Opinion ID: 296620
Heading Depth: 2
Heading Rank: 1

Heading: Contention of Justification in Terms of Deficits Within Nebraska

Text: 23 The first premise of Assistant Secretary Mehren for justification of these differentials was that supplemental milk is needed in the Central and Western Zones, at least in the months of short supply. He found that the differentials in the Order reflect the cost of moving supplemental milk from the Eastern Zone to the Central and Western Zone plants, and also reflect the incremental cost of these zones, over and above the Eastern Zone, in receiving imports from Minnesota and Wisconsin. 24 24 The Judicial Officer used a broader frame of reference for upholding the order, stating that the market area as a whole was a deficit market requiring imports of milk from the Minnesota-Wisconsin region, that milk has increased value as it moves westward from the surplus area of Minnesota and Wisconsin, and that while there are seasonal surpluses in the Central and Western Zones to some extent supplemental supplies are imported into these zones. 25 Thus the Agriculture officials painted Western and Central Nebraska as an area of short milk supply. When we study the record it becomes plain that whereas the national pattern for milk includes a volume moving west from Minnesota-Wisconsin, within the state of Nebraska the basic pattern of milk supplies is from west to east-- a kind of localized cross-current that is traverse to the national movement of milk westward from Wisconsin. The Secretary may take account of large trends and flows when formulating regulatory policies. Where, however, the specific area covered by a local milk marketing order is fairly characterized by a different trend, the regulation and its justification must take full account of the local movement. 26 What is involved in the Secretary's first justification of the Order before us is the movement of raw milk before it is processed, not the distribution of processed milk by the handler into the consumer market. And while raw milk is imported into Nebraska from the Minnesota-Wisconsin complex, 25 the exhibits in the record of the promulgation hearing show that within Nebraska itself the dominant movement of raw milk is eastward from the Central and Western Zones (sometimes referred to together as the 'western zones'), and there is no significant movement of milk westward to these western zones. We refer particularly to the data for 1963, as presented by the Coop itself in Exhibits 28 and 29. More than 11 million pounds of milk were transferred from the Central Zone (North Platte) to the Eastern Zone (Grand Island), while only 222,000 pounds were transferred from the Eastern to the Central Zone. More than 2 million pounds were shipped from the Western Zone (Scottsbluff) to the east, and no milk was transferred to the Western Zone. The data for 1964 in these exhibits follow the same pattern. 26 27 To the extent that milk is shipped westward from the Eastern Zone the shipments do not go to the western zones of Nebraska (except for a relatively small offset to the Central Zone), but are movements that go almost entirely to Denver. Two salient conclusions emerge. First, the Central and Western Zones are essentially areas of raw milk surplus, not deficit. The Coop found it necessary to return very little raw milk to those areas from the Grand Island station. /27/ Second, even if there is occasional deficit in the western zones, it is due primarily to the fact that the Coop, for its own reasons, has first moved raw milk eastward from the Central and Western Zones into Grand Island and then moved milk westward into Denver. 28 The basic movement in Nebraska, however, remains eastward. 29 28 The Government argues that the need for supplemental milk supplies in the western zones is evident from the fact of imports of milk into Nebraska from the east. But the record shows that while 11.4 million pounds were imported into Nebraska in 1963, 7.1 million were exported to Denver, yielding a net import into Nebraska of about 4.3 million pounds for that year (Ex. 30). Assuming that all of this milk was transferred westward to the western zones, it is only one-third as great as the 12.9 million net pounds transferred in 1963 from the western zones to the Eastern Zone. The conclusion is inescapable that the imports were not needed to supply handlers in the Central and Western Zones, but rather to fill the requirements of handlers located in the Eastern Zone. This was the testimony of Fairmont's witness (Rasey, Tr. 304), it is supported by the data, and no contrary explanation appears in the testimony of any other witness. 29 We move from the annual data to consider the possibility that in some months of the year handlers in the western zones will run short of raw milk. We see that even in September, 1963, when net imports into Nebraska reached their monthly high of 1.2 million pounds (Ex. 30), there was still a net transfer to the Eastern Zone from the Central Zone of 395,000 pounds, and from the Western Zone of 175,000 pounds. These facts establish that imports from other states were for the benefit of handlers in the Eastern Zone, not the western zones. Although the record does not isolate demand and supply for the Eastern Zone, it is plain that month by month the handlers in the Eastern Zone require milk movements into that Zone to meet their needs, and at least part of these needs is satisfied by transfers from the western zones of Nebraska. 30 In short, the Eastern Zone of Nebraska is a deficit area. The Department's conclusion that the western zones are a deficit area is not only unsupported by any data isolating demand and supply for the western zones,-- an omission which, in context, is not without importance,-- but is simply not supported by any substantial evidence whatever in the record before the court. 30 If there is a slight deficit in the western zones on occasion, due to the Coop's desire to take advantage of the higher Colorado prices, that does not warrant deviation from the uniform price payable by handlers, which the Act contemplates as the norm for milk marketing orders. For these exceptional situations, the Western and Central Zone handlers can pay higher prices on a private contract basis. But there is no reason to impose on these handlers a requirement to pay a higher premiun price all year around, and thereby put them at a severe disadvantage vis-a-vis their competitors handling milk in the Eastern Zone, on the theory that there is a general westward milk movement in Nebraska, when in fact the predominant movement in Nebraska is eastward. 31 31 We have undertaken this rather detailed evidentiary review because it is with diffidence that we hold that the Secretary's first ground of decision is not supported by substantial evidence on the record. Yet that is the only conclusion that we think can fairly be reached on this record. The Secretary's observation that milk supplies generally move westward from Wisconsin and Minnesota does not establish that handlers in the western zones of Nebraska are dependent for their supplies of raw milk on producers in the Eastern Zone of that state. On the contrary, what this record shows is that farmers in western Nebraska are able themselves to meet the needs of handlers in western Nebraska, and if they do not do so, it is because their own Coop insists that they first ship their milk eastward to a receiving station in eastern Nebraska. While normally the court defers to administrative expertise, the record is so devoid of support for the Secretary's finding with respect to milk supplies and movements in Nebraska that the finding cannot be allowed to stand. 32