[Federal Register Volume 59, Number 6 (Monday, January 10, 1994)]
[Proposed Rules]
[Pages 1305-1307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-424]


[[Page Unknown]]

[Federal Register: January 10, 1994]


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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service

7 CFR Parts 1005, 1007, 1011, and 1046

[DA-93-29]

 

Milk in the Carolina, Georgia, Tennessee Valley, and Louisville-
Lexington-Evansville Marketing Areas; Revised Proposed Suspension of 
Certain Provisions of the Orders

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed suspension of rules.

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SUMMARY: This document invites written comments on a proposal that 
would suspend for nearly two years certain provisions of the Carolina, 
Georgia, Tennessee Valley, and Louisville-Lexington-Evansville Federal 
milk orders. If adopted, the proposal would regulate a plant at 
Kingsport, Tennessee, under the Tennessee Valley order, instead of the 
Carolina order, and it would keep regulated under the Tennessee Valley 
order a plant at Somerset, Kentucky, that otherwise might become 
regulated under the Louisville-Lexington-Evansville order. The 
proposals were submitted by Land-O-Sun Dairies, which operates the 
Kingsport, Tennessee, plant, and Southern Bell Dairy, Inc., which 
operates the Somerset, Kentucky, plant. These handlers contend that 
without the suspension they would be subject to pricing disparities 
that could jeopardize their business.

DATES: Comments are due no later than January 20, 1994.

ADDRESSES: Comments (two copies) should be sent to USDA/AMS/Dairy 
Division, Order Formulation Branch, room 2968, South Building, P.O. Box 
96456, Washington, DC 20090-6456.

FOR FURTHER INFORMATION CONTACT: Nicholas Memoli, Marketing Specialist, 
USDA/AMS/Dairy Division, Order Formulation Branch, room 2968, South 
Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 690-1932.

SUPPLEMENTARY INFORMATION: Prior document in this proceeding:
    Notice of Proposed Suspension (DA-93-29): Issued October 22, 1993; 
published October 28, 1993 (58 FR 57970).
    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires the 
Agency to examine the impact of a proposed rule on small entities. 
Pursuant to 5 U.S.C. 605(b), the Administrator of the Agricultural 
Marketing Service has certified that this action would not have a 
significant economic impact on a substantial number of small entities. 
This action would lessen the regulatory burden on small entities by 
removing pricing disparities that are causing or could cause financial 
hardship for certain distributing plants.
    The Department is issuing this proposed action in conformance with 
Executive Order 12866.
    This proposed suspension has been reviewed under Executive Order 
12778, Civil Justice Reform. This action is not intended to have a 
retroactive effect. This action will not preempt any state or local 
laws, regulations, or policies, unless they present an irreconcilable 
conflict with the rule.
    The Agricultural Marketing Agreement Act of 1937, as amended (7 
U.S.C. 601-674), provides that administrative proceedings must be 
exhausted before parties may file suit in court. Under section 
608c(15)(A) of the Act, any handler subject to an order may file with 
the Secretary a petition stating that the order, any provisions of the 
order, or any obligation imposed in connection with the order is not in 
accordance with law and requesting a modification of the order or to be 
exempted from the order. A handler is afforded the opportunity for a 
hearing on the petition. After a hearing, the Secretary would rule on 
the petition. The Act provides that the district court of the United 
States in any district in which the handler is an inhabitant, or has 
its principal place of business, has jurisdiction in equity to review 
the Secretary's ruling on the petition, provided a bill in equity is 
filed not later than 20 days after the date of the entry of the ruling.
    Notice of proposed rulemaking was published in the Federal Register 
(58 FR 57970) on October 28, 1993, concerning the proposed suspension 
of certain provisions of the Georgia, Carolina, and Tennessee Valley 
Federal milk orders (DA-93-29). The public was afforded the opportunity 
to comment on the notice by submitting written data, views, and 
arguments by November 4, 1993. Six comment letters were received 
concerning the three-market proposed suspension.
    Subsequent to the issuance of the above proposed suspension, a 
suspension request was received from a handler regulated under the 
Tennessee Valley order that in effect expands the initial suspension 
issue to the Louisville-Lexington-Evansville order. It also affects a 
proposed suspension that was issued earlier for the Louisville order. 
Because of the interrelationship of these several requests, it has been 
determined that a revised proposed suspension involving all four orders 
should be issued for comment. Therefore, notice is hereby given that, 
pursuant to the provisions of the Agricultural Marketing Agreement Act 
of 1937, as amended (7 U.S.C. 601-674), the suspension of the following 
provisions of the orders regulating the handling of milk in the 
Carolina, Georgia, Tennessee Valley, and Louisville-Lexington-
Evansville marketing areas is being considered for a 23-month period 
beginning February 1, 1994:
    1. In Sec. 1005.7(d)(3) of the Carolina order, the words ``from'', 
``there'', ``a greater quantity of route disposition, except filled 
milk, during the month'', and ``than in this marketing area'';
    2. In Sec. 1007.7(e)(3) of the Georgia order, the words ``, except 
as provided in paragraph (e)(4) of this section,'';
    3. In Sec. 1007.7 of the Georgia order, paragraph (e)(4);
    4. In Sec. 1011.7(d)(3) of the Tennessee Valley order, the words 
``from'', ``there'', ``a greater quantity of route disposition, except 
filled milk, during the month'', and ``than in this marketing area''; 
and
    5. In Sec. 1046.2 of the Louisville-Lexington-Evansville order, the 
word ``Pulaski''.
    All persons who desire to send written data, views or arguments 
about the proposed suspension should send two copies of them to the 
USDA/AMS/Dairy Division, Order Formulation Branch, Room 2968, South 
Building, P.O. Box 96456, Washington, DC 20090-6456, by the 10th day 
after publication of this notice in the Federal Register.
    The comment period is limited to 10 days so that the suspension, if 
found appropriate, can be implemented quickly and thereby minimize 
financial hardship and disruptive marketing conditions.
    The comments that are sent will be made available for public 
inspection in the Dairy Division during normal business hours (7 CFR 
1.27(b)).

Statement of Consideration

    This proposed suspension would allow a distributing plant at 
Kingsport, Tennessee, that is located within the Tennessee Valley 
marketing area and that meets all of the pooling standards of the 
Tennessee Valley order to be regulated under that order rather than the 
Carolina order, as now, despite the plant having greater sales in the 
Carolina marketing area. It would also allow a distributing plant 
located at Somerset, Kentucky, that has been regulated under the 
Tennessee Valley order to remain regulated there even if it should 
develop greater sales in the Louisville-Lexington-Evansville (Order 46) 
marketing area. In addition, the proposed suspension would allow a 
supply plant at Springfield, Kentucky, that has been supplying the 
Somerset plant to remain pooled under the Tennessee Valley order 
without having to make uneconomic shipments of milk that it contends 
would be necessary if the Southern Belle plant shifted to Order 46.
    1. The problem of Land-O-Sun Dairies, Inc. In recent months, the 
blend price to producers at Kingsport, Tennessee, under the Tennessee 
Valley order has been significantly higher than the blend price at that 
location under the Carolina order. For example, during the months of 
July through October 1993, the Tennessee Valley blend price at 
Kingsport was 32 cents, 29 cents, 20 cents, and 20 cents, respectively, 
higher than the Carolina blend price at Kingsport. Although the Class I 
price at Kingsport is identical under both of these orders, the 
Tennessee Valley order's higher Class I utilization has resulted in a 
higher blend price at Kingsport during nearly every month for the past 
two years.
    The difference in blend prices at Kingsport requires Land-O-Sun 
Dairies, as a Carolina order handler, to pay significant over-order 
prices to retain its milk supply in competition with nearby handlers 
regulated under the Tennessee Valley order. Land-O-Sun has indicated 
that it cannot continue to pay these over-order prices without 
jeopardizing the existence of its business. It therefore proposed a 
suspension of certain provisions of Orders 5 and 11 that would allow it 
to become regulated under Order 11.
    As noted in the earlier proposed suspension, the paragraph that is 
proposed to be suspended from the Georgia order is merely a conforming 
change to preserve the status quo between the Carolina and Georgia 
orders. This change is necessary to continue the regulation of a 
Greenville, South Carolina, plant under the Georgia order. Without the 
suspension, the plant would become regulated under the Carolina order.
    2. The problem of Southern Belle Dairy Company. Southern Belle 
Dairy at Somerset, Kentucky, has been regulated under Order 11 for the 
past four years. However, recently it has acquired accounts that could 
cause it to shift to Order 46.
    In recent months, the blend price at Somerset under Order 11 has 
been significantly higher than the blend price at that location under 
Order 46. For example, during the months of July through October 1993, 
the blend price under Order 11 at Somerset was 67 cents, 62 cents, 49 
cents, and 25 cents, respectively, higher than the Order 46 price at 
that location. Of these amounts, 19 cents is attributable to a 19-cent 
higher Class I price at that location under Order 11. Southern Belle 
contends that if it should shift to Order 46 it would have to pay 
substantial over-order prices to its producers to retain its milk 
supply. Moreover, slight changes in sales could cause it to shift back 
and forth between the two orders, causing market instability and 
uncertainty under the base-excess programs applicable to both orders.
    3. The problem of Armour Food Ingredients Company. Armour Food 
operates a supply plant and a nonpool manufacturing plant at 
Springfield, Kentucky. The supply plant has been regulated under Order 
11 since August 1992. If the Southern Belle plant shifts to Order 46, 
Armour's supply plant would also become subject to the regulations of 
Order 46 because the plant is supplying milk to the Southern Belle 
plant. Armour contends that the plant would not qualify as a pool plant 
based on its present milk handling practices because, under the net 
shipment provision of Order 46, all of the shipments sent to its 
manufacturing facility from pool distributing plants for surplus 
disposal would be subtracted from its shipments to pool distributing 
plants. Armour states that to keep the milk of its producers pooled 
under Order 46 it would have to incur substantial increases in 
transportation and assembly costs. To avoid these costs, Armour 
proposed suspending language in the net shipment provision of Order 46.
    4. Industry responses to the earlier proposed suspensions (DA-93-29 
and DA-93-26). On the basis of the Land-O-Sun request, a notice of 
proposed suspension of provisions in Orders 5, 7, and 11 was issued on 
October 22, 1993 (DA-93-29)(58 FR 57970). Four comments were submitted 
in support of the action, and two comments were filed in opposition to 
it.
    Milkco, Inc., a handler regulated under the Carolina order with a 
plant in Asheville, North Carolina, stated that it supported the 
proposed suspension. Southern Belle Dairy also submitted a letter in 
support of the suspension.
    A letter supporting the suspension also was received from Mid-
America Dairymen, Inc., on behalf of Southern Milk Sales, Inc., a dairy 
cooperative with producer milk pooled on the Tennessee Valley, Georgia, 
and Carolina orders. The cooperative notes in its letter that ``paying 
higher over-order values to maintain its supply of milk would 
jeopardize the existence of the affected distributing plant.''
    Additionally, an individual dairy farmer who supplies producer milk 
to Land-O-Sun filed a comment in support of the suspension. He stated 
that if Land-O-Sun paid him a lesser price for his milk he would have 
to sell to another handler.
    Coburg Dairy, a Carolina order handler located in Charleston, South 
Carolina, filed a comment opposing the suspension. Coburg competes with 
the Kingsport plant for Class I sales in the Carolina market. The 
handler argued that the regulation of the Kingsport plant under the 
Tennessee Valley order would give the plant a competitive advantage in 
the Carolina market since it has a lower Class I price and because it 
presumably would not have to pay over-order prices to its producers.
    The North Carolina Farm Bureau Federation, a general farm 
organization, also objected to the proposed suspension on the grounds 
that regulation of the Kingsport plant under Order 11 would jeopardize 
the over-order prices in the Carolina market. The Federation indicated 
that eroding Class I premiums and lower Class I utilization were 
threatening the health of the dairy industry in North Carolina.
    In response to the Armour Food request, a notice of proposed 
suspension of the net shipment provision of Order 46 was issued on 
September 22, 1993 (DA-93-26) (58 FR 50526). Three comments were 
submitted.
    Southern Belle supported the suspension, indicating that Armour was 
supplying it with milk and could encounter problems of assembly and 
transportation if the plant became subject to the provisions of Order 
46 because of a shift in regulation of the Southern Belle plant from 
Order 11 to Order 46.
    Milk Marketing, Inc., a cooperative association with 688 dairy 
farmers under Order 46, and The Kroger Company, a handler operating 
Winchester Farms Dairy at Winchester, Kentucky, filed comments opposing 
the proposed suspension of the net shipment provision. MMI argued that 
if the net shipment provision is suspended, the intent of the order 
would not be carried out appropriately and that the needs of the order 
would not be met in an efficient manner. Kroger stated that there was 
not an abundant amount of milk available for fluid use under Order 46 
and that the net shipment provision was needed to help assure that 
distributing plants have sufficient supplies of milk to meet their 
fluid requirements. It contends that there is no justification to relax 
the performance provisions of the order during the season when milk 
availability is reduced and Class I sales increase simply because there 
is a ``possibility'' that a distributing plant may switch regulation 
from Order 11 to Order 46.
    No final action has been taken on Armour's request to suspend the 
net shipment provision. However, since that issue would become moot 
under the proposed suspension being considered herein, final action on 
the Armour proposal is being held in abeyance pending the outcome of 
the current proposal.

List of Subjects in 7 CFR Parts 1005, 1007, 1011, and 1046

    Milk marketing orders.

    Authority: Secs. 1-19, 48 Stat. 31, as amended; 7 U.S.C. 601-
674.

    Dated: January 3, 1994.
Lon Hatamiya,
Administrator.
[FR Doc. 94-424 Filed 1-7-94; 8:45 am]
BILLING CODE 3410-02-P