Opinion ID: 757355
Heading Depth: 2
Heading Rank: 2

Heading: Class I Differentials

Text: 10 The subject of this dispute is the pricing of Class I milk. The current computation--base price plus an area-specific Class I differential--has been used since the 1960s. Until then, during the first 25 years of the milk-marketing-order program, [t]he independence of markets ... made it easier to deal with local changes in supply and demand. Agricultural Marketing Service, U.S. Department of Agriculture, Marketing Bulletin No. 27, The Federal Milk Marketing Order Program 34. In the 1960s, however, [a]dvances in transportation and refrigeration facilitated the movement of milk between markets and, thus, markets began to lose many of their local characteristics. The ability of handlers to obtain their supply of milk from sources outside the traditional milkshed made it necessary to give more weight to the cost of alternative milk supplies in establishing the Class I price level for a market. The increased mobility of milk made national supply-demand conditions an important factor in the supply-demand conditions of local markets.... Class I prices [came to be] viewed as a coordinated system of prices for the various markets.... Id. Therefore, [c]hanges in individual order prices usually are made only in the context of a system of prices for all markets. Id. 11 The last such changes before 1985 occurred in 1968. Thereafter, no significant changes were made, in part because markets remained adequately supplied at existing Class I price levels. When supplies have tightened, cooperatives have obtained over-order[-minimum] payments to help cover the cost of importing needed supplies. Id. at 35. 12 However, in 1985, Congress found that the then-existing Class I differentials were not high enough to accomplish their goal of adequate supply by nonlocal producers: 13 The last major changes made by the Department of Agriculture to Class I price differentials were in the late 1960s. Since costs, including transportation, assembly, and handling, have increased substantially during that time, the Committee feels it is necessary to adjust the fluid milk differentials in 35 of the 44 federal milk orders so that the prevailing minimum order prices will better cover the cost of supplying these markets. This action will reduce the need for over-order payments and providing [sic] equity among handlers supplying the market. 14 H.R.Rep. No. 99-271(I), at 22, reprinted in 1985 U.S.C.C.A.N. 1103, 1126. 15 Congress therefore amended the AMAA to address specifically the pricing of milk of the highest use classification, in § 608c(5)(A). That provision fixes the minimum aggregate amount of the adjustments, under clauses (1) and (2) [customary and quality adjustments] at levels ranging from $1.20 (for the Upper Midwest) to $4.18 (for Southeastern Florida) per hundredweight, representing increases for 35 of the 44 orders. These minimum differentials were to be effective [t]hroughout the 2-year period beginning on [December 23, 1985] (and subsequent to such 2-year period unless modified by amendment to the order involved). The differentials have not since been amended, by either Congress or the Secretary.