 all inclusive, of the order regulating the handling of milk in the Arizona-Las Vegas marketing area (7 CFR Part 1131) which is annexed hereto; and
(a) Record of milk handled. The undersigned certifies that he/she handled during the month of______2004, ___hundredweight of milk covered by this marketing agreement.
[FR Doc. 04-28630 Filed 12-29-04; 8:45 am]