Opinion ID: 106423
Heading Depth: 1
Heading Rank: 1

Heading: the general scheme of milk regulation.

Text: The order around which the present controversy centers, now titled Milk Marketing Order No. 2, 7 CFR §§ 1002.1 et seq., [2] though somewhat more complex than others, is in its general outline representative of the pattern of regulation established by the Secretary for the promotion of orderly marketing conditions in the milk industry and the preservation of minimum prices for farmers. Pursuant to the authority granted by § 8c (5) (A), [3] the Order classifies milk that is sold within the New York-New Jersey marketing area in accordance with the form in which or the purpose for which it is used. Milk that contains 3% to 5% butterfatthe usual proportion in ordinary liquid milkand is sold for fluid consumption is assigned to Class I. Milk that is used for cream (sweet and sour), half and half, or milk drinks containing less than 3% or more than 5% butterfat is classified in Class II. The remaindermilk that is to be stored for a substantial period and used for dairy products such as butter and cheeseis grouped in Class III. 7 CFR § 1002.37. This classification reflects the relative prices usually commanded by the different forms of milk. Thus, highest prices are paid for milk used for fluid consumption, and the lowest for milk which is to be processed into butter and cheese. Since the supply of milk is always greater than the demands of the fluid-milk market, the excess must be channeled to the less desirable, lower-priced outlets. It is in order to avoid destructive competition among milk producers for the premium outlets that the statute authorizes the Secretary to devise a method whereby uniform prices are paid by milk handlers to producers for all milk received, regardless of the form in which it leaves the plant and its ultimate use. Adjustments are then made among the handlers so that each eventually pays out-of-pocket an amount equal to the actual utilization value of the milk he has bought. Under the Marketing Order here in question it is primarily the handlers whose plants are located within the marketing area and who regularly supply that are with fluid milk who are regulated. All handlers who receive or distribute milk within the area are required to submit monthly reports to the Market Administrator, listing the quantity of milk they have handled and the use for which it was sold. But only the handlers operating pool plants i. e., plants which meet certain standards set out in 7 CFR §§ 1002.25-1002.29 [4] must pay the producers from whom they buy the uniform price set by the Administrator. This price is calculated each month on the basis of the reports that are submitted. After determining the minimum prices for each use classification pursuant to formulas set out in 7 CFR § 1002.40, the Administrator computes an average price for the pool milk handled during that month. This figure is reached by first multiplying the pool milk disposed of in each class by the established minimum price for that class, and then adding the products to the compensatory payments made for nonpool milk. After certain minor adjustments are made, this sum is divided by the total quantity of pool milk sold in the market during the month. The quotient is a blend price. With some adjustments to reflect transportation expenses, this uniform price must be paid to producers by all handlers maintaining pool plants. 7 CFR § 1002.66. Adjustments among handlers are made by way of a Producer Settlement Fund, into which each handler contributes the excess of his use value [5] over the uniform price paid by him to his producer. Handlers whose use value of the milk they purchase is less than the blend price they are required to pay may withdraw the difference from the fund. The net effect is that each handler pays for his milk at the price he would have paid had it been earmarked at the outset for the use to which it was ultimately put. But the farmer who produces the milk is protected from the effects of competition for premium outlets since he is automatically allotted a proportional share of each of the different use markets.