Proposed Rule: Milk Marketing Orders: Central

Wednesday,
September 13, 2006
Part IV
Department of
Agriculture
Agricultural Marketing Service
7 CFR Part 1032

Milk in the Central Marketing Area; Final
Decision on Proposed Amendments to
Marketing Agreement and to Order;
Proposed Rule
jlentini on PROD1PC65 with PROPOSALS4
VerDate Aug<31>2005 16:27 Sep 12, 2006 Jkt 208001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\13SEP4.SGM 13SEP4
54152 Federal Register / Vol. 71, No. 177 / Wednesday, September 13, 2006 / Proposed Rules
DEPARTMENT OF AGRICULTURE The amendments to the rules large business even if the local plant has
proposed herein have been reviewed fewer than 500 employees.
Agricultural Marketing Service under Executive Order 12988, Civil During January 2005, the time of the
Justice Reform. They are not intended to hearing, there were 5,778 dairy
7 CFR Part 1032 have a retroactive effect. If adopted, the producers pooled on, and 23 handlers
[Docket No. AO–313–A48; DA–04–06] proposed amendments would not regulated by, the Central order.
preempt any State or local laws, Approximately 5,365 producers, or 92.9
Milk in the Central Marketing Area; regulations, or policies, unless they percent, were considered ‘‘small
Final Decision on Proposed present an irreconcilable conflict with businesses’’ based on the above criteria.
Amendments to Marketing Agreement this rule. Of the 23 handlers regulated by the
and to Order The Agricultural Marketing Central order during January 2005, 11
Agreement Act of 1937 (the Act), as handlers, or 47.8 percent, were
AGENCY: Agricultural Marketing Service, amended (7 U.S.C. 601–674), provides considered ‘‘small businesses.’’
USDA. that administrative proceedings must be The adopted amendments regarding
ACTION: Proposed rule; final decision. exhausted before parties may file suit in the pooling standards serve to revise
court. Under Section 608c(15)(A) of the established criteria that determine those
SUMMARY: This document is the final
Act, any handler subject to an order may producers, producer milk, and plants
decision proposing to adopt that have a reasonable association with
request modification or exemption from
amendments that increase supply plant and consistently serve the fluid needs of
such order by filing with the
performance standards, amend features the Central milk marketing area. Criteria
Department of Agriculture (Department)
of the ‘‘touch-base’’ provision, amend for pooling are established on the basis
a petition stating that the order, any
certain features of the ‘‘split plant’’ of performance levels that are
provision of the order, or any obligation
provision and decrease the diversion considered adequate to meet the Class I
imposed in connection with the order is
limit standards of the order. This fluid needs of the market and, by doing
not in accordance with the law. A
decision also limits the volume of milk so, determine those producers who are
handler is afforded the opportunity for
a handler can pool to 125 percent of the eligible to share in the revenue that
a hearing on the petition. After a
total volume of milk pooled in the arises from the classified pricing of
hearing, the Department would rule on
previous month. This final decision is milk.
the petition. The Act provides that the
subject to producer approval. Criteria for pooling are established
district court of the United States in any
FOR FURTHER INFORMATION CONTACT: Jack district in which the handler is an without regard to the size of any dairy
Rower, Marketing Specialist, Order inhabitant, or has its principal place of industry organization or entity.
Formulation and Enforcement Branch, business, has jurisdiction in equity to Therefore, the proposed amendments
USDA/AMS/Dairy Programs, STOP review the Department’s ruling on the will not have a significant economic
0231–Room 2971, 1400 Independence petition, provided a bill in equity is impact on a substantial number of small
Avenue, SW., Washington, DC 20250– filed not later than 20 days after the date entities.
0231, (202) 720–2357, e-mail address: of the entry of the ruling. A review of reporting requirements
jack.rower@usda.gov. was completed under the Paperwork
Regulatory Flexibility Act and Reduction Act of 1995 (44 U.S.C.
SUPPLEMENTARY INFORMATION: This final
Paperwork Reduction Act Chapter 35). It was determined that
decision adopts amendments that: (1)
Increase supply plant performance In accordance with the Regulatory these proposed amendments would
standards to 25 percent for the months Flexibility Act (5 U.S.C. 601 et seq.), the have no impact on reporting, record
of August through February and to 20 Agricultural Marketing Service has keeping, or other compliance
percent for the months of March considered the economic impact of this requirements because they would
through July; (2) Require the non-pool action on small entities and has certified remain identical to the current
side of a split plant to maintain nonpool that this proposed rule will not have a requirements. No new forms are
status for 12 months; (3) Amend the significant economic impact on a proposed and no additional reporting
‘‘touch-base’’ feature of the order to substantial number of small entities. For requirements would be necessary.
require that at least one day’s the purpose of the Regulatory Flexibility This action does not require
production of the milk of a dairy farmer Act, a dairy farm is considered a ‘‘small additional information collection that
be received at a pool plant in each of the business’’ if it has an annual gross requires clearance by the Office of
months of January, February, and revenue of less than $750,000, and a Management and Budget (OMB) beyond
August through November, to be eligible dairy products manufacturer is a ‘‘small currently approved information
for diversion to non-pool plants; (4) business’’ if it has fewer than 500 collection. The primary sources of data
Lower the diversion limit standards by employees. used to complete the forms are routinely
five percentage points, from 80 percent For the purposes of determining used in most business transactions.
to 75 percent, for the months of August which dairy farms are ‘‘small Forms require only a minimal amount of
through February, and by five businesses,’’ the $750,000 per year information which can be supplied
percentage points, from 85 percent to 80 criterion was used to establish a without data processing equipment or a
percent for the months of March production guideline of 500,000 pounds trained statistical staff. Thus, the
through July; and (5) Establish per month. Although this guideline does information collection and reporting
provisions that limit the volume of milk not factor in additional monies that may burden is relatively small. Requiring the
a handler may pool in a month to 125 be received by dairy producers, it same reports for all handlers does not
percent of the volume of milk pooled in should be an inclusive standard for significantly disadvantage any handler
the prior month. most ‘‘small’’ dairy farmers. For that is smaller than the industry
This administrative action is governed purposes of determining a handler’s average.
by the provisions of Sections 556 and size, if the plant is part of a larger No other burdens are expected to fall
557 of Title 5 of the United States Code, company operating multiple plants that on the dairy industry as a result of
and therefore, is excluded from the collectively exceed the 500-employee overlapping Federal rules. This
requirements of Executive Order 12866. limit, the plant will be considered a rulemaking proceeding does not
Federal Register / Vol. 71, No. 177 / Wednesday, September 13, 2006 / Proposed Rules 54153
duplicate, overlap, or conflict with any 1. Pooling Standards and able to service the fluid milk needs
existing Federal rules. of the Central marketing area.
A. Performance Standards for Supply
Prior documents in this proceeding: Plants The DFA/PF witness testified that the
proposed increase in the performance
Notice of Hearing: Issued September A portion of a proposal, published in standards for supply plants would
17, 2004; published September 22, 2004 the hearing notice as Proposal 1, seeking increase the blend price received by
(69 FR 56725). to increase supply plant performance dairy farmers whose milk is pooled and
Notice of Hearing Delay: Issued standards by five percentage points, priced on the Central order. The witness
October 18, 2004; published October 13, from 20 percent to 25 percent, for the was of the opinion that an increase in
2004 (69 FR 61323). months of August through February, the blend price will serve to attract and
Recommended Decision: Issued and from 15 percent to 20 percent for retain milk supplies that are otherwise
February 15, 2006; published February the months of March through July, is shipped from the Central order area to
22, 2006 (71 FR 9015). adopted. A portion of another similar neighboring marketing areas. The
proposal, published in the hearing witness asserted that increasing supply
Preliminary Statement notice as Proposal 5, seeking to increase plant performance standards will ensure
supply plant performance standards by that the Class I needs of the Central
A public hearing was held upon
20 percentage points, from 15 percent to marketing area are being met.
proposed amendments to the marketing
35 percent, for the month of July, by 15 The DFA/PF witness testified that
agreement and the order regulating the
percentage points, from 20 percent to 35 current supply plant performance
handling of milk in the Central
percent, for the months of August standards allow far more milk to be
marketing area. The hearing was held,
through January and by 10 percentage pooled on the Central order than is
pursuant to the provisions of the
points, from 15 percent to 25 percent, necessary. Relying on market
Agricultural Marketing Agreement Act
for the month of March is not adopted. administrator data, the witness noted
of 1937, as amended (7 U.S.C. 601–674),
Currently, the Central order requires a that the projected Class I utilization of
and the applicable rules of practice and
supply plant to ship 20 percent of its 50.1 percent, anticipated during Federal
procedure governing the formulation of
total receipts to a distributing plant order reform for the consolidated
marketing agreements and marketing
during the months of August through marketing area, was not achieved. The
orders (7 CFR Part 900).
February, and 15 percent of its total witness added that the average Class I
The amendments set forth below are receipts during the months of March utilization in the Central marketing area
based on the record of a public hearing through July, in order for the total has ranged from a low of 26 percent in
held in Kansas City, Missouri, on receipts of the supply plant to be 2002 to nearly 33 percent in 2003. The
December 6–8, 2004, pursuant to a pooled. witness was of the opinion that these
notice of hearing issued September 17, Proposal 1 was offered jointly by average Class I utilization levels
2004, published September 22, 2004 (69 Dairy Farmers of America, Inc., (DFA), demonstrate that reserve supplies of
FR 56725), and a notice of a hearing and Prairie Farms Cooperative (PF), milk in the marketing area of 74 and 67
delay issued October 13, 2004, hereafter referred to as DFA/PF. DFA/PF percent, respectively, for 2002 and 2003,
published October 18, 2004 (69 FR are member-owned Capper-Volstead far exceed the 49–50 percent reserve
61323). cooperatives that pool milk on the levels projected during Federal order
Upon the basis of the evidence Central order. Proposal 1 would reform. In addition, the witness noted
introduced at the hearing and the record increase the amount of milk a supply that increased supply plant performance
thereof, the Administrator, on February plant would be required to ship to a standards implemented in 2001 have
15, 2006, issued a Recommended distributing plant by five percentage not been effective in reducing the excess
Decision containing notice of the points, from 20 percent to 25 percent, reserve supply of milk in the marketing
opportunity to file written exceptions for the months of August through area. The witness concluded that this
thereto. February, and from 15 percent to 20 data confirms that the current
The material issues, findings, percent for the months of March performance standards of the Central
conclusions and rulings of the through July, in order to pool all of its order provide opportunities for milk not
Recommended Decision, with one receipts on the Central order. regularly and consistently serving the
minor modification, are hereby The proponents are of the opinion Class I market to be pooled on the order.
approved, adopted and are set forth that current supply plant performance The DFA/PF witness described
herein. The material issues on the standards enable milk that does not concerns regarding the geography of the
hearing record relate to: demonstrate a consistent and reliable Central marketing area and explained
service to the Class I market to be that higher prices are received for milk
1. Pooling Standards pooled on the order. The proponents in the bordering Southeast and
A. Performance standards for supply
contend that the pooling of this Appalachian marketing areas.
plants.
B. The ‘‘Split plant’’ provision. additional milk is causing an According to the witness, higher milk
C. System pooling for supply plants. unwarranted lowering of the order’s prices in the Appalachian and Southeast
D. Elimination of the supply plant blend price. orders tend to attract milk from the
provision. A witness appearing on behalf of Central marketing area and create
E. Standards for producer milk. DFA/PF testified in support of Proposal localized supply imbalances within the
2. Establishing pooling limits. 1. The DFA/PF witness stated that eastern portion of the marketing area.
3. Transportation and assembly credits. increasing the volume of milk a supply The witness testified that increasing
Findings and Conclusions plant is required to ship to a pool supply plant performance standards
distributing plant in order to have all would deter milk originating from
The following findings and the receipts of the supply plant pooled, within the Central order boundaries
conclusions on the material issues are combined with other proposed changes from pooling on the Appalachian and
based on evidence presented at the to the Central order pooling provisions, Southeast orders. According to the
hearing and the record thereof: will better identify milk ready, willing witness this would tend to increase the
blend price paid to dairy farmers whose plant performance standards by 20 Louis and southern Illinois, who
milk is pooled on the Central order. percentage points, from 15 percent to 35 compete with handlers located in the
A number of DFA member dairy percent, for the month of July, by 15 Appalachian and Southeast orders,
farmers whose milk is pooled on the percentage points, from 20 percent to 35 obtain needed milk supplies.
Central order testified in support of the percent, for the months of August A brief submitted on behalf of DFA/
portion of Proposal 1 that would through January and by 10 percentage PF opposed adoption of the level of
increase supply plant performance points, from 15 percent to 25 percent, performance standards for supply plants
standards. The dairy farmer witnesses for the month of March. These proposed offered by Dean. DFA/PF noted that
were of the opinion that increasing changes to supply plant performance increasing supply plant performance
supply plant performance standards standards are not recommended for standards to the levels advanced in
will raise the level of Class I utilization adoption. Proposal 5 are unnecessarily high and
and in turn, increase the blend price. Two witnesses appeared on behalf of are more restrictive than current market
A witness from National All-Jersey Dean in support of increasing supply conditions could reasonably justify.
(NAJ) representing AMPI, et al., plant performance standards. The A brief submitted by AMPI, et al.,
(Associated Milk Producers Inc., Central witnesses were of the opinion that reiterated the group’s opposition to
Equity Cooperative, Land O’ Lakes, Inc., current supply plant performance increased performance standards for
First District Association, Foremost standards are inadequate to assure a supply plants as advanced by both Dean
Farms USA, joined by Wells Dairy, Inc., reasonable supply of fluid milk to the and DFA/PF. The brief highlighted the
Milnot Holdings and National All- order’s distributing plants. The contention that increased performance
Jersey), testified in opposition to the witnesses were of the opinion that standards for supply plants would
portion of Proposal 1 that would increasing supply plant performance unfairly penalize reserve suppliers of
increase supply plant performance standards as they proposed to the levels the marketing area by restricting their
standards. NAJ is a national advanced would better attract an ability to share in the benefits of the
organization whose mission is to adequate milk supply for Class I use to marketwide pool.
promote milk pricing equity and the marketing area. B. The ‘‘Split Plant’’ Provision
increase the value and demand for the The first Dean witness testified that
milk produced by the Jersey breed. The marketwide pooling and classified A proposal from Dean, published in
NAJ witness was of the opinion that pricing are built on the assumption that the hearing notice as Proposal 10,
increasing supply plant performance Class I milk is the highest priced class seeking to require the nonpool side of a
standards would result in inefficient and that pool revenues generated from split plant to maintain nonpool status
movements of milk and pass the costs Class I sales will attract a regular and for 12 months, is adopted. Another Dean
of regulatory inefficiencies to consistent milk supply. The witness was proposal, published in the hearing
consumers. of the opinion that current supply plant notice as Proposal 9, seeking to
In their post hearing brief, DFA/PF performance standards allow handlers eliminate the split plant provision is not
reiterated their support for Proposal 1. to pool milk on the Central order that adopted.
The brief asserted that adoption of the does not regularly and consistently The current split plant provision
portion of Proposal 1 that would serve the Class I market. According to provides for designating a portion of a
increase supply plant performance the witness, low supply plant pool plant as a nonpool plant provided
standards would more accurately performance standards reduce the blend that the nonpool portion of the plant is
identify the milk of producers servicing price paid to producers who physically separate and operated
the fluid needs of the market. According consistently serve the needs of the separately from the regulated or ‘‘pool’’
to the brief, increasing supply plant Central order fluid market by allowing side of the plant. Current provisions
performance standards will increase the lower-valued milk to be pooled on the afford handlers operating a split plant
blend price for the producers who order. the option of maintaining nonpool
provide regular and consistent service to The first Dean witness was of the status or qualifying the nonpool side of
the Class I market. The DFA/PF brief opinion that adoption of higher the plant for pooling on a monthly basis.
reiterated support for not pooling milk performance standards would increase The Dean witness testified that the
which does not provide regular and the volume of milk available to the Class nonpool side of a split plant can
consistent service to the fluid milk I market. The witness further testified facilitate the pooling of milk that does
needs of the Central marketing area. that if the USDA adopted higher not demonstrate a regular and consistent
A brief from Select Milk Producers, performance standards for supply service to the fluid milk needs of the
Inc. (Select) and Continental Dairy plants, adoption of Proposals 9 and 10, Central marketing area. The witness
Products, Inc. (Continental) supported or Proposals 11, 12, and 13 would also stated that if Proposal 10 was adopted,
adoption of the higher performance be necessary. (Proposals 9, 10, 11, 12, then Proposal 4, a proposal to eliminate
standard features of Proposal 1. Select and 13 are discussed later in this all supply plant provisions, and
and Continental are member-owned decision.) Proposal 9, a proposal to eliminate split
Capper-Volstead cooperatives whose The second Dean witness also was of plants, would not be needed.
milk is pooled on the Central order. The the opinion that increasing supply plant The Dean witness testified that
brief noted that adoption of higher performance standards would help to Proposal 10 would require the nonpool
performance standards would deter the ensure that the fluid milk needs of the side of a split plant to maintain nonpool
pooling of milk on the order not marketing area are being met. According status for a 12-month interval.
servicing the fluid needs of the market. to the witness, increasing supply plant According to the witness, adoption of
A portion of Proposal 5, advanced by performance standards would decrease this provision would deter pooling milk
Dean Foods (Dean) (who described the volumes of milk in lower-valued that does not regularly and consistently
themselves as the largest processor and uses pooled on the order, thereby serve the Class I market. The witness
distributor of fluid milk in the United increasing the order’s blend price. The added that Proposal 10 was advanced as
States, owning and operating nine witness testified that increasing supply an alternative to Proposal 9. The witness
distributing plants regulated by the plant performance standards would testified that as advanced in Proposal 9,
Central order), would increase supply assist fluid milk handlers located in St. a split plant could either be a pool plant
or a nonpool plant but not both. The producer farms as qualifying shipments. because their adoption would eliminate
witness stated that if USDA did not Current Central order provisions or overly restrict the operation of supply
eliminate split plants then Dean would provide the ability for 2 or more supply plant systems. On brief, DFA/PF noted
seek the adoption of Proposal 10. plants (subject to certain additional that, as with elimination of the split
In a post hearing brief, Select and conditions) to operate as a ‘‘system’’ in plant provision, some small producers
Continental supported adoption of meeting the qualifications for pooling in may not have alternative markets for
Proposal 10. The brief stated that the same manner as a single plant. their milk if supply plant systems are
Proposal 10 would deter the pooling of The Dean witness testified that system eliminated or are made overly
milk that does not regularly and pooling affords handlers the ability to restrictive.
consistently serve the Class I market. link several supply plants together in an In a post hearing brief, AMPI, et al.,
According to the brief, split plants effort to qualify producer milk for reiterated opposition to Proposals 11,
should be prohibited from using milk pooling on the order. According to the 12, and 13. The AMPI, et al., brief
receipts in the nonpool side of the plant witness, current system pooling opposed restrictions on pooling milk of
from being pooled without provisions allow plants and farms close producers ready, willing, and able to
demonstrating actual service to the to distributing plants to deliver serve the Class I needs of the Central
Class I market. The brief expressed the producer milk on behalf of more distant marketing area. The brief opposed
opinion that reducing the volume of plants, thereby providing for the pooling elimination or restriction of supply
milk that a split plant could pool on the of milk that does not regularly and plant systems contending such action
order from its nonpool side would tend consistently serve the Class I market. would eliminate markets for the milk of
to increase the Central order blend According to the witness, adoption of small dairy farmers without alternative
price. Proposal 11 would require plants to markets available.
The Select and Continental brief transfer milk to obtain and maintain Select and Continental also opposed
however, opposed the elimination of eligibility for pool qualification. The adoption of Proposals 11, 12 and 13 in
split plants as advanced in Proposal 9. witness stated that Proposal 11 would their post-hearing brief. The brief
The brief stated that requiring a split require every handler to pool their opposed eliminating or restricting
plant to elect non-pool status for 12 producers on the basis of actual supply plant systems on the basis that
months for its nonpool side would deliveries to distributing plants. no verifiable evidence was presented
provide sufficient incentive to prevent The Dean witness testified in support demonstrating that supply plant systems
the pooling of excess milk through split of Proposal 12 in the event supply plant do not provide consistent and reliable
plants. systems were not eliminated as service to the Class I market.
DFA/PF commented on brief that advanced in Proposal 11. According to
Dean’s Proposals 4–13 in general ‘‘go D. Elimination of the Supply Plant
the witness, Proposal 12 would limit the
too far, too fast’’ given the current Provision
use of supply plant systems to a single
market conditions of the Central handler rather than multiple handlers as A proposal by Dean, published in the
marketing area. According to the brief, currently provided in the order. The hearing notice as Proposal 4, seeking to
DFA/PF contend that the adoption of witness testified that allowing only a eliminate the supply plant provision, is
the Dean proposals would not serve the single handler to qualify pool supply not adopted.
needs of small dairy farms. The brief plants through system pooling A Dean witness characterized
noted that some small producers may provisions would ensure that each Proposal 4 as a preferred alternative to
not have alternative markets for their handler is willing and able to increasing supply plant performance
milk if Dean’s proposal to eliminate the demonstrate regular and consistent standards sought in Proposals 1 and 5.
split plant provision was adopted. service to the fluid milk needs of the The witness explained that if Proposal
The AMPI, et al., brief opposed Central marketing area. 4 is adopted, then Proposals 9–13,
elimination of the split plant provision The Dean witness testified that seeking to increase performance
or requiring a 12-month pooling Proposal 13 would require each plant in standards for supply plants and supply
commitment from operators of split a supply plant system to meet at least plant systems would not be needed. The
plants. Their opposition was based on 40 percent of the total performance witness testified that while the role of
the view that elimination of split plants, standard required for pooling. supply plants in the milk order system
or imposing a 12-month pooling According to the witness, Proposal 13 is is to supply the needs of distributing
commitment for split plant operators, similar to Proposal 11 in that it would plants, the milk supply of plants for the
would unfairly restrict their ability to prohibit the use of milk shipped directly Central marketing area is only of
pool milk on the order. from producer farms to qualify a supply residual concern because it provides an
plant system. However, the witness outlet for reserve producers when their
C. System Pooling for Supply Plants stated that Proposal 13 also would milk is not needed for fluid use.
Three proposals presented by Dean, require every supply plant in a supply The Dean witness testified that supply
published in the hearing notice as plant system to ship a significant plants no longer represent the most
Proposals 11, 12 and 13, and modified volume of milk to the fluid market. The efficient means for supplying
at the hearing, are not adopted. Proposal witness noted that qualification of distributing plants. According to the
11 would have eliminated providing for distant milk would be discouraged by witness, supply plants play a minor role
supply plant systems. Proposal 12 adoption of Proposals 12 and 13 since in the Central marketing area,
would have required a supply plant the use of milk shipped directly from representing less than 5 percent of the
system to be operated by only one producer farms for qualification milk shipped to distributing plants.
handler. Proposal 13 would have purposes would be prohibited. The According to the witness, milk
required that every plant participating Dean witness expressed preferences for assembled from farms must be received
in a system ship 40 percent of the the adoption of Proposal 11 over at a supply plant, cooled and stored,
system’s qualifying shipment as if they Proposal 12, and adoption of Proposal and reloaded and delivered to
had been operating as separate plants. 12 over Proposal 13. distributing plants. The witness stated
Proposal 13 also would have prohibited A witness from DFA/PF expressed that the increased handling of milk
using milk shipped directly from opposition to Proposals 11, 12, and 13, through supply plants reduces its
quality compared with milk that is dairy farmer be physically received at a alternative order on which to pool, the
direct delivered from farms. The witness pool plant in each of the months of current pooling standards of the Central
said that direct delivery from farms to January, February and August through order make it the most likely candidate
distributing plants is a superior method November. If the touch-base standard is among Federal milk orders. The witness
for ensuring that milk pooled on the not met, the milk would have to be testified that the current pooling
order serves the Class I needs of the physically received at a pool plant in standards of the Central order can not
market. The witness was of the opinion each of the months of March through adequately prevent such milk from
that supply plants inappropriately July and December. The current touch- pooling because the pooling standards
facilitate pooling milk that does not base standard of the Central order are too liberal. According to the witness,
regularly and consistently serve the specifies a one-time only delivery this milk can not demonstrate regular
Class I market. standard. and reliable service to the Class I
A witness representing NAJ testified The DFA/PF witness explained that market.
in opposition to the elimination of the current one-time touch-base The DFA/PF witness illustrated that
supply plants. According to the witness, standard of the Central order should be milk produced in Idaho, for example,
elimination of the supply plant replaced by the strengthened touch-base cannot profitably be delivered to
provision also would reduce the ability feature of Proposal 1. The witness distributing plants located in the Central
of dairy farmers to pool milk on the continued that the months of January, marketing area. According to the
Central order. The witness was of the February, and August through witness, milk produced in this region
opinion that eliminating the supply November, were added to the proposed would need to travel more than 680
plant provision would have a negative touch-base standard to correspond with miles for delivery at the nearest
impact on the income of the periods of higher Class I demands. The distributing plant of the order located in
cooperatives represented by NAJ. The DFA witness explained that requiring Denver. The witness asserted that the
witness stated that supply plants one day’s milk production of a producer current one-time touch-base standard
provide a legitimate means by which to be delivered to a pool plant in each combined with the existing diversion
producers continue to serve the Class I of these six months should increase limit standards of the order provide the
market of the Central marketing area. milk available for Class I use. The DFA/ incentive for milk located far from the
A witness for DFA/PF testified in PF witness was opposed to any touch- marketing area to be profitably pooled
opposition to the elimination of supply base standard of more than one day per on the order which otherwise would not
plants. According to the witness, month for the six months advanced by be economically feasible.
provisions for supply plants should be the proposal, as being overly restrictive. The witness provided a scenario
provided because they continue to play The DFA/PF witness testified that where a single 50,000-pound load of
a role in supplying milk to distributing increasing the touch-base standard and milk delivered once to Denver could
plants. DFA/PF reiterated this lowering the diversion limit standards cause one million pounds of milk to be
opposition to Proposal 4 in their post- of the Central order will help to ensure pooled on the Central order through the
hearing brief. AMPI, et al., joined DFA/ that milk that could not consistently diversion process but delivered to
PF in opposing this proposal. and reliably demonstrate service to the plants far from the marketing area.
Class I market is not pooled on the According to the witness’ calculations,
E. Standards for Producer Milk order. The witness testified that the a 50,000-pound load of milk delivered
Several amendments to the Producer pooling of such milk on the order once to a pool plant located in Denver
milk provision of the Central order are reduces the blend price paid to would incur a loss $4,640. However, the
adopted. The amendments were largely producers who consistently and reliably witness explained that each additional
contained in Proposal 1. Changes to the serve the Class I needs of the Central load of milk, up to one million pounds
producer milk provision are necessary marketing area. now qualified for diversion to nonpool
to more accurately identify the milk of The DFA/PF witness acknowledged plants located near producers farms,
those dairy farmers that are regularly that amendments to the pooling would return an additional $7,081. The
and consistently serving the Class I provisions of the Central order witness emphasized that the milk
needs of the market. The adopted implemented in 2003 reduced the portrayed in this example would rely
amendments include: (1) Increasing the volume of milk pooled that was not solely on the liberal pooling standards
touch-base standard so that one day’s serving the Class I needs of the market. of the order. The milk would never
milk production of a dairy farmer must However, the witness noted that those consistently and reliably supply the
be delivered to a pool plant in each of changes did not contemplate that milk Central marketing area.
the months of January, February and from the Mountain States might seek to In another scenario, the DFA/PF
August through November for the milk be pooled on the Central order. The witness illustrated the impact of 25
of the dairy farmer to be eligible for witness was of the opinion that the million pounds of milk a month
diversion to a nonpool plant; and (2) current touch-base and diversion limit shipped from southern Idaho that would
Decreasing the diversion limit standards standards were inadequate to prevent be pooled on the Central order through
to not more than 75 percent of receipts the sharing of Class I revenue with the the diversion process by meeting the
during August through February, and milk of producers that could not one-time touch-base standard during the
not more than 80 percent of receipts for possibly serve the Class I market of the months of November 2003–January
March through July. Central marketing area. The witness was 2004. The witness explained that
The feature of Proposal 1 to of the opinion that if milk located far pooling this volume of milk would have
geographically limit the location of from the Upper Midwest marketing reduced the Central order’s blend price
nonpool plants eligible to receive area 1 and currently pooled on the by $0.25 per cwt.
diverted milk to those plants in States Upper Midwest order were to seek an In a third scenario, the DFA/PF
located in the marketing area and New witness demonstrated how milk located
Mexico is not adopted. 1 Amendments to the pooling provisions of the
in southern Idaho can be pooled every
Proposal 1 increases the touch-base Upper Midwest order were implemented on month through the diversion process by
February 1, 2006 (70 FR 73126). See Final Partial
standard to require the equivalent of at Decision published in the Federal Register, October meeting the one-time touch-base
least one days’ milk production of a 5, 2005 (70 FR 58086). standard of the Central order. The
witness said that this scenario was consequences for dairy farmer income, all distributing plants of the order are
based on the 58-month period of if adopted. The NAJ witness was of the adequately supplied. Additionally,
January 2000 to October 2004. The opinion that the aim of Proposal 5 was other measures are being taken to
witness explained that this scenario to deter milk from being pooled on the prevent the pooling of milk which can
assumes that a single 50,000-pound load order. It was the witness’ opinion that not demonstrate regular and consistent
of milk was shipped to a distributing the adoption of Proposal 5 would create service in supplying the Class I needs of
plant located in the Central marketing marketing inefficiencies and additional the marketing area. The pooling of such
area and all other milk diverted to costs for members of NAJ. The witness milk results in an unwarranted lowering
nonpool plants are located in Idaho. The also was of the opinion that the of the blend price returned to those
witness testified that the shipping adoption of Proposal 5 would producers who demonstrate regular and
handler would receive a positive return discourage available milk supplies in consistent service in supplying the Class
averaging $0.348 per cwt per month the milkshed from pooling on the I needs of the market.
($201,000 over the 58-month period) on Central order. The pooling standards of all Federal
the total volume of milk pooled. The NAJ and AMPI, et al., also submitted milk marketing orders, including the
DFA/PF witness concluded that from exceptions to increasing the touch-base Central order, are intended to ensure
their scenarios, the current Central order standard and lowering the diversion that an adequate supply of milk is
diversion limit and touch-base limit standards in the recommended available to meet the Class I needs of the
standards encourage pooling of milk decision. NAJ and AMPI, et al., market and provide the criteria for
that can not and does not regularly and reaffirmed their opinion that adoption determining the producer milk that has
consistently supply the Class I needs of of a one day touch-base standard along demonstrated service in meeting the
the market. with a decrease in diversion limits Class I needs of the market and thereby
A brief submitted by Select and would unnecessarily burden their receive the order’s blend price. The
Continental supported the producer members. pooling standards of the Central order
milk amendments called for in Proposal Central Equity, a dairy farmer are represented in the Pool plant,
1, except for limiting diversions to cooperative located in Missouri, also Producer, and the Producer milk
nonpool plants that are located in the took exception to increasing the touch- provisions of the order and are based on
States comprising the Central marketing base standard. One hundred and performance, specifying standards that
area. The brief noted that the goal of the fourteen Central Equity dairy farmer if met, qualify a producer, the milk of
Federal order program should be to members submitted a form-letter a producer, or a plant to share in the
ensure that milk pooled on the order detailing the difficulties the cooperative benefits arising from the classified
actually serves the Class I market. would endure in meeting the increased pricing of milk.
Features of Proposal 5, offered by touch-base standard. The cooperative Pooling standards that are
Dean, regarding diversion limits and members were of the opinion that the performance-based provide the only
touch-base standards are not adopted. recommended touch-base standard viable method for determining those
Proposal 5 seeks to raise the touch-base would significantly increase hauling producers eligible to share in the
standard to 4 days in each month of the costs and require the cooperative to pay marketwide pool. It is usually the
year and decrease diversion limits to 65 pooling fees for access to pool plants. additional revenue generated from the
percent for the months of July through The cooperative added that they are not higher-valued Class I use of milk that
January, and 75 percent during the opposed to increased performance adds additional income to producers,
months of February through June. A standards in general, but are concerned and it is reasonable to expect that only
Dean witness stated that increasing the with difficulties that small cooperatives those producers who consistently bear
touch base requirement would ensure and independent dairy farmers face in the costs of supplying the market’s fluid
the increased availability of milk to obtaining access to pool facilities. needs should share in the returns
serve the needs of the fluid market. The Exceptions to increasing the touch- arising from higher-valued Class I sales.
witness testified that adopting higher base standard and lowering the An important objective of pooling
touch-base and lower diversion limit diversion limit standard were also standards is identifying the milk that
standards would ensure that pool plants received from Wells Dairy (Wells). serves the fluid milk needs of the
would keep their facilities operating at Wells Dairy is an Iowa based dairy market, a feature which if ineffective
a higher level of output than would be products manufacturer. Wells was of the can result in pooling milk that is not
the case if more milk were diverted. opinion that the recommended touch- providing such service
The diversion limit standard feature base standard would be difficult for Record evidence supports finding that
of Proposal 5 was modified by Dean on certain dairy farmers and dairy farmer certain features of pooling standards of
brief. The modification specified that cooperatives to meet. Wells noted that the Central order relating to
milk would not be eligible for diversion increasing the touch-base standard and performance standards for supply
‘‘unless’’ (instead of ‘‘until’’) milk has lowering the diversion limit standard plants, diversion limits, touch-base, and
been physically received as producer will unduly burden dairy farmers and split plants need to be amended given
milk at a pool plant, and the exception cooperatives that have limited access to the pooling of milk that does not
for a loss of Grade A status was changed pooling facilities served under full- regularly and consistently serve the
to a period not to exceed 21 rather than supply contracts. Class I needs of the Central marketing
10 days in a calendar year. The record reveals that distributing area.
The witness from NAJ, on behalf of plants in certain areas of the marketing The most recent amendments to the
AMPI, et al., testified in opposition to area are having difficulty obtaining Central order (published in the August
increasing the touch-base and lowering reliable milk supplies. Because this 27, 2003, Final Decision (68 FR 51640))
the diversion limit standards as decision does not adopt transportation intended to correct similar inadequacies
advanced. The witness stated that the credits (discussed later in this decision) of the supply plant pooling provisions
proposed lowering of diversion limits for the movement of milk to distributing and diversion limit standards for the
together with increasing supply plant plants, increasing the performance consolidated Central order. However,
performance standards as called for in standards for supply plants is a the record reveals that the combination
Proposal 5 would have negative reasonable measure to better assure that and features adopted for pool plants in
2003 have not been as effective as the continued importance of supply pool plant. The record evidence
intended to reasonably assure that only plant systems to supplying the Class I confirms that usually this milk is
milk of producers who regularly and market. delivered to a nonpool plant located
consistently serve the Class I market is Record evidence from proponents and nearer the farms of producers located far
pooled on the order. opponents of limiting diversions to from the marketing area who cannot
Record evidence reveals that the supply plants located in the marketing serve the Class I market. It is therefore
performance and pooling standards of area or New Mexico supports appropriate to amend the order’s
the Central order are inadequate to concluding that dairy farmers in some diversion provisions to ensure that milk
ensure that the benefits of consistently regions of the Central marketing area pooled through the diversion process is
and reliably servicing the Class I market rely on supply plants to market their part of the legitimate reserve supply of
are shared equitably among those milk. In addition, the record contains the pool plant from which it was
producers who actually bear the costs of evidence that supply plants and supply diverted. This standard is a necessary
serving that market. The record plant systems continue to provide safeguard against excessive milk
evidence demonstrates that milk distant necessary service to the Class I market supplies becoming associated with the
from the Central marketing area does without regard to the location of those market through the diversion process to
not provide reasonable service to the plants or plant systems. According to prevent the unwarranted reduction of
Class I market but can be pooled on the the record, distant milk may use the the order’s blend price.
order because of current pooling pooling standards of the Central order as However, the record does not support
standards. This evidence shows that a means to pool milk that will never finding that diversions to plants not
pooling large volumes of milk at lower perform service to the Class I market. located within the marketing area or
class-use values has lowered the order’s However, the record does not show New Mexico cannot be part of the
blend price. Specifically, the record clearly that milk diverted to supply legitimate reserve supply for the
shows that the current one-time touch- plants outside the marketing area or marketing area. In this regard, the
base standard and the diversion limit New Mexico cannot be part of the proposed limitation on diversions based
standard of the order do not properly legitimate reserve of the market which on plant location is not reasonable.
identify the milk of producers who may require additional pooling Based on the record, the proposed
reliably and consistently serve the Class safeguards. Performance rather than increase in the touch-base standard and
I market. plant location continues to be the lowering of the diversion limitation
The record demonstrates that current standard for identifying the milk of standard is adequate to ensure that milk
pooling standards of the Central order producers who should share in the consistently and reliably serving the
make it the most logical order for distant benefits of pooling. In that regard, this Class I market is properly identified.
milk—such as in Southern Idaho—to be decision finds agreement with the Accordingly, the portion of Proposal 1
pooled. The record shows that the opponents of limiting diversions to seeking to limit diversions to plants
current performance standards of the supply plants located within the located in the marketing area or New
Central order are insufficient to prevent marketing area or New Mexico, as Mexico is not adopted.
milk from qualifying for pooling while sought in Proposal 1. Exceptions received by AMPI, et al.,
not performing service to the Class I Despite the comments by AMPI et al., NAJ, Central Equity and Wells Dairy
market. NAJ, Central Equity and Wells Dairy, opined the difficulties that certain
In addition, the record provides this decision continues to find that cooperatives and independent dairy
evidence that milk produced in areas several of the performance standards farmers face in meeting an increased
distant from the marketing area cannot advanced in Proposal 1 are reasonable touch-base standard. However, this
profitably be delivered to distributing in light of other adopted changes to the decision continues to find that that the
plants in the Central marketing area. order’s pooling provisions. The touch-base standard should be amended
However, the current liberal touch-base combination of amendments increasing so that at least one days’ milk
and diversion limit standards make supply plant performance standards, production of a dairy farmer is
pooling on the Central order attractive modifying the split plant provision, physically received at a pool plant
while reducing the blend price of the reducing diversion limit standards and during January, February, and August
order for those producers who actually increasing the touch-base standard are through November for the milk of the
provide service to the Class I market. appropriate in light of denying dairy farmer to be eligible for diversion
Record evidence reveals the proposals to establish transportation to a nonpool plant. Amending the
continued importance of supply plants and assembly credits. The adopted touch-base standard is widely supported
for producers whose milk provides amendments should more accurately by the record and should reduce the
consistent and reliable service to the identify the milk of those producers that ability of milk not performing a
Class I market. According to the record, provide a consistent and reliable supply consistent and reliable service to the
opposition to restrictive supply plant of milk to the Class I needs of the Class I market from being pooled. The
standards beyond those advanced in Central marketing area and assure that months of January, February, and
Proposals 1 and 10 was based on the distributing plants are adequately August through November are,
continued need for supply plant service supplied. according to the record, the high
to distributing plants in the marketing The record indicates that milk located demand months for fluid milk.
area. Similarly, the record reveals a either inside or outside the marketing Adoption of the one-day touch base
consensus among producers concerning area can be reported as diverted milk by standard for each of these six months
their continued support for supply plant a pooled handler. This milk is eligible will more properly identify the milk of
systems as an integral part of milk to receive the order’s blend price. Under those producers serving the market’s
supply networks in the Central the current pooling provisions, this can Class I needs. Accordingly, exceptions
marketing area. Opposition to the occur after a one-time delivery to a received from AMPI, et al., NAJ, Central
elimination or additional restriction of Central marketing area pool plant. After Equity and Wells Dairy are found to not
supply plants and supply plant systems the initial delivery, however, such milk be compelling.
in Proposals 4, 11, 12, and 13, is need never again be physically Record evidence does not support
revealed by the record to be based on delivered to a Central marketing area finding that the 4-day touch base
standard advanced by Dean would the Class I use of milk provides the greater than the Class III price, then
improve the identification of dairy additional revenue to a marketing area’s dairy farmers receive a positive PPD.
farmers whose milk serves beyond what total classified use value of milk. However, a negative PPD can occur if
a 1-day standard would provide within The series of Class prices that are the value of the Class III milk in the pool
the context of current marketing applicable for any given month are not exceeds the value of the remaining
conditions. This will be reinforced by announced simultaneously. The Class I classes of milk in the pool. This can
the other adopted amendments to the price and the Class II skim milk price occur as a result of the price inversions
order’s pooling standards. are announced prior to the beginning of discussed above.
The amendment requiring a handler the month for which they will be The Central Federal order operates a
to make a 12-month commitment if effective. Class prices for milk in all marketwide pool. The Order contains
opting to create a split plant will ensure other uses for the month are not pooling provisions which specify
that the milk shipped from the pool side determined until on or before the 5th criteria that, if met, allow dairy farmers
of a split-plant serves the Class I market. day of the following month. The Class to share in the benefits that arise from
This amendment (Proposal 10, I price is determined by adding a classified pricing through pooling. The
advanced by Dean) is a reasonable differential value to the higher of either equalization of all class prices among
modification of the split plant feature an advanced Class III or Class IV value. handlers regulated by an order is
for supply plants to provide for orderly These values are calculated based on accomplished through a mechanism
marketing and maintain the integrity formulae using National Agricultural known as the producer settlement fund
and intent of the order’s performance Statistics Service (NASS) survey prices (PSF). Typically, Class I handlers pay
standards. The proposal retains the of cheese, butter, and nonfat dried milk the difference between the blend price
principle that milk regularly and powder for the first two weeks of the and their use-value of milk into the PSF.
consistently demonstrating service to prior month. For example, the Class I Manufacturing handlers typically
the Class I needs of the market should price for August is announced in late receive a draw from the PSF, usually the
benefit from being pooled on the order. July and is based on the higher of the difference between the Class II, III or IV
Accordingly, Proposal 10 is adopted. Class III or IV value computed using price and the blend price. In this way,
The Federal milk order system NASS commodity price surveys for the all handlers pay the class value for milk
recognizes that there are costs incurred first two weeks of July. and all dairy farmer suppliers receive at
by producers in servicing an order’s The Class III and IV prices for the least the order’s blend price.
Class I market. The primary reward to month are determined and announced When manufacturing class prices of
producers for performing such service is after the end of the month based on the milk are high enough to result in a use-
receiving the order’s blend price. Taken NASS survey prices for the selected value of milk for a handler that is higher
as a whole, the amended pooling dairy commodities during the month. than the blend price, handlers of
provisions will ensure that milk seeking For example, the Class III and IV prices manufacturing milk may choose to not
to be pooled consistently demonstrates for August are based on NASS survey pool their milk receipts. Opting to not
service in meeting the marketing area’s commodity prices during August. A pool their milk receipts allows these
Class I needs. Consequently, adoption of large increase in the NASS survey price handlers to avoid the obligation of
these amended pooling provisions will for the selected dairy commodities from paying into the PSF. The choice by a
provide for more equitable sharing of one month to the next can result in the manufacturing handler to not pool their
revenue generated from Class I sales Class III or IV price exceeding the Class milk receipts is commonly referred to as
among those producers who bear those I price. This occurrence is commonly ‘‘de-pooling’’. When the blend price
costs and assure Class I handlers of a referred to by the dairy industry as a rises above the manufacturing class use-
regular and reliable supply for fluid use. ‘‘class price inversion.’’ A producer values of milk these same handlers
price inversion generally refers to when again opt to pool their milk receipts.
2. Establishing Pooling Limits the Class III or IV price exceeds the This is often referred to as ‘‘re-pooling’’.
Preliminary Statement average classified use value, or blend The ability of manufacturing handlers to
price, of milk for the month. Price de-pool and re-pool manufacturing milk
Federal milk marketing orders rely on inversions have occurred with is viewed by some market participants
the tools of classified pricing and increasing frequency in Federal milk as being inequitable to both producers
marketwide pooling to assure an orders since the current pricing plan and handlers.
adequate supply of milk for fluid (Class was implemented on January 1, 2000,
I) use and to provide for the equitable despite efforts made during Federal The ‘‘De-pooling’’ Proposals
sharing of the revenues arising from the Order Reform to reduce such Proponents are in agreement that milk
classified pricing of milk. Classified occurrences. Price inversions can create marketing orders should contain
pricing assigns a value to milk an incentive for dairy farmers and provisions that will tend to deter the
according to how the milk is used. manufacturing handlers who voluntarily practice of de-pooling. Four proposals
Regulated handlers who buy milk from participate in the marketwide pooling of intending to deter the de-pooling of
dairy farmers are charged class prices milk to elect not to pool their milk on milk were considered in this
according to how they use the farmer’s the order. Class I handlers do not have proceeding. The proposals offered
milk. Dairy farmers are then paid a this option; their participation in the different degrees of deterrence against
weighted average or ‘‘blend’’ price. The marketwide pool is mandatory. de-pooling by establishing limits on the
blend price that dairy farmers are paid The producer price differential, or amount of milk that can be re-pooled.
for their milk is derived through the PPD, is the difference between the Class The proponents of these four proposals
marketwide pooling of all class uses of III price and the weighted average value are generally of the opinion that de-
milk in a marketing area. Thus each of all Classes. In essence, the PPD is the pooling erodes equity among producers
producer receives an equal share of each dairy farmer’s share of the additional/ and handlers, undermines the orderly
use class of milk and is indifferent as to reduced revenues associated with the marketing of milk and is detrimental to
the actual Class for which the milk was Class I, II and IV milk pooled in the the Federal order system.
used. The Class I price is usually the market. If the weighted average price of Two different approaches to deter de-
highest class price for milk. Historically, Class I, II and IV milk in the pool is pooling are represented by these four
proposals. The first approach, published to the pool, either shipping ten days Class II, III or IV handlers who de-pool
in the hearing notice as Proposals 2 and milk production of a producer to a pool may pay dairy farmers a higher price for
8, addresses de-pooling by limiting the distributing plant or waiting eleven their milk. The witness stressed that
volume of milk a handler can pool in a months for eligibility to re-pool. when the Class I price is not high
month to a specified percentage of what Under Dean’s Proposal 7, a handler enough to attract milk from other uses,
the handler pooled in the prior month. that de-pools milk cannot re-pool for a disorderly conditions arise in the
The second approach, published in the 2 to 4 month time period, depending on marketplace.
hearing notice as Proposals 6 and 7, the month in which de-pooling The DFA/PF witness asserted that
addresses de-pooling by establishing occurred. Proposal 7 also provides the when a Class II, III or IV handler de-
what is commonly referred to as a option to return milk to the pool by pools milk, inequities arise for the dairy
‘‘dairy farmer for other markets’’ shipping ten days milk production of a farmers who supplied the de-pooling
provision. These proposals would producer to a pool distributing plant. handler. In the absence of provisions to
require milk of a producer that was de- Proposals 6 and 7 were modified at the discourage de-pooling, the witness
pooled to not be able to be re-pooled by hearing. explained, de-pooling becomes a
that producer for a defined time period. A witness appearing on behalf of rational economic practice since only
All proponents agreed that while none DFA/PF testified in support of Proposal Class I milk is required to be pooled and
of the proposals would completely 2 and in general opposition to the its value shared through the order’s
eliminate de-pooling, they would likely practice of de-pooling. The witness blend price.
deter the practice. testified that adoption of Proposal 2 The DFA/PF witness testified that the
Of the four proposals received that would minimize the practice of de- combination of de-pooling with recent
would limit de-pooling, this decision pooling since not all the milk that was increasingly volatile milk prices
adopts Proposal 2, offered by DFA/PF. de-pooled could immediately return to requires immediate regulatory measures
Specifically, adoption of the proposal the pool in the following month. The to mitigate the disorderly effects that de-
will limit the volume of milk a handler witness noted that both DFA and Prairie pooling has on market participants. The
can pool in a month to no more than Farms de-pool milk when advantageous witness cited market administrator data
125 percent of the volume of milk but stressed that the practice of de- showing that since implementation of
pooled in the prior month. Milk pooling and re-pooling is detrimental to Federal order reform in 2000 there have
diverted to nonpool plants in excess of the Federal order system. been 43 months when opportunities to
this limit would not be pooled, and milk The DFA/PF witness testified that de-pool existed for the Central order.
shipped to pool distributing plants and restricting the pooling of milk on the Relying on statistics provided by the
allocated as Class I in excess of the basis of prior performance is not a new market administrator, the witness
volume shipped to pool distributing concept in Federal milk marketing order illustrated that in April 2004 a handler
plants in the prior month will not be provisions. The witness referenced the in the Central order choosing to de-pool
subject to the 125 percent limitation. ‘‘dairy farmer for other markets’’ was able to pay over $4.00 per
The 125 percent limitation may be provision currently in place in the hundredweight (cwt) more for milk than
waived at the discretion of the Market Northeast order as an example of a Class I handler unable to de-pool
Administrator for a new handler on the pooling provisions based on prior because the Class III price was $19.66
order or for an existing handler whose performance. The witness noted that and the uniform price was $15.64. The
milk supply changes due to unusual Proposal 2 is similar to a ‘‘dairy farmer witness characterized pricing
circumstances. for other markets’’ provision as it limits differences of this magnitude as
As published in the hearing notice, pooling based on the handler’s previous disruptive, disorderly and a competitive
Proposal 8, offered by Dean Foods, month’s pooled volume. The DFA/PF disadvantage for any Class I handler.
addresses de-pooling in a similar witness speculated that the manner in When similarly situated handlers face
manner as Proposal 2, but would which Proposal 2 attempts to reduce the disparate costs in procuring a supply of
establish a limit on the total volume of practice of de-pooling is too drastic for milk, the witness added, producers in
milk a handler could pool in a given some and not strong enough for others. common procurement areas are
month to 115 percent of the volume that Nevertheless, adoption of Proposal 2, negatively affected. The witness
was pooled in the prior month. This the witness stressed, would provide an asserted that this is a disorderly
proposal was modified at the hearing to appropriate economic consequence to marketing condition.
allow for pooling the milk receipts of a discourage those entities that might Two DFA member dairy farmers from
new handler on the order without otherwise choose to de-pool. Nebraska testified in support of
volume restrictions. The DFA/PF witness was of the Proposal 2. Both witnesses maintained
As published in the hearing notice, opinion that since the purpose of that they received smaller milk checks
Proposals 6 and 7, also offered by Dean Federal milk marketing orders are to than they otherwise would have
Foods would address de-pooling by ensure an adequate supply of milk for received if milk had not been de-pooled.
establishing defined time periods during the fluid market, equitably share pool The witnesses added that when fluid
which de-pooled milk could not be proceeds, and promote orderly milk bottlers experience difficulties in
pooled. Proposal 6 essentially would marketing, milk order provisions should obtaining a milk supply, the costs to
require an annual pooling commitment attract milk to its highest valued use supply that milk should be passed on to
by handler to the market. Under when needed and provide for milk to consumers, not dairy farmers. The
Proposal 6, if the milk of a producer is clear the market when not needed in witnesses also stated that in order to
de-pooled in a month, then the milk of higher-class uses. Since Class I milk equalize returns from all classified uses
the producer could not re-establish cannot be de-pooled, the witness noted, of milk, there needs to be a commitment
eligibility for pooling on the order Class I handlers can be at a disadvantage to have all milk pooled every month of
during the following eleven months to handlers who can de-pool during the year.
unless ten days milk production was periods of price inversions. Class I Two DFA member dairy farmers from
delivered to a pool distributing plant. handlers are unable to maintain a Missouri also testified in support of
Under Proposal 6, handlers that de-pool competitive pay price for their milk Proposal 2. The witnesses noted that de-
milk have limited options to return milk supply, the witness explained, since pooling amplifies the problem of
negative PPD’s. The witnesses were of The Dean witness testified that a of a producer to re-join the pool would
the opinion that de-pooling creates similar provision to those contained in discourage de-pooling. The 10 day
differences in pay prices among Proposals 6 and 7 is currently in place delivery requirement would insure that
similarly located dairy farmers whose in the Northeast order. The witness was participation in the pool was open to
milk is pooled in the Central market, of the opinion that defined time periods any dairy farmer for whom it was
and that different pay prices represent a during which de-pooled milk cannot technically and economically feasible to
disorderly marketing condition. The again become pooled causes handlers to supply milk for fluid use. According to
witnesses stated that in order to enjoy behave differently by taking a longer the witness, Proposals 6 and 7 also
the additional funds usually generated term view of pooling. The witness would make more milk readily available
by the Class I market, handlers should explained that handlers in the Northeast to service the fluid needs of the market.
be required to demonstrate that their order need to evaluate more than the The additional Dean witness also
milk is available for the Class I market current month’s economic impacts of stressed that adoption of Proposal 6
by not de-pooling. pooling or not pooling milk, along with would not totally eliminate de-pooling
A dairy farmer from Kansas testified possible future missed opportunities. but would make it more difficult to re-
in opposition to the practice of de- The Dean witness further contrasted pool milk after it had been de-pooled.
pooling. The witness was of the opinion the current ‘‘dairy farmer for other The Dean witness testified that producer
that a commitment to serve the Class I markets’’ provision effective in the milk continuously pooled on the
market should be required in order to Northeast to the standards proposed in Central, or any other Federal milk order,
share in the blend price. The witness Proposals 6 and 7. The witness testified which shares in both the costs and
stressed that in order to share in the that in the Northeast order, July is a benefits of pool participation on a
returns generated from the marketwide month when de-pooled milk can return continuous basis would not be affected
pool handlers and cooperatives should to the pool regardless of when the milk by adoption of Proposal 6.
participate in the pool every day not had been de-pooled during the previous The second Dean witness added that
only when it may be profitable. year. Relying on market administrator adoption of Proposal 6 would increase
data, the witness related that during the returns to producers and provide for
A witness testified on behalf of Dean
months of February through July 2004, more orderly marketing conditions. The
in support of Proposal 8. The witness
large volumes of milk were de-pooled witness was of the opinion that
explained that Proposal 8 addresses the adoption of Proposal 6 would cause
from the Northeast order. Because of the
practice of de-pooling in a similar Class II, III or IV milk to remain pooled
‘‘dairy farmer for other markets’’
manner as Proposal 2 but would limit during times when the blend price was
provision, the witness explained, milk
the pooling of milk to 115 percent of the lower than the respective class price.
that was de-pooled during the months of
volume that was pooled in the prior This would increase the PPD, by making
February through June could not return
month. The witness was of the opinion it less negative, and raise the blend
to the pool until July. During this
that a monthly pooling limit would price received by all producers, the
period, noted the Dean witness, a large
discourage the de-pooling of milk since volume of milk usually pooled on the witness concluded. Adoption of
the greater the proportion of a handler’s Northeast order was pooled on the Proposal 6 also would cause some Class
milk that is de-pooled, the longer it will Mideast order. III milk that is de-pooled to never return
take to re-pool that milk. Accordingly, The Dean witness testified that to the pool, the witness noted, since it
the witness concluded, those who Proposal 6 would require a handler that would no longer be financially
benefit the most from de-pooling also de-pooled milk in a month to remain off advantageous.
would have the most difficulty in the pool for eleven additional months or A Kansas dairy farmer testified in
attempting to regain pool status. ship 10 days milk production of a support of Proposal 6. The witness
A witness for Dean also testified in producer to a pool distributing plant in stated that de-pooling cost Kansas
support of Proposals 6 and 7 which order for all milk of a producer to return dairymen who supplied the needs of the
would establish defined time periods to the pool, while Proposal 7 would fluid market $6.2 million between
during which de-pooled milk could not provide the option to either return March 2004 and October 2004. The
be re-pooled. The witness testified that during designated months depending on witness spoke in favor of any proposal
Dean prefers adoption of Proposal 6 the month in which milk was de- that would require greater commitment
over Proposal 7. Proposal 6 would pooled, or ship 10 days milk production to servicing the Class I needs of the
impose a 12-month period during which of a producer to a pool distributing Central marketing area.
de-pooled milk could not again be plant in order for all milk of a producer A DFA member dairy farmer from
pooled while Proposal 7 would to return to the pool. Missouri testified that de-pooling hurts
establish a 2 to 4 month period during A second Dean witness offered dairy farmers and was in favor of any
which de-pooled milk could not again additional testimony in support of proposal that would limit the ability for
be pooled. Under Proposal 6, the Proposal 6. The witness testified that milk to return to the pool the immediate
witness explained, if the milk of a Proposal 6 would exclude from the pool month after de-pooling. The witness
producer were de-pooled, the milk the milk of any dairy farmer not stated that there should be a waiting
could only reassociate before the annual continuously pooled under a Federal period of at least 2 or 3 months to pool
commitment period if ten days milk order during the previous twelve milk after the milk had been de-pooled
production of the milk of the producer months. The only exception to this or a limit on the milk volume that could
was delivered to a pool distributing exclusion would be a dairy farmer who return to the pool the month after de-
plant. According to the witness, temporarily lost Grade A status but was pooling.
Proposal 7 would provide an option for reinstated as a Grade A producer within Land O’ Lakes (LOL), initially a
milk that had been de-pooled to return 21 days, noted the additional Dean member of AMPI, et al., opposing
to the pool during certain specified witness. The witness emphasized that adoption of Proposals 2, 6, 7 or 8,
months of the year depending on when the portion of Proposal 6 that would submitted a comment to the
the milk was de-pooled or by shipping require delivery of 10 days milk recommended decision in support of
ten days production of the milk of a production of a dairy farmer to a pool adoption of Proposal 2. LOL suggested,
producer to a pool distributing plant. distributing plant in order for all milk however, a 135 percent pooling limit for
the month of March to compensate for reduction in the amount of milk made with AMPI, et al., that de-pooling is an
28 days in the month of February and available to service the fluid market issue that should be addressed on a
the increases in milk production since the de-pooled milk may rejoin the national basis.
typically seen during the spring months. pool the next month. The AMPI, et al., The brief by Dean reiterated support
A witness appearing on behalf of witness added that the Federal order for Proposals 6, 7 or 8, in order of
Dean testified in opposition to Proposal system should be sharing money preference, seeking to restrict the ability
2. The witness was of the opinion that derived from Class I handlers, not taking of handlers to de-pool and re-pool milk
limiting pooling to 125 percent of money from dairy farmers whose milk is in the Central marketing area. The brief
receipts pooled during the previous used in the production of cheese simply expressed the view that Class I handlers
month was too loose of a standard and to offset a low Class I price created by who are required to pool their milk
urged the adoption of Proposal 6 or the timing of announcing Class prices. receipts are at a constant financial
Proposal 8. The AMPI, et al., witness was also of disadvantage to those handlers who may
A witness appearing on behalf of the opinion that the Department should opt to pool or not pool.
AMPI, et al., testified in opposition to not consider Proposals 2, 6, 7 and 8 on Dean, in comments to the
Proposals 2, 6, 7, and 8. The witness an emergency basis. The witness Recommended Decision, supported
was of the opinion that de-pooling was testified that the proposed shift in adoption of Proposal 2, but was of the
an issue that was national in scope, and regulatory policy as contained within opinion that the adopted amendments
should be addressed in a national these proposals should require the may not go far enough in preventing de-
hearing. The witness testified that the issuance of a recommended decision pooling.
voluntary option of pooling or not with opportunity for public comment. AMPI, along with First District
pooling milk delivered to a nonpool A witness representing NAJ testified Association (AMPI Group), took
plant has been a mainstay of the Federal that the problems arising from de- exception to the adoption of any
order system and should not be pooling are a result of the timing of proposals that would deter the practice
amended. The witness was of the price announcements. The witness also of de-pooling. The AMPI Group
opinion that Proposals 2, 6, 7, and 8 do stated that the de-pooling issue would reiterated their position that Proposals
not address the root cause of price best be addressed at a national hearing. 2, 6, 7 and 8 do not address the root
inversions—advance Class I pricing— In a post hearing brief, DFA/PF cause of price inversions—advance
but rather only treats the symptom of reiterated the position that the pooling Class I pricing—but rather only treats
the problem. Class I prices are of milk in any month should not exceed the symptom of the problem.
announced by the USDA in advance, 125 percent of the milk volume pooled Family Dairies, a dairy farmer
noted the witness, while milk prices for in the previous month. The brief cooperative that pools milk on the
manufactured uses are announced after indicated that the pooling proposals Central order, took exception to
the month has passed. This can cause a (Proposals 6, 7, and 8) advanced by adopting any proposals that would deter
lag between changes in the value of milk Dean are too restrictive for the current the practice of de-pooling. The comment
and changes in the advanced Class I marketing conditions in the Central suggested that price inversions and
price, added the witness, sometimes marketing area. According to the brief, negative PPDs should be the focus of
resulting in a Class III price that exceeds Proposal 2 represents the least any regulatory change.
the uniform and Class I price, otherwise restrictive pooling proposal that could All Federal milk marketing orders
known as a price inversion. The witness be supported by current marketing require the pooling of milk received at
added that it would be appropriate to conditions while providing a reasonable pool distributing plants—which is
reconsider whether advanced pricing deterrent to de-pooling. predominantly Class I milk—and all
remains sound regulatory policy. A brief on behalf of AMPI, et al., pooled producers and handlers on an
The AMPI, et al., witness was also of reiterated the view that de-pooling and order share in the additional revenue
the opinion that Federal order Class I re-pooling should be addressed on a arising from higher valued Class I sales.
price differentials are artificially high. national basis and that pooling Manufacturing handlers and
Milk used to produce cheese, the decisions should continue to be based cooperatives of Class II, III and IV uses
witness noted, is priced entirely through on immediate market conditions. The of milk who meet the pooling and
the marketplace and receives benefit brief expressed the view that the ability performance standards make all of their
from the Federal order system only to de-pool continues to be unrelated to milk receipts eligible to be pooled and
when the uniform price is higher than the willingness to serve the needs of the usually find it advantageous.
the Class III price. Adoption of Class I market. Manufacturing handlers and
Proposals 2, 6, 7 or 8, the witness noted, A brief by Select/Continental cooperatives who supply a portion of
would penalize milk used in the supported Proposal 6 as advanced by their total milk receipts to Class I
production of cheese by limiting the Dean. The brief noted that this ‘‘dairy distributing plants receive the difference
amount of milk that could be pooled farmer for other markets’’ proposal between their use-value of milk and the
and was a radical change in Federal offered the most comprehensive means order’s blend price. Federal milk orders,
order pooling philosophy. The witness to eliminate the inequities of de-pooling including the Central order, establish
added that adoption of these proposals while maintaining the strongest possible limits on the volume of milk eligible to
would require cheese manufacturers to support for producers continuously and be pooled that is not for fluid uses
estimate Federal order blend prices and reliably serving the needs of the Class I primarily through diversion limit
PPDs in an effort to decide whether it market. The brief noted that Proposals 2 standards. However, manufacturing
was more profitable to de-pool, remain and 8, seeking to restrict the ability to handlers and cooperatives are not
pooled or a combination of both. pool to 125 percent and 115 percent of required, as are Class I handlers, to pool
The AMPI, et al., witness testified that the previous month’s volume all their eligible milk receipts.
the de-pooling of milk does not cause respectively, was an improvement over According to the record,
any reduction to the amount of milk current conditions but was not as robust manufacturing handlers and
available to serve the fluid market. The as Proposal 6 which would require a 12- cooperatives have opted to not pool
witness was of the opinion that when month pooling commitment by their milk receipts when the
milk was de-pooled there was not a handlers. The brief found agreement manufacturing class prices of milk are
higher than the order’s blend price— service the Class I market. Prices eligibility to pool their physical
commonly referred to as being received by dairy farmers who supplied receipts, including diversions to
‘‘inverted.’’ During such months, the other milk needs of the market are nonpool plants. Opponents to proposals
manufacturing handlers and not known. However, it is reasonable to to deter de-pooling are of the view that
cooperatives have elected to not pool all conclude that prices received by dairy meeting the pooling standards of the
of their eligible milk receipts because farmers were not equitable or uniform. order and deciding how much milk to
doing so would require them to pay into The record reveals that ‘‘inverted’’ pool are unrelated events. Proponents
the PSF of the order, the mechanism prices of milk are generally the result of took the view that participation in the
through which handler and producer the timing of Class price marketwide pool should be based on a
prices are equalized. When prices are announcements. Despite changes made long-term commitment to supply the
not inverted, handlers would pool all of as part of Federal milk order reform to market because in the long-term it is the
their eligible receipts and receive a shorten the time period of setting and sales of higher priced Class I milk that
payment or draw from the PSF. In announcing Class I milk prices and adds additional revenue to the pool.
receiving a draw from the PSF, such basing the Class I price on the higher of The producer price differential, or
handlers will have sufficient money to the Class III or Class IV price to avoid PPD, is the difference between the Class
pay at least the order’s blend price to price inversions, large month-to-month III price and the weighted average value
their supplying dairy farmers. price increases in Class III and Class IV of all Class I, II and IV milk pooled. In
When manufacturing handlers and product prices sometimes trumped the essence, the PPD is the residual revenue
cooperatives opt to not pool all of their intent of better assuring that the Class I remaining after all butterfat, protein and
eligible milk receipts in a month, they price for the month would be the other solids values are paid to
are essentially avoiding a payment to highest-valued use of milk. In all orders, producers. If the pooled value of Class
the PSF. This, in turn, enables them to the Class I price (and the Class II skim I, II and IV milk is greater than the Class
avoid the marketwide sharing of the price) is announced prior to or in III value, dairy farmers receive a
additional value of milk that accrues in advance of the month for which it will positive PPD. While the PPD is usually
the higher-valued uses of milk other apply. The Class I price is calculated by positive, a negative PPD can occur when
than Class I. When the Class I price using the National Agricultural class prices rise rapidly during the six-
again becomes the highest valued use of Statistics Service (NASS) surveyed week period between the time the Class
milk, or when other class-price cheese, butter, nonfat dry milk and dry I price is announced and the time the
relationships become favorable, the whey prices for the two most current Class II butterfat and III and IV milk
record reveals that these same handlers weeks prior to the 24th day of the prices are announced. When
opt to again pool their eligible milk preceding month and then adding a manufacturing prices fall, this same lag
receipts and draw money from the PSF. differential value to the higher of either in the announcement of class prices
It is the ability of manufacturing the advanced Class III or Class IV price. yields a positive PPD.
handlers and cooperatives opting to not Historically, the advance pricing of As revealed by the record, when
pool milk and thereby avoid the Class I milk has been used in all Federal manufacturing plants and cooperatives
marketwide sharing of the revenue orders because Class I handlers cannot opted to not pool milk because of
accruing from non-Class I milk sales avoid regulation and are required to inverted price relationships, PPD’s were
that is viewed by proponents as giving pool all of their Class I milk receipts, much more negative. When this milk is
rise to disorderly marketing conditions. they should know their product costs in not pooled, a larger percentage of the
According to proponents, producers and advance of notifying their customers of milk remaining pooled will be ‘‘lower’’
handlers who cannot escape being price. However, milk receipts for Class priced Class I milk. When
pooled and priced under the order are III and IV uses are not required to be manufacturing milk is not pooled, the
not assured of equitable prices. pooled; thus, Class III and IV product weighted average value of milk
The record reveals that since the prices (and the Class II butterfat value) decreases relative to the Class II, III or
implementation of Federal milk are not announced in advance. These IV value making the PPD more negative.
marketing order reform in January 2000, prices are announced on or before the For example, record evidence
and especially in more recent years, 5th of the following month. Of demonstrated that in April 2004, a
large and rapid increases in importance here is that manufacturing month when a sizeable volume of milk
manufactured product prices during plant operators and cooperatives have was not pooled, the PPD was a negative
certain months have provided the the benefit of knowing all the classified $3.97 per cwt. If all eligible milk had
economic incentives for manufacturing prices of milk before making a decision been pooled, the PPD would have been
handlers to opt not to pool eligible milk to pool or not pool eligible receipts. $.87 per cwt higher or a negative $3.10
on the Central order. For example, The record reveals that the decision of per cwt. This $0.87 per cwt represents
during the three month period of manufacturing handlers or cooperatives the additional burden borne by those
February to April 2004, the Class III to pool or not pool milk is made on a producers who remained pooled.
price increased over 65 percent from month-to-month basis and is generally The record reveals that when
$11.89 per cwt to $19.66 per cwt. independent of past pooling decisions. manufacturing handlers and
During the same time period, total Manufacturing handlers and cooperatives opt to not pool milk,
producer milk pooled on the Central cooperatives that elected to not pool unequal pay prices may result to
order decreased by nearly 50 percent their milk receipts did so to avoid similarly located dairy farmers. For
from 1.16 billion pounds to 612 million making payments to the PSF and they example, Dean noted that when a
pounds. When milk volumes of this anticipated that all other manufacturing cooperative delivers a high percentage
magnitude are not pooled the impacts handlers and cooperatives would do the of their milk receipts to a distributing
on producer blend prices are significant. same. However, the record indicates plant, it lessens their ability to not pool
Producers who incur the additional that normally pooled manufacturing milk, making them less competitive in
costs of consistently servicing the Class handlers and cooperatives met the a marketplace relative to other
I needs of the market receive a lower pooling standards of the order to ensure producers and handlers. Other evidence
return than would otherwise have been that the Class I market was adequately in the record supports conclusions
received if they did not continue to supplied and that they established identical to Dean that when a dairy
farmer or cooperative is able to receive uses to meet Class I demands. As However each marketing area has
increased returns from shipping milk to revealed by the record, this method has unique marketing conditions and
a manufacturing handler during times of not been sufficient to provide the characteristics which have area-specific
price inversions, other dairy farmers or appropriate price signals to assure an pooling provisions to address those
cooperatives who may have shipped adequate supply of milk for the Class I specific conditions. Because of this,
more milk to a pool distributing plant market. Accordingly, additional pooling issues are considered unique to
are competitively disadvantaged. measures are needed as a means of each order. This decision finds that it
The record of this proceeding reveals assuring that milk remains pooled and would be unreasonable to address
that the ability of manufacturing thus available to the Class I market. pooling issues, including de-pooling, on
handlers and cooperatives to not pool Adoption of Proposal 2 is a reasonable a national basis.
all of their eligible milk receipts gives measure to meet the objectives of Some manufacturing handlers and
rise to disorderly marketing conditions orderly marketing. cooperatives argued at the hearing, and
and warrants the establishment of This decision does find that noted in exceptions to the
additional pooling standards to disorderly marketing conditions are Recommended Decision, that their milk
safeguard marketwide pooling. Current present when producers do not receive did perform in meeting the Class I needs
pooling provisions do not require or uniform prices. Handlers and during the month and this occurred
prohibit handlers and cooperatives from cooperatives opting to not pool milk do before making their pooling decisions.
pooling all eligible milk receipts. not account to the pool at the classified They argue that the Class I market is
However, the record reveals that when use-values of those milk receipts. They therefore not harmed and that the
handlers and cooperatives opt to not do not share in all the additional costs intents and goals of the order program
pool milk inequities arise among and burdens with those producers who are satisfied. With respect to this
producers and handlers that are are pooled and who are incurring the proceeding and in response to these
contrary to the intent of the Federal costs of servicing the Class I needs of arguments, this decision finds that the
milk marketing order program— the market. This is not a desired or practice of de-pooling undermines the
maintaining orderly marketing reasonable outcome especially when the intent of the Federal order program to
conditions. same handlers and cooperatives will assure producers uniform prices across
The record contains extensive again pool all of their eligible receipts all uses of milk normally associated
testimony regarding the effects on the when class-price relationships change with the market as a critical indicator of
milk order program resulting from in a subsequent month. These inequities orderly marketing conditions. Similarly,
advance pricing and the priority the borne by the market’s producers are handlers and cooperatives who de-pool
milk order program has placed on the contrary to the intent of the Federal purposely do so to gain a momentary
Class I price being the highest valued order program’s reliance on marketwide financial benefit (by avoiding making
use of milk. It remains true that the pooling—ensuring that all producers payments to the PSF) which would
Class I use of milk is still the highest supplying the market are paid uniform otherwise be equitably shared among all
valued use of milk notwithstanding prices for their milk regardless of how market participants. While the order’s
those occasional months when milk the milk of any single producer is used. performance standards tend to assure
used in usually lower-valued classes Despite the exceptions submitted by that distributing plants are adequately
may be higher. This has been AMPI Group and Family Dairies, it is supplied with fresh, fluid milk, the
demonstrated by an analysis of the reasonable that the order contain goals of marketwide pooling are
effective Class I differential values—the pooling provisions intended to deter the undermined by the practice of de-
difference in the Class I price at the base disorderly conditions that arise when pooling. Producers and handlers who
zone of Jackson County, Missouri, and de-pooling occurs. Such provisions regularly and consistently bear the costs
maintain and enhance orderly of serving the Class I needs of the
the higher of the Class III or Class IV
marketing. Accordingly, this decision market will not equitably share in the
price—for the 65 month period of
finds it reasonable to adopt provisions additional value arising momentarily
January 2000 through May 2005
that limit the volume of milk a handler from non-fluid uses of milk. These same
performed by USDA.2 These
or cooperative may pool in a month to producers and handlers will, in turn, be
computations reveal that the effective
125 percent of the total volume pooled required to share the additional revenue
monthly Class I differential averaged
by the handler or cooperative in the arising from higher-valued Class I sales
$1.97 per cwt. Accordingly, it can only
prior month. Adoption of this standard in a subsequent month when class-price
be concluded that in the longer-term
will not prevent manufacturing handlers relationships change.
Class I sales continue to be the source The four proposals considered in this
or cooperatives from electing to not pool
of additional revenue accruing to the proceeding to deter the practice of de-
milk. However, it should serve to
pool even when, in some months, the pooling in the Central order have
maintain and enhance orderly
effective differential is negative. differences. They all seek to address
marketing by encouraging participation
Price inversions occur when the
in the marketwide pooling of all market disorder arising from the
wholesale price for manufactured practice of de-pooling. However, this
classified uses of milk.
products rises rapidly indicating a This decision does not adopt a 135 decision does not find adoption of the
tightening of milk supplies to produce percent pooling limit for the month of two ‘‘dairy farmer for other markets’’
those products. It is for this reason that March as suggested by LOL in their proposals—Proposals 6 and 7—
the Department chose the higher of the comments and exceptions to the reasonable because they would make it
Class III and Class IV prices as the recommended decision. A 135 percent needlessly difficult for milk to be re-
mover of the Class I price. Distributing standard applicable for the month of pooled and because their adoption may
plants must have a price high enough to March was not considered and disrupt prevailing marketing channels
attract milk away from manufacturing examined at the hearing. or cause the inefficient movement of
2 Official notice is taken of data and information
Consideration was given on whether milk. Likewise, Proposal 8, to restrict
published in Market Administrator Bulletins, as
de-pooling should be considered at a pooling in a month to 115 percent of the
posted on individual Market Administrator Web national hearing with other, broader prior month’s volume pooled by the
sites. national issues of milk marketing. handler, is not adopted. Adoption of
this proposal would disrupt current distributing plants within the marketing similarly insufficient to attract milk.
marketing conditions beyond what the area. The witness asserted that this was According to the witness, this causes
record justifies. Therefore, this decision reasonable because it would keep milk procurement problems for some
adopts Proposal 2 to limit the pooling of transportation and assembly cost distributing plants in this localized
milk in any month by a handler to 125 recovery at less than full cost. portion of the Central marketing area.
percent of the handler’s pooled receipts According to the witness, the proposed The DFA/PF witness testified that
in the prior month because it provides rates and distance limitations would marketwide service payments are
the most reasonable measure to deter tend to discourage inefficient authorized in the legislation that
the practice of de-pooling. movements of milk by handlers from provides for Federal milk orders. The
seeking transportation and assembly witness explained that payments for
3. Transportation and Assembly Credits services not elsewhere compensated can
credits.
A proposal, published in the hearing The AMPI, et al., witness expressed be taken from producer revenue to
notice as Proposal 3 and modified at the the opinion that all producers receiving compensate providers of services that
hearing, seeking establishment of the benefits of marketwide pooling are of marketwide benefit. The witness
transportation and assembly credits in should contribute to the recovery of asserted that transportation and
the Central Order is not adopted. The costs associated with moving milk assembly operations performed in the
published proposal seeks to provide a within the marketing area to serve the Central marketing area meet the general
credit for the shipment of milk from Class I needs of the market. The witness objectives of providing marketwide
supply plants to distributing plants. The provided examples of milk movements service for marketwide benefit.
proposal was modified at the hearing to where supply plant handlers moving According to the witness, Proposal 3, as
expand the transportation credit to milk to distributing plants were unable modified, describes a set of services that
include milk shipped directly from to recover the full costs of assembling benefit the entire market. The witness
dairy farms to distributing plants. In and transporting milk at Federal order was of the opinion that the marketwide
addition, the modified proposal would minimum prices. The witness testified services include: marketing of milk,
provide an assembly credit for milk that because handlers transporting milk farm pick-up of milk, off-load and re-
shipped directly from dairy farms to directly from dairy farms to distributing load of milk, procurement of milk,
distributing plants. plants incur costs similar to the selling milking equipment,
The proposal would provide a credit overhead costs incurred by handlers disseminating information and prices to
for the shipment of milk from supply transporting milk from supply plants, producers, milk testing, delivery to
plants and dairy farms to distributing the proponents seek an assembly credit distributing plants, and other field
plants at a rate of $0.003 per cwt per for all milk that serves the Class I services.
mile, excluding the first 25 miles of market. The AMPI, et al., witness According to the DFA/PF witness,
shipment and all shipments farther than testified that even though dairy farmers inclusion of milk shipped directly from
500 miles. In addition, the proposal currently are charged for the cost of dairy farms to distributing plants for
would provide for a credit of $0.10 per assembling their milk into loads and transportation and assembly credits
cwt for the assembly of milk from dairy transporting the milk to distributing would be more representative of how
farms to distributing plants. The Central plants, the charges are insufficient to the majority of milk is transported to
order does not currently have completely recoup the costs incurred by distributing plants regulated by the
transportation or assembly credit handlers. order. The witness noted that in the
provisions. A witness representing DFA/PF Central marketing area distributing
As published in the hearing notice, testified in support of Proposal 3 and plants receive only about 4.5 percent of
Proposal 3 was advanced by AMPI, et al. modified the proposal to include the their milk from supply plants. The
The modification to Proposal 3, transportation and assembly credits for witness testified that the modification of
presented at the hearing to include milk shipped directly from farms to Proposal 3 to include milk shipped from
transportation credits for shipments distributing plants. The witness asserted farms to distributing plants would more
from dairy farms directly to distributing that the costs of assembly and accurately represent the transportation
plants was advanced by DFA/PF. transportation of milk in the Central compensation requirements needed to
On behalf of all proponents of marketing area are not fully recouped in ensure delivery of milk for fluid use.
Proposal 3, the Foremost, et al., witness the market by handlers. The witness According to the DFA/PF witness, the
requested that the proposal be modified noted that the $0.003 per mile inclusion of farm to distributing plant
to remove all references to ‘‘milk reload transportation credit rate would apply shipments would require the Market
stations’’ as originally offered in the to milk shipped to a distributing plant. Administrator of the Central order to
proposal. Accordingly, no additional The DFA/PF witness testified that verify handler claims for receiving
references will be made concerning re- additional compensation for the credits. The witness indicated that least-
load stations in this decision. transportation and assembly of milk for distance routes for delivery from each
A witness appearing on behalf of fluid use is needed in particular areas of point of origin to the destination
AMPI, et al., testified that transportation the Central marketing area because the distributing plants would need to be
and assembly credits are needed in the order’s blend price is insufficient to determined. According to the witness,
Central marketing area to allow keep milk produced in the marketing the additional cost that would be borne
transporting handlers to recover costs of area within the marketing area. The by the Market Administrator in
assembling and transporting milk to witness noted this was specifically administering transportation and
serve the Class I needs of the market. apparent in the southeastern portion of assembly provisions would be negligible
The AMPI, et al., witness was of the the marketing area that borders portions and should not require a higher
opinion that the rates and distance of the Southeast and Appalachian administrative assessment. However,
limitations proposed for the orders. In addition, the witness testified the witness acknowledged that
transportation and assembly credits that the location values of milk for proponents had not consulted the
would compensate handlers for markets within the Central marketing Market Administrator’s office for an
approximately 75 percent of the cost of area, for example in St. Louis, Missouri, estimate of additional administrative
moving milk from supply plants to and areas of southern Illinois, are costs that may be borne in operating a
transportation and assembly credit month. The Foremost, et al., witness attracted to markets for specific use
provision. testified that the impact of providing through classified pricing. Fluid milk,
The DFA/PF witness testified that the credits for assembly would reduce the according to the brief, should be
St. Louis area market is unable to Central order’s blend price by $0.036– attracted to distributing plants by
consistently and successfully attract $0.040 per cwt per month. The DFA/PF appropriate location values. According
milk from the Central order’s milkshed witness testified that the combined to the brief, implementing
because the order’s Class I price and the impact of transportation credits for the transportation and assembly credits in
blend price are lower than those in the supply plant to distributing plant the Central marketing area would be an
nearby Appalachian and Southeast movements, direct delivery from farms admission that the Class I price surface
marketing areas. According to the to distributing plants, and assembly was no longer successful in meeting the
witness, marketwide service payments credits would reduce the Central Class I needs of the marketing area.
for transportation and assembly of milk marketing area’s blend price by a total In a post hearing brief, DFA/PF
to serve markets such as St. Louis would of $0.081–$0.085 per cwt per month. reiterated their support for
provide sufficient financial incentive to DFA/PF took exception to the transportation and assembly credits as
offset the higher blend prices of these Recommended Decision and reiterated modified. The brief reiterated support
bordering Federal milk marketing areas. their support for the adoption of and reinforcement of the testimony
Additionally, it would ensure a transportation and assembly credits. offered to expand the scope for
consistent and reliable supply of milk to DFA/PF again noted that transportation transportation and assembly credits to
meet the needs of that portion of the and assembly credits, as proposed, were include direct farm-to-plant milk
Central marketing area’s Class I market, designed to reward those who supply movements. Likewise, Dean Foods
the witness said. the fluid milk needs of the entire market reiterated its support in a post-hearing
A witness for Prairie Farms (PF) and are necessary to facilitate the brief for expanding transportation and
testified in support of the adoption of orderly movement of milk. assembly credits to include direct farm-
Proposal 3 as modified at the hearing. A witness for Dean testified in to-plant milk movements as a means to
The witness was of the opinion that support of Proposal 3 as modified by improve the available milk supply for
without expansion of transportation and DFA/PF. The Dean witness expressed a its distributing plant operations in the
assembly credits that included direct preference for the DFA/PF modification southeastern portion of the Central
shipped milk, the ability to serve the to include direct farm milk shipments to order.
Class I needs of all locations in the distributing plants but did not support Geographically, the Central marketing
Central marketing area would not be adoption of assembly credits. The area is the largest Federal milk
achieved because milk would seek the witness noted that Dean would consider marketing area, spanning the distance
higher blend prices available in the the entire Proposal 3, including the from eastern Illinois to western
nearby markets of the Appalachian and DFA/PF modification, if the assembly Colorado. It is bordered by the Upper
Southeast orders. The witness from credit feature were retained. The Midwest, Mideast, Appalachian,
Prairie Farms provided example witness was of the opinion that Southeast, and Southwest marketing
scenarios of actual and hypothetical net adopting the proposal would increase areas. The marketing area also is
returns possible for handlers shipping equity among handlers and producers bordered by unregulated areas on the
milk to distributing plants in the who supply the Class I market. west including Utah, portions of
Central, Appalachian, and Southeast However, the witness was unable to western South Dakota, western portions
marketing areas. The witness compared identify distributing plants in the St. of Nebraska, and all of Wyoming. In
these returns to net returns available Louis and southern Illinois portions of addition the Central marketing area
from shipping to distributing plants in the marketing area that did not or could completely surrounds a large
Illinois and St. Louis within the Central not receive sufficient milk supplies. In unregulated area in central Missouri.
marketing area. According to the addition, the witness was unable to Proposal 3 as advanced by AMPI, et
witness, these example scenarios recall if handlers had asked or relied on al., seeks to establish a marketwide
reinforced the assertion that milk is the Central marketing area’s Market service payment in the form of a
attracted by higher Class I prices in Administrator to increase the Central transportation credit for the movement
localized areas of the Appalachian and order’s performance standards to bring of milk from supply plants to
Southeast marketing areas. forth milk to meet the market’s Class I distributing plants at a rate of $0.003 per
The PF witness was of the opinion needs. cwt per mile. The proposal provides for
that inappropriate Class I differential Dean reiterated support for adoption a distance limit for receipt of the credit
levels, as in the St Louis area example, of transportation and assembly credits for milk movements between 25 to 500
were the root cause of the market’s in exceptions to the Recommended miles from the supply plants to
inability to attract sufficient fluid milk; Decision. Dean noted that handlers face distributing plants. The proposal also
however, modifications to the Class I higher costs in procuring milk supplies seeks the establishment of an assembly
price surface are not currently feasible. in the St. Louis area, and that adoption credit feature for which handlers would
In light of this, the witness stated that of transportation and assembly credits collect $0.10 per cwt for the assembly of
obtaining the needed financial would help reduce those costs. loads of milk within the marketing area.
incentives to ensure delivery of milk to In a post hearing brief, Select/ The modification to Proposal 3,
this deficit portion of the marketing area Continental indicated general advanced by DFA/PF, seeks expansion
by the use of transportation and opposition to adopting transportation of the transportation credit to include
assembly credits is a reasonable and assembly credits for milk milk shipped directly from dairy farms
alternative to changing the Class I movements from supply plants to to distributing plants. The modification
differentials. distributing plants. The brief expressed would establish a transportation credit
The DFA/PF witness estimated that support for a transportation and rate of $0.003 per cwt per mile for milk
providing credits for milk transported assembly credit provision that would be shipped directly from dairy farms to
from farms to distributing plants would limited to milk shipped directly from distributing plants. The combination of
reduce the Central order’s blend price to dairy farms to distributing plants. the two proposals effectively seeks
dairy farmers by $0.045 per cwt per According to the brief, milk should be transportation and assembly credits for
all Class I milk pooled on the Central the magnitudes of their costs per mile and dairy farmer income that would
order. The rationale for the modification and per hundredweight of milk result from the adoption of a
to Proposal 3 is that milk shipped handled. The transportation and transportation and assembly credit of
directly from farms to distributing assembly credit provisions of the this magnitude would be 3–4 times the
plants represents more than 95 percent Chicago Regional order applied to a magnitude of the blend price reduction
of all milk shipped to distributing geographically compact milkshed with that dairy farmers experience in the
plants. Milk shipped from supply plants the emphasis on encouraging milk Upper Midwest. According to Market
represents about 5 percent of all milk movements to the single urban market Administrator information, the average
shipped to distributing plants. of Chicago. The Chicago Regional sized producer in the Central marketing
Proponents estimate that the Central marketing area (and the Chicago area produces and markets about
order blend price would be lowered in metropolitan area of the current Upper 200,000 pounds of milk per month. The
the range of $0.036–$0.040 per cwt per Midwest marketing area) was supplied average reduction in income for such an
month by the assembly credit feature for with milk primarily from southern and average producer per month would be
all Class I milk, if adopted. The central Wisconsin. The transportation $160–$170 per month, or about $2000
proponents estimate that the impact of and assembly credit feature of the per year. A similar sized producer in the
the transportation credit for all Class I current Upper Midwest marketing order Upper Midwest marketing area would
milk pooled on the Central order would provides pool plants that serve the Class experience a reduction in income of
be a blend price reduction of I market with some recovery of $40–$57 per month or about $500–$680
approximately $0.045 per cwt, if assembly and transportation costs per year. The differences in magnitudes
adopted. The combined reduction to the incurred in transferring milk to are interesting but germane only to the
Central order blend price per month distributing plants. extent that transportation and assembly
would be $0.081–$0.085 per cwt. In contrast, the Central marketing area credits are justified.
The transportation and assembly is geographically much larger and The proposed transportation and
credits advanced by the proponents are handlers with Class I route disposition assembly credits are justified by
similar to the transportation and serve multiple urban centers in a variety proponents on the basis that the
assembly credits implemented in the of States located from Illinois to movement of milk to serve the Class I
Chicago Regional order, a predecessor Colorado. Despite exceptions to the market is a marketwide service of
order of the current Upper Midwest Recommended Decision from DFA, the marketwide benefit and credits for
order. The transportation and assembly record reveals that the area of concern providing marketwide services are
credit provisions of the Chicago to the proponents is a relatively limited authorized in the Agricultural
Regional order were carried forward area of St. Louis and portions of Marketing Agreement Act of 1937,
into the provisions of the current Upper southern Illinois. The record does not (AMAA) as amended. However, the
Midwest order as a part of Federal milk reveal that there are other portions of focus of the record evidence is on the
order reform. These provisions were the marketing area where problems have marketing conditions in the southern
first implemented in 1987 to ensure that been identified in procuring milk Illinois and St. Louis regions of the
the costs of serving the Class I market supplies for Class I use. Accordingly, it Central marketing area. However, the
of the Chicago Regional marketing area is reasonable to conclude that record does not indicate that price
were shared by all market participants marketwide service payments in the differences as noted in proponent
that benefited from the revenue form of transportation and assembly testimony concerning the eastern
generated from Class I sales. The impact credits on all Class I milk may only portion of the marketing area occur
on producer revenue was expected to be solve a localized problem while all elsewhere in the Central marketing area.
minimal according to the Final Decision dairy farmers would receive a lower The record does not support concluding
published October 15, 1987, (7 CFR blend price for their milk. that handlers serving major urban areas
10130). The impact of transportation and in other regions of the marketing area
The transportation credit provisions assembly credits on dairy farmer income (such as, Denver, Oklahoma City, or
of the Upper Midwest order provide a is far lower in the Upper Midwest Tulsa) experience difficulty in attracting
credit of $0.028 cents per mile for bulk marketing area than that proposed for milk supplies. This supports concluding
milk delivered from pool plants to the Central order. For example, that the issues raised by the proponents
distributing plants. The assembly credit according to Market Administrator data, are at best localized in nature rather
provisions of the Upper Midwest order the reduction to the Upper Midwest than marketwide.
provide a credit of $0.08 cents per cwt blend price in October 2004 was $ 0.015 In addition, the record reveals in the
to the operator of a distributing plant for per cwt and $0.0125 per cwt for the testimony of the AMPI, et al., witness
milk received from dairy farms and pool assembly and transportation credits, that some transportation and assembly
plants. The credits are computed by the respectively. This represents an overall costs incurred by handlers for milk
Market Administrator and are deducted reduction of $0.0275 per cwt to the delivered to distributing plants are
from the marketwide value of milk Upper Midwest blend price in that recovered by the marketplace. While
before calculation of the order’s blend month. Market Administrator data proponents have asserted that the
price. The impact of these credits on the shows that during May 2005 the recovery of costs for assembly by
Upper Midwest blend price ($0.02– reduction to the Upper Midwest blend handlers is incomplete, the record
$0.03 per cwt) are one fourth to one price attributable to the combined contains insufficient information upon
third the magnitude of impact that impact of the transportation and which to judge if lowering producer
proponents expect the proposed assembly credit features was $0.020 per blend prices by as much as $.08 per cwt
transportation and assembly credits cwt. is reasonable. The size of the likely
would have on the Central order blend The record reveals that the impact blend price reduction is important but
price, if adopted. anticipated by proponents of not the critical factor in determining
The transportation and assembly transportation and assembly credits on whether transportation and assembly
credit features of the current Upper the Central order blend price would be credits are reasonable for the Central
Midwest order and the pre-reform a reduction of as much as $0.081–$0.085 marketing area. The most important
Chicago Regional order are similar in per cwt. The reduction in blend prices factor in that regard is whether the
marketwide costs would provide due date for payments into the producer exceptions received was carefully and
marketwide rather than local benefits. settlement fund, was advanced by the fully considered in conjunction with the
Contrary to exceptions to the Market Administrator. The proposal was record evidence. To the extent that the
Recommended Decision from Dean, withdrawn and was not considered in findings and conclusions and the
record evidence supplied by a Class I this decision. regulatory provisions of this decision
handler located in St. Louis indicates are at variance with any of the
that the firm is able to continue Rulings on Proposed Findings and exceptions, such exceptions are hereby
receiving, bottling, and selling milk in Conclusions overruled for the reasons previously
the St. Louis area. This evidence Briefs, proposed findings and stated in this decision.
suggests that milk movements to conclusions were filed on behalf of
handlers in the St. Louis area are certain interested parties. These briefs, Marketing Agreement and Order
occurring and meet the order’s Class I proposed findings and conclusions and Annexed hereto and made a part
needs. This evidence provides a basis to the evidence in the record were hereof are two documents, a Marketing
conclude that the order provisions considered in making the findings and Agreement regulating the handling of
attract sufficient milk for fluid use. In conclusions set forth above. To the milk, and an Order amending the order
this regard, the need for additional extent that the suggested findings and regulating the handling of milk in the
government intervention beyond what conclusions filed by interested parties Central marketing area, which has been
the order currently provides in meeting are inconsistent with the findings and decided upon as the detailed and
the market’s fluid demands is not conclusions set forth herein, the appropriate means of effectuating the
warranted. requests to make such findings or reach foregoing conclusions.
The record evidence concerning such conclusions are denied for the It is hereby ordered that this entire
challenges faced by handlers in moving reasons previously stated in this decision and the two documents
milk within the Central marketing area decision. annexed hereto be published in the
to distributing plants in St. Louis and Federal Register.
Illinois indicates that there may be, at General Findings
Determination of Producer Approval
best, localized issues in supplying the The findings and determinations
and Representative Period
Class I needs of these plants. The hereinafter set forth supplement those
proponents for transportation and that were made when the Central order March 2006 is hereby determined to
assembly credits attribute these was first issued and when it was be the representative period for the
difficulties to the higher location values amended. The previous findings and purpose of ascertaining whether the
and blend prices of nearby or bordering determinations are hereby ratified and issuance of the order, as amended in the
portions of the Southeast and confirmed, except where they may Recommended Decision published in
Appalachian orders. However, the conflict with those set forth herein. the Federal Register on February 22,
record reveals that handlers have not The following findings are hereby 2006 (71 FR 9015), regulating the
sought alternative actions to bring forth made with respect to the aforesaid handling of milk in the Central
additional milk supplies to meet Class marketing agreement and order: marketing area is approved or favored
I demands. For example, there is no (a) The tentative marketing agreement by producers, as defined under the
record evidence illustrating that the and the order, as hereby proposed to be terms of the order (as amended and as
Market Administrator has been called amended, and all of the terms and hereby proposed to be amended) who
upon to change performance standards conditions thereof, will tend to during such representative period were
or diversion limits which would better effectuate the declared policy of the Act; engaged in the production of milk for
ensure that the Class I needs of any of (b) The parity prices of milk as sale within the aforesaid marketing area.
the Central marketing area’s distributing determined pursuant to Section 2 of the
List of Subjects in 7 CFR Part 1032
plants would be met. Act are not reasonable in view of the
This decision finds that adoption of price of feeds, available supplies of Milk marketing orders.
the proposed transportation and feeds, and other economic conditions Dated: September 1, 2006.
assembly credit provision is not which affect market supply and demand Lloyd C. Day,
supported by record evidence. for milk in the marketing area, and the Administrator, Agricultural Marketing
Accordingly, this decision does not find minimum prices specified in the Service.
agreement with the rationale advanced tentative marketing agreement and the
by proponents that marketwide service order, as hereby proposed to be Order Amending the Order Regulating
payments in the form of transportation amended, are such prices as will reflect the Handling of Milk in the Central
and assembly credits for milk are the aforesaid factors, ensure a sufficient Marketing Area
needed to overcome deficiencies of the quantity of pure and wholesome milk, This order shall not become effective
Central order. At best, record evidence and be in the public interest; and unless and until the requirements of
demonstrates that if there are difficulties (c) The tentative marketing agreement § 900.14 of the rules of practice and
in procuring milk for Class I use, they and the order, as hereby proposed to be procedure governing proceedings to
are isolated to a fraction of the amended, will regulate the handling of formulate marketing agreements and
marketing area. Adopting transportation milk in the same manner as, and will be marketing orders have been met.
and assembly credits would applicable only to persons in the
Findings and Determinations
unreasonably lower the returns to all respective classes of industrial and
dairy farmers pooled on the order to commercial activity specified in, the The findings and determinations
address a localized issue. marketing agreement upon which a hereinafter set forth supplement those
hearing has been held. that were made when the order was first
Withdrawn Proposal issued and when it was amended. The
A proposal published as Proposal 14, Rulings on Exceptions previous findings and determinations
seeking to require payments from the In arriving at the findings and are hereby ratified and confirmed,
producer settlement fund to be made no conclusions, and the regulatory except where they may conflict with
later than the next business day after the provisions of this decision, each of the those set forth herein.
(a) Findings. A public hearing was § 1032.7 Pool plant. handler to be physically received at a
held upon certain proposed * * * * * pool plant in each of the months of
amendments to the tentative marketing (c) A supply plant from which the January and February, and August
agreement and to the order regulating quantity of bulk fluid milk products through November;
the handling of milk in the Central shipped to (and physically unloaded (3) The equivalent of at least one day’s
marketing area. The hearing was held into) plants described in paragraph milk production is caused by the
pursuant to the provisions of the (c)(1) of this section is not less than 25 handler to be physically received at a
Agricultural Marketing Agreement Act percent during the months of August pool plant in each of the months of
of 1937, as amended (7 U.S.C. 601–674), through February and 20 percent in all March through July and December if the
and the applicable rules of practice and other months of the Grade A milk requirement of paragraph (d)(2) of this
procedure (7 CFR part 900). received from dairy farmers (except section (§ 1032.13) in each of the prior
Upon the basis of the evidence dairy farmers described in § 1032.12(b)) months of August through November
introduced at such hearing and the and from handlers described in and January through February are not
record thereof, it is found that: § 1000.9(c), including milk diverted met, except in the case of a dairy farmer
pursuant to § 1032.13, subject to the who marketed no Grade A milk during
(1) The said order as hereby amended,
following conditions: each of the prior months of August
and all of the terms and conditions
thereof, will tend to effectuate the * * * * * through November or January through
declared policy of the Act; (h) * * * February;
(7) That portion of a regulated plant (4) Of the quantity of producer milk
(2) The parity prices of milk, as designated as a nonpool plant that is received during the month (including
determined pursuant to Section 2 of the physically separate and operated diversions, but excluding the quantity of
Act, are not reasonable in view of the separately from the pool portion of such producer milk received from a handler
price of feeds, available supplies of plant. The designation of a portion of a described in § 1000.9(c)) the handler
feeds, and other economic conditions plant must be requested in advance and diverts to nonpool plants not more than
which affect market supply and demand in writing by the handler and must be 75 percent during the months of August
for milk in the aforesaid marketing area. approved by the market administrator. through February, and not more than 80
The minimum prices specified in the Such nonpool status shall be effective percent during the months of March
order as hereby amended are such on the first day of the month following through July, provided that not less than
prices as will reflect the aforesaid approval of the request by the market 25 percent of such receipts in the
factors, insure a sufficient quantity of administrator and thereafter for the months of August through February and
pure and wholesome milk, and be in the longer of twelve (12) consecutive 20 percent of the remaining months’
public interest; and months or until notification of the receipts are delivered to plants
(3) The said order as hereby amended desire to requalify as a pool plant, in described in § 1032.7(a), (b) or (i);
regulates the handling of milk in the writing, is received by the market * * * * *
same manner as, and is applicable only administrator. Requalification will (f) The quantity of milk reported by a
to persons in the respective classes of require deliveries to a pool distributing handler pursuant to either
industrial or commercial activity plant(s) as provided for in § 1032.7(c). § 1032.30(a)(1) or § 032.30(c)(1) for the
specified in, a marketing agreement For requalification, handlers may not current month may not exceed 125
upon which a hearing has been held. use milk delivered directly from percent of the producer milk receipts
producer’s farms pursuant to § 1000.9(c) pooled by the handler during the prior
Order Relative to Handling
or § 1032.13(c) for the first month. month. Milk diverted to nonpool plants
It is therefore ordered, that on and 3. Section 1032.13 is amended by
reported in excess of this limit shall be
after the effective date hereof, the revising paragraph (d)(1), redesignating
removed from the pool. Milk received at
handling of milk in the Central paragraphs (d)(2) through (6) as
pool plants in excess of the 125 percent
marketing area shall be in conformity to paragraphs (d)(4) through (8), adding
limit, other than pool distributing
and in compliance with the terms and new paragraphs (d)(2) and (d)(3),
plants, shall be classified pursuant to
conditions of the order, as amended, revising redesignated paragraph (d)(4),
§ 1000.44(a)(3)(v). The handler must
and as hereby amended, as follows: and adding a new paragraph (f), to read
designate, by producer pick-up, which
The provisions of the order amending as follows:
milk is to be removed from the pool. If
the order contained in the § 1032.13 Producer milk. the handler fails to provide this
Recommended Decision issued by the information the provisions of paragraph
* * * * *
Administrator, Agricultural Marketing (d) * * * (d)(5) of this provision shall apply. The
Service, on February 15, 2006, and (1) Milk of a dairy farmer shall not be following provisions apply:
published in the Federal Register on eligible for diversion until milk of such (1) Milk shipped to and physically
February 22, 2006 (71 FR 9015), are dairy farmer has been physically received at pool distributing plants shall
adopted and shall be the terms and received as producer milk at a pool not be subject to the 125 percent
provisions of this order. The revised plant and the dairy farmer has limitation;
order follows. continuously retained producer status (2) Producer milk qualified pursuant
since that time. If a dairy farmer loses to § ll.13 of any other Federal Order
PART 1032—MILK IN THE CENTRAL in the previous month shall not be
producer status under the order in this
MARKETING AREA included in the computation of the 125
part (except as a result of a temporary
1. The authority citation for 7 CFR loss of Grade A approval), the dairy percent limitation; provided that the
Part 1032 continues to read as follows: farmer’s milk shall not be eligible for producers comprising the milk supply
diversion until milk of the dairy farmer have been continuously pooled on any
Authority: 7 U.S.C. 601–674, and 7253. Federal Order for the entirety of the
has been physically received as
2. Section 1032.7 is amended by producer milk at a pool plant; most recent three consecutive months.
revising paragraph (c) introductory text (2) The equivalent of at least one day’s (3) The market administrator may
and paragraph (h)(7) to read as follows: milk production is caused by the waive the 125 percent limitation:
(i) For a new handler on the order, provisions referred to in paragraph I hereof typographical errors which may have been
subject to the provisions of paragraph as augmented by the provisions specified in made in this marketing agreement.
(f)(3) of this section, or paragraph II hereof, shall be and are the Effective date. This marketing agreement
(ii) For an existing handler with provisions of this marketing agreement as if shall become effective upon the execution of
set out in full herein. a counterpart hereof by the Department in
significantly changed milk supply
I. The findings and determinations, order accordance with Section 900.14(a) of the
conditions due to unusual relative to handling, and the provisions of
circumstances; aforesaid rules of practice and procedure.
§§ 1032.1 to 1032.86 all inclusive, of the
(4) A bloc of milk may be considered In witness whereof, the contracting
order regulating the handling of milk in the
ineligible for pooling if the market handlers, acting under the provisions of the
Central marketing area (7 CFR Part 1032
administrator determines that handlers which is annexed hereto); and Act, for the purposes and subject to the
altered the reporting of such milk for the II. The following provisions: Record of limitations herein contained and not
milk handled and authorization to correct otherwise, have hereunto set their respective
purpose of evading the provisions of
typographical errors. hands and seals.
this paragraph.
(a) Record of milk handled. The Signature
Marketing Agreement Regulating the undersigned certifies that he/she handled By (Name) lllllllllllllll
Handling of Milk in the Central Marketing during the month of January (Title) lllllllllllllllll
Area 2005,_hundredweight of milk covered by this
marketing agreement. (Address) llllllllllllllll
The parties hereto, in order to effectuate
the declared policy of the Act, and in (b) Authorization to correct typographical (Seal)
accordance with the rules of practice and errors. The undersigned hereby authorizes Attest
procedure effective thereunder (7 CFR Part the Deputy Administrator, or Acting Deputy
900), desire to enter into this marketing Administrator, Dairy Programs, Agricultural [FR Doc. 06–7498 Filed 9–6–06; 8:45 am]
agreement and do hereby agree that the Marketing Service, to correct any BILLING CODE 3410–02–P

Proposed Rule: Milk Marketing Orders: Central

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Proposed Rule: Milk Marketing Orders: Central

Uploaded by

Copyright:

Available Formats

Wednesday,

September 13, 2006

7 CFR Part 1032

You might also like