[Federal Register Volume 59, Number 165 (Friday, August 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20990]


[[Page Unknown]]

[Federal Register: August 26, 1994]


                                                   VOL. 59, NO. 165

                                            Friday, August 26, 1994

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1001, 1002, 1004, 1005, 1006, 1007, 1011, 1012, 1013, 
1030, 1032, 1033, 1036, 1040, 1044, 1046, 1049, 1050, 1064, 1065, 
1068, 1075, 1076, 1079, 1093, 1094, 1096, 1099, 1106, 1108, 1124, 
1126, 1131, 1134, 1135, 1137, 1138, and 1139

[Docket Nos. AO-14-A67, etc.; DA-94-02]

 

Milk in the New England and Other Marketing Areas; Recommended 
Decision and Opportunity To File Written Exceptions on Proposed 
Amendments to Tentative Marketing Agreements and to Orders 

------------------------------------------------------------------------
 7 CFR                                                                  
 part                    Marketing area                       AO Nos.   
------------------------------------------------------------------------
1001..  New England......................................  AO-14-A67    
1002..  New York-New Jersey..............................  AO-71-A82    
1004..  Middle Atlantic..................................  AO-160-A70   
1005..  Carolina.........................................  AO-388-A7    
1006..  Upper Florida....................................  AO-356-A31   
1007..  Georgia..........................................  AO-366-A37   
1011..  Tennessee Valley.................................  AO-251-A38   
1012..  Tampa Bay........................................  AO-347-A34   
1013..  Southeastern Florida.............................  AO-286-A41   
1030..  Chicago Regional.................................  AO-361-A32   
1032..  Southeastern Illinois-Eastern Missouri...........  AO-313-A41   
1033..  Ohio Valley......................................  AO-166-A64   
1036..  Eastern Ohio-Western Pennsylvania................  AO-179-A59   
1040..  Southern Michigan................................  AO-225-A46   
1044..  Michigan Upper Peninsula.........................  AO-299-A29   
1046..  Louisville-Lexington-Evansville..................  AO-123-A65   
1049..  Indiana..........................................  AO-319-A42   
1050..  Central Illinois.................................  AO-355-A29   
1064..  Greater Kansas City..............................  AO-23-A62    
1065..  Nebraska-Western Iowa............................  AO-86-A51    
1068..  Upper Midwest....................................  AO-178-A49   
1075..  Black Hills, South Dakota........................  AO-248-A33   
1076..  Eastern South Dakota.............................  AO-260-A33   
1079..  Iowa.............................................  AO-295-A45   
1093..  Alabama-West Florida.............................  AO-386-A15   
1094..  New Orleans-Mississippi..........................  AO-103-A57   
1096..  Greater Louisiana................................  AO-257-A44   
1099..  Paducah, Kentucky................................  AO-183-A48   
1106..  Southwest Plains.................................  AO-210-A55   
1108..  Central Arkansas.................................  AO-243-A47   
1124..  Pacific Northwest................................  AO-368-A24   
1126..  Texas............................................  AO-231-A63   
1131..  Central Arizona..................................  AO-271-A33   
1134..  Western Colorado.................................  AO-301-A24   
1135..  Southwestern Idaho-Eastern Oregon................  AO-380-A14   
1137..  Eastern Colorado.................................  AO-326-A28   
1138..  New Mexico-West Texas............................  AO-335-A39   
1139..  Great Basin......................................  AO-309-A33   
------------------------------------------------------------------------

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This document recommends adopting a proposal to have the Class 
II milk price in all Federal orders be the basic formula price for the 
second preceding month plus a fixed differential of $0.30. The Class II 
price would, like the Class I price in all Federal orders, be announced 
on or before the fifth day of the month and apply to milk marketed 
during the following month. This recommended decision would also 
eliminate the ``add-back'' provision that requires that the difference 
between the Class II price and the Class III price be added to a 
subsequent month's Class II price when the Class II price for the month 
falls below the Class III price.

DATES: Comments are due on or before September 26, 1994.

ADDRESSES: Comments (six copies) should be filed with the Hearing 
Clerk, Room 1083, South Building, United States Department of 
Agriculture, Washington, DC 20250.

FOR FURTHER INFORMATION CONTACT: Gino M. Tosi, Marketing Specialist, 
USDA/AMS/Dairy Division, Order Formulation Branch, Room 2971, South 
Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 690-1366.

SUPPLEMENTARY INFORMATION: This administrative action is governed by 
the provisions of Sections 556 and 557 of Title 5 of the United States 
Code and, therefore, is excluded from the requirements of Executive 
Order 12866.
    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 will not have a 
significant economic impact on a substantial number of small entities. 
The amendments would promote more orderly marketing of milk by 
producers and regulated handlers.
    The amendments to the rules proposed herein have been reviewed 
under Executive Order 12778, Civil Justice Reform. They are not 
intended to have a retroactive effect. If adopted, the proposed 
amendments would not preempt any state or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
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 provision of the 
order, or any obligation imposed in connection with the order is not in 
accordance with the law and requesting a modification of an 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.
    Prior document in this proceeding:
    Notice of Hearing: Issued December 14, 1993; published December 21, 
1993 (58 FR 67380).

Preliminary Statement

    Notice is hereby given of the filing with the Hearing Clerk of this 
recommended decision with respect to proposed amendments to the 
tentative marketing agreements and the orders regulating the handling 
of milk in the New England and other marketing areas. This notice is 
issued pursuant to the provisions of the Agricultural Marketing 
Agreement Act and the applicable rules of practice and procedure 
governing the formulation of marketing agreements and marketing orders 
(7 CFR Part 900).
    Interested parties may file written exceptions to this decision 
with the Hearing Clerk, U.S. Department of Agriculture, Washington, DC 
20250, by the 30th day after publication of this decision in the 
Federal Register. Six copies of the exceptions should be filed. All 
written submissions made pursuant to this notice will be made available 
for public inspection at the office of the Hearing Clerk during regular 
business hours (7 CFR 1.27(b)).
    The proposed amendments and findings and conclusions set forth 
below are based on the record of a public hearing held at Ramada Hotel-
Old Town, 901 N. Fairfax Street, Alexandria, Virginia, on January 6 and 
7, 1994, pursuant to a notice of hearing issued December 14, 1993, and 
published in the Federal Register, December 21, 1993 (58 FR 67380).
    The material issues on the record of the hearing relate to:
    1. Replacing the current Class II pricing formula used to establish 
the Class II milk price in all Federal milk orders.
    2. Determining whether emergency marketing conditions exist that 
would warrant omission of a recommended decision under the rules of 
practice and procedure (7 CFR 900.12(d)).

Findings and Conclusions

    The following findings and conclusions on the material issues are 
based on evidence presented at the hearing and the record thereof:
    1. Class II milk price. A proposal to replace the Class II milk 
price formula with the basic formula price for the second preceding 
month plus a fixed differential of $0.30 should be adopted. Further, 
this price will be announced by the fifth day of the preceding month. 
Thus, for example, the Class II price delivered by producers in 
September would be announced on August 5, and would be the M-W price 
for July plus $0.30. Adoption of this proposal will result in the Class 
II milk price and the Class I milk price being announced at the same 
time and being applicable for all Federal milk orders. Adoption of this 
proposal would eliminate the need to retain in Federal milk orders the 
section providing for the basic Class II formula price. Adoption of 
this proposal also eliminates the ``add-back'' provision of current 
Class II pricing where, for a given month, if the Class II price is 
less than the Class III price for the same month, the difference 
between these prices are ``added-back'' in computing the second 
succeeding month's Class II price.
    For most Federal milk orders, the current Class II milk price is 
the Minnesota-Wisconsin (M-W) price for the second preceding month as 
adjusted by an ``updating'' product price formula (the basic Class II 
formula price provisions of those orders), plus an amount by which the 
simple average of the basic formula prices (M-W prices) for the most 
recent 12-month period, plus ten cents, exceeds the same 12-month 
period's average of the basic Class II formula prices. The Class II 
milk price is announced by the 15th of the previous month. However, if 
the announced Class II price for a given month is less than the Class 
III price for the same month, the difference between these prices is 
``added-back'' in computing the second succeeding month's Class II 
price. This feature is often referred to as the ``add-back'' provision.
    The purpose of the basic Class II formula price (Section 51a in 
most orders) is to provide a mechanism for updating the M-W price for 
the second preceding month so that the Class II price for the current 
month can be based on the M-W price but still reflect more current 
marketing conditions that might indicate forthcoming changes in the M-W 
price. This updating is done by comparing movements of wholesale prices 
for butter, nonfat dry milk, and Cheddar cheese during the first 15 
days of the preceding month with such prices during the same period a 
month earlier.
    The current Class II differential, which is included in the Class 
II milk price, in most orders is 10 cents. A 15-cent differential 
applies under the three Florida orders, and a 25-cent differential 
applies under the Pacific Northwest order.
    The proposal recommended for adoption was proposed by the Milk 
Industry Foundation and International Ice Cream Association (MIF/IICA) 
and the National Milk Producers Federation (NMPF), Proposal One as 
published in the hearing notice. The MIF/IICA are national trade 
associations for processors of fluid milk, cultured dairy products, and 
manufacturers of frozen desert products. The MIF comprises some 220 
member companies who operate nearly 500 plants nationwide and process 
about 80 percent of all the Class II cultured dairy products in the 
United States. The IICA comprises some 186 member companies who operate 
about 350 plants nationwide that manufacture, as well as distribute, 
approximately 85 percent of the ice cream and related frozen products 
consumed in the United States. The NMPF is the national farm commodity 
organization that represents dairy producers and the dairy cooperative 
marketing associations they own and operate. The Federation's members 
produce a substantial majority of the U.S. milk supply and market milk 
in all Federal milk order areas.
    A second proposal, Proposal Two as published in the hearing notice, 
was offered by Friendship Dairies, Inc. Like the proposal recommended 
for adoption, this proposal would replace the Class II price formula 
with the basic formula price for the second preceding month, but would 
add a fixed differential of $0.10 instead of $0.30. Announcement of the 
Class II milk price under this proposal would also be by the fifth day 
of the preceding month. Friendship Dairies, Inc. (Friendship), is a 
family owned and operated cultured dairy products manufacturer 
regulated under the New York-New Jersey (Order 2) marketing area and 
processes most of the 250 million pounds of milk which it receives 
annually from about 175 independent producers and milk marketing 
cooperatives in Class II products such as cottage cheese and yogurt.
    A third proposal, Proposal Three as published in the hearing 
notice, was offered by Women Involved in Farm Economics (WIFE). This 
proposal would replace the Class II price formula with the basic 
formula plus a fixed differential of $0.50. No witness from WIFE 
testified. However, testimony was received by a witness from the 
National Farmers Organization (NFO) in support of a $0.50 Class II 
differential. The NFO represents about 4,000 member dairy farmers and 
others who market their milk through NFO in at least 13 Federal milk 
orders.
    A fourth proposal, Proposal Four as published in the hearing 
notice, would replace the Class II price formula with a Class II price 
of $0.60 above the Class III or Class III-A price, whichever was 
higher. This proposal received no evidence or testimony at the hearing 
and is considered abandoned.
    The fifth proposal, Proposal Five as published in the hearing 
notice, proposed including the ``add-back'' provision in the Class II 
price calculation. Retention of the ``add-back'' provision was proposed 
by the Central Milk Producers Cooperative (CMPC), a federation of milk 
cooperatives with operations in the Chicago Regional (Order 30) 
marketing area. Its membership includes: Associated Milk Producers, 
Inc., Bongards Creameries, Inc., Golden Guernsey Dairy Cooperative, 
Independent Milk Producers Cooperative, Land O'Lakes, Inc., Manitowoc 
Milk Producers Cooperative, Mid-America Dairymen, Inc., Midwest 
Dairymen's Company, Milwaukee Cooperative Milk Producers, National 
Farmers Organization, Southern Milk Sales, Inc., Wisconsin Dairies 
Cooperative, Wisconsin Milk Producers Cooperative, Inc., and the 
Woodstock Progressive Milk Producers Association. Members of CMPC 
supply milk to bottlers with Class I and Class II utilization in 
Federal Orders 30, 32, 40, 50, 68, and 79. They also supply milk to 
primarily ``stand alone'' Class II plants in Federal Orders 30, 33, and 
49. Certain CMPC members also operate plants processing Class I and 
Class II products.
    Testimony in support of adopting Proposal One, which would replace 
the Class II price formula with the basic formula price for the second 
preceding month plus a fixed differential of $0.30 and be announced by 
the fifth day of the preceding month, included:
    a. The proponents MIF/IICA and NMPF;
    b. Prairie Farms Dairy, a large regional dairy cooperative that 
processes and distributes a full line of Grade A dairy products, wholly 
owns 15 dairy plants, manages one plant for Mid-America Dairymen, Inc., 
and jointly owns 11 plants with other cooperatives;
    c. The Kroger Company, which operates seven fluid distributing 
plants regulated under six Federal Orders. Kroger Company also operates 
two nonpool ice cream manufacturing plants that distribute dairy 
products in 22 Federal orders;
    d. Crowley Foods, a major dairy products manufacturer that operates 
six plants in Federal Orders 1, 2, and 4, four of which are involved in 
the manufacture of Class II products; and
    e. Dean Foods Company, which operates 34 fluid milk plants in 17 
Federal orders, processing in excess of 4.5 billion pounds of milk per 
year.
    Except for supporting the fifth proposal, which would retain the 
``add-back'' provision, the CMPC offered testimony in support of 
replacing the Class II price formula with the basic price formula for 
the second preceding month plus a fixed differential of $0.30, with 
this price being announced by the fifth day of the preceding month.
    Testimony offered by the proponent witness for the MIF/IICA cited 
that price volatility in Federal order markets in the past few years 
has resulted in the movement of Class II prices in a magnitude and 
direction too often in the opposite direction of Class I and Class III 
prices. The witness indicated that these more volatile and opposite-
moving price relationships have acted to severely limit Class II 
processors in their ability to sell products on a forward contract 
basis and have caused confusion to their customers who possess a 
relatively limited knowledge of milk procurement and pricing. This 
witness maintains that for efficient marketing and efficient pricing of 
milk, both Class I and Class II prices should be reflecting movements 
in the M-W price at the same time, in the same magnitude, and in the 
same direction.
    The MIF/IICA proponent witness offered testimony that revisited a 
proposal that they submitted at the National Hearing in the fall of 
1990 to change the method for establishing advance notice of the price 
paid for Class II milk under Federal orders. At that hearing, the 
proposal offered was to establish a Class II price by using the M-W 
price for the second preceding month plus a fixed differential of 
$0.15, explaining that the rationale for establishing a 15-cent 
differential was based on a comparison of the Class II price with the 
basic formula price over the decade of the 1980's. The proponent 
witness observed that for the 10-year period of 1980 through 1990 the 
Class II price averaged about $0.15 above the M-W price.
    The witness also testified that because of the Food Security Act of 
1985, and the subsequent 1990 Farm Bill, the groundwork was laid for 
basing milk prices on market forces more than had been done in the 
past. The MIF/IICA witness contends that the result has been more 
volatile milk pricing which has rendered the current Class II price 
formula ineffective in tracking the Class I price, and that the spread 
between the Class II and the M-W price has increased from its longer-
term average.
    The proponent witness testified that the Class II price has on 
average approximated the basic formula price for the second preceding 
month plus 30 cents. It is on this basis that, according to the 
proponent witness, they are endorsing a Class II price based on the 
basic formula price for the second preceding month plus a 30-cent fixed 
differential. They maintain that this approach has the advantage of 
being easily understood and is revenue-neutral when compared to the 
current Class II price computation. They noted that it also allows for 
the announcement of the Class II price for the month to be made a full 
ten days earlier than under the current Class II pricing and 
announcement structure.
    From an economic point of view, the MIF/IICA proponent witness 
stressed that while revising the price computation for determining the 
Class II price is certainly needed, it is imperative not to have a 
Class II price which would increase the probability of reducing an 
already declining market for Class II product sales. Because the Class 
II price has averaged nearly 30 cents above the basic formula price for 
the second preceding month over the past six years, the witness 
asserted that the level of the Class II price for raw milk to both 
processors and producers would be maintained. The witness offered and 
cited Federal order statistics that supported their position that Class 
II product sales are steady-to-declining. The witness said this 
underscores the economic need to maintain the cost of Class II milk at 
its current level relative to the basic formula price.
    Lastly, the MIF/IICA proponent witness testified that the changing 
cost structure of milk components under Federal orders reinforces their 
position of a fixed 30-cent differential added to the second preceding 
month's basic formula price in determining the Class II milk price. The 
witness noted that since 1990, the butter price has been reduced under 
the Federal price support program while the cost of nonfat dry milk has 
risen. Noting also that the butterfat differential computation was 
changed in mid-1990, these two developments have significantly 
increased the cost structure for Class II products, particularly for 
lower to nonfat Class II products.
    The NMPF witness offered testimony and evidence in support of the 
testimony of the MIF/IICA position. The witness compared the actual 
Class II price each month under the Chicago Regional order with what 
the Class II price would have been under their alternative proposal for 
the six-year period from 1988 to 1993. These comparisons on average, 
the witness said, would neither have increased handler's costs nor have 
changed prices received by dairy farmers. This proponent witness 
maintained that this alternative proposal would have generated more 
stable prices over the past six years and that the range between 
monthly high and low prices would have been less than the actual Class 
II price range. According to the witness, their proposal assures that 
monthly fluctuations in Class I and Class II prices will be identical. 
Also, according to the NMPF witness, under the current Class II pricing 
formula, Class I and Class II prices could, and often did, move in 
opposite directions in the same month. They maintained that consistent 
movements in Class I and Class II prices would lessen confusion and 
mitigate marketing problems that arise when Class I and Class II prices 
move in opposite directions in the same month.
    The NMPF proponent witness testified that their proposed 
alternative for determining the Class II milk price is simple, easy to 
understand, and can be calculated as soon as the basic formula price is 
announced by the USDA. In addition to joining the MIF/IICA position in 
support of Proposal One, this witness asserted that based on data for 
the past six years, adoption of their proposal would result in no 
changes in either Class II prices paid by handlers or prices received 
by producers. Additionally, this witness observed that there would be 
little overall price impact, but prices would be more stable, and 
market conditions would improve.
    A joint brief filed by the MIF/IICA and the NMPF reiterated their 
testimony calling for adoption of Proposal One.
    The witness for Prairie Farms Dairy, Inc., offered testimony in 
support of the need to adopt the MIF/IICA and NMPF's Class II pricing 
proposal. This witness offered testimony supporting the proponents' 
observations of the pricing problems and business impacts that occur 
when Class I and Class II prices move in different directions in the 
same month. This witness attributes, in part, the decline in sales of 
Class II products to the wide price swings of the Class II price and 
how retailers have reacted to these swings. The Prairie Farms witness 
asserted that adoption of the MIF/IICA and NMPF proposal would not 
negatively affect farmers, that returns to processors would be more 
constant, and that consumers would see a more stable average price on 
Class II products, which might result in increased sales.
    The Prairie Farms witness viewed the 10-cent differential as a 
``nuisance'' differential and summarized their opinion in four major 
points in support of Proposal One: (1) that the proposal is supported 
by the majority of the dairy industry; (2) the proposal would result in 
a 10-day earlier announcement of the Class II price along with the 
Class I price, which would simplify price changes to customers in a 
more timely manner; (3) that Class I and Class II prices will move in 
the same direction and at the same magnitude; and (4) that Class II 
price swings will be more moderate, resulting in more stable consumer 
prices that hopefully will increase Class II product sales.
    The witness representing Kroger Company testified to their support 
for the MIF/IICA and NMPF proposal, offering that adoption of the 
proposal will enable processors to intelligently inform their customers 
of changes in costs for Class I and Class II products simultaneously. 
This witness similarly expressed concern of a declining Class II 
products market. In support of the fixed 30-cent differential feature 
for Class II pricing, the Kroger witness maintained that the value of 
Class II milk to dairy farmers is greater than the intended target 
differential of ten cents contained in the current Class II pricing 
formula. This witness also asserted that it is important to establish a 
pricing level which recognizes these market realities. He maintained 
that a 30-cent Class II differential added to the basic formula price 
recognizes the increased value of Class II milk and establishes a 
competitive price level for Class II products. The Kroger witness 
testified that this proposal would, over time, establish revenue 
neutrality with the current Class II pricing method.
    The witness for Crowley Foods, testifying in support of the MIF/
IICA and NMPF proposal, voiced identical concerns about Class I and 
Class II price relationships and went further to mention that the 30-
cent fixed differential also offers a happy medium between the price 
concerns of producers and processors. Additionally, the Crowley Foods 
witness said that announcing the Class II price an additional ten days 
in advance of the current Class II price announcement would afford 
improved promotional planning and ensure that Class II prices move in 
tandem with fluid prices.
    Testimony by the witness for Dean Foods offered his organization's 
support for the MIF/IICA and NMPF proposal.
    The witness representing the CMPC offered testimony in support of 
Proposal One. However, CMPC sees the need to retain the ``add-back'' 
feature of Class II milk pricing. Hence, their support as proponents 
for Proposal Five.
    The CMPC witness emphasized the role of Class II products in the 
market place, offering evidence that customers demand the same basic 
product and equal service levels (and costs) for their Class II milk as 
with Class I milk. However, this witness testified, the current Class 
II pricing system does not generate adequate returns to pay for the 
costs of service so closely associated with Class I.
    This witness offered evidence in support for a 30-cent 
differential, indicating it is the minimum justifiable differential 
level. However, the witness tempered support for this level with 
concern that in no event should such apparent increase in the Class II 
differential be permitted to result in no real price increase, hence 
their support for the fifth proposal for retention of the ``add-back.'' 
The impetus for retaining the add-back provision offered by the CMPC 
witness drew from the Recommended Decision of October 31, 1989 (54 FR 
33709) that concluded that Class II milk should not be less than the 
value for Class III milk. Although the CMPC witness acknowledged that a 
Class II differential increase without an add-back feature would lessen 
the risk of loss to producers, they continue to assert that the add-
back provision provides the necessary guaranty against such loss.
    The brief filed by CMPC elaborated further on their support for 
retention of the add-back provision. In their view, the add-back 
provides the month-to-month guaranty against lost revenue to producers. 
This is necessary to retain, stated the CMPC brief, because producer 
and handler prices are computed on a month-to month basis and not on 
the basis of annual, or three year or six year average prices.
    Support for Proposal One was offered in a brief filed on behalf of 
the Southern Foods Group, Inc. (SFG), and Anderson-Erickson Dairy 
Company (AE). The SFG owns and operates six fluid processing plants in 
Texas and Louisiana and processes Class II products. The AE operates a 
fluid processing plant and an ice cream plant in Des Moines, Iowa. In 
the opinion of SFG/AE, only Proposal One provides the changes necessary 
to correct the problems currently associated with Class II milk 
pricing.
    The SFG/AE brief points to producer and handler agreement that 
Class II pricing needs to move in the same direction and at the same 
rate as Class I prices and that advance pricing of Class II milk is 
critical to the ability of the industry to sell finished Class II 
products. They also point out that there is universal agreement that 
the existing Class II price formula is unacceptable and that Class II 
pricing should be based on the Minnesota-Wisconsin (M-W) price series. 
On the basis of the record, the SFG/AE concludes that the Class II 
price must be based on the second prior month's M-W plus a differential 
of not more than thirty cents without an add-back.
    Testimony offered in support of Proposal Two, which would establish 
the Class II price as the basic formula price for the second preceding 
month plus a fixed differential of $0.10 and have this price announced 
by the fifth day of the preceding month, was received from:
    a. The proponent, Friendship Dairies, Inc.;
    b. Kraft General Foods, a large handler of producer milk that 
operates plants that process Class II and Class III products in many 
states; and
    c. Galloway Company, a regulated handler under Federal Order 30 
that primarily produces sweetened condensed milk, and ice cream mixes.
    The proponent witness representing Friendship Dairies, Inc., 
offered testimony on the need for the Class II differential to be set 
at ten cents, and for the ``add-back'' provision of current Class II 
milk pricing to be eliminated. The testimony offered in support of 
their proposal rested largely on prior decisions issued by the 
Department which had determined that ten cents above the basic formula 
price was the appropriate price (differential) level for Class II milk. 
Additionally, this proponent witness agreed with other testimony that 
eliminating the Class II product price formula and using the second 
preceding month's basic formula price would more accurately reflect the 
true direction or magnitude in the movement of the Class III price and 
simplify the pricing of Class II milk. This witness emphasized that 
this distortion was most attributable to the ``add-back'' provision.
    The Friendship witness offered testimony that demonstrated that the 
add-back provision resulted in price enhancement of the Class II price 
above the intended 10-cent target differential. Additionally, this 
witness testified that when the Class II price is dramatically higher 
than the Class III-A price, the economic incentive exists for using 
nonfat dry milk (NFDM) in place of fresh fluid milk. According to this 
witness, while increasing the price of Class II milk may increase the 
blend price producers receive in the short term, the long-term effect 
will be to promote the use of NFDM for manufacturing Class II products.
    Even if the Class II price had not increased, said the Friendship 
witness, the decreasing value placed on butterfat has had the effect of 
increasing the cost of a hundredweight of Class II skim milk. Because 
the cost of milk is the single most significant factor affecting the 
price of most finished Class II products, especially cottage cheese, 
this absolute increase in cost is staggering and sales have declined, 
said the witness. According to the witness, any resulting decline in 
the use of milk for skim-based Class II products would yield a lower 
price to dairy farmers and would compound the continuing shift of milk 
value from the fat to skim component.
    While the Friendship witness applauded the advance pricing feature 
of Class II milk, he asserted that the add-back provision of current 
Class II pricing effectively obliterates any benefits of advance 
pricing, citing that prices have become volatile. This volatility has 
caused confusion in the marketplace because Class II prices too often 
move completely independent of the Class III and Class I price, 
according to this witness. The result of this confusion, said the 
witness, is manufacturers attempting to quote a price based upon a 
forecast, only to rescind because of a large movement in prices due to 
the add-back feature of current Class II milk pricing. This reality, 
said the witness, has implications at the consumer level because 
special featured prices on products that are offered to supermarket 
chains to promote sales must be guaranteed well in advance so that 
advertising and related promotional business can be planned. The 
witness sees the result of current pricing practices as lower Class II 
product sales and lower returns to dairy farmers.
    The Friendship witness testified that their proposal achieves the 
Department's intent that the Class II price be Class III plus ten 
cents. The witness said that adoption of any other proposal would 
deviate from this intent. Further, said the witness, supply and demand 
conditions, at least in Order 2, do not warrant any increase in the 
Class II price.
    Support for the 10-cent differential level for Class II milk was 
offered from Kraft General Foods (Kraft). The Kraft witness testified 
that current Class II pricing has not achieved the targeted Class II 
differential of ten cents above the Class III price. Rather, it has 
exceeded the intended differential, and the difference has been 
compounded in recent years. On a month-to-month basis, said Kraft, the 
advance Class II price formula has resulted in gross distortions 
between the Class II and Class III price in the amount of difference 
and the direction of price movements.
    The Kraft witness expressed disagreement with the MIF/IICA and NMPF 
proposal only from the view that the appropriate differential level 
should be ten cents and not thirty cents. The witness noted that 
current Class II pricing has resulted in an effective Class II 
differential level of almost thirty cents. This is not what should be 
adopted as the Class II differential because the effective thirty cents 
is a result of the failure of the formula used to compute the Class II 
price, he said. According to the Kraft witness, it is one thing to 
achieve enhancement of the minimum regulated price by mistake and quite 
another to do so by design. Like the Friendship witness, the Kraft 
witness drew heavily on previous decisions that reiterated that the 
appropriate Class II price be the Class III price plus ten cents. This 
witness was of the opinion that supply and demand conditions did not 
warrant any increase in the current target differential.
    Like the Friendship witness, the Kraft witness joined in the 
concern that if the Class II differential level is increased above the 
current intended 10-cent level, there would likely be increased 
substitution of NFDM for fluid milk in Class II products. Kraft also 
agreed with Friendship that the add-back provision should be 
eliminated.
    The witness from Galloway Company offered testimony in support of 
Proposal Two. Much of this witness's testimony supported testimony of 
the Friendship and Kraft witnesses and further elaborated on the 
concern for the substitution of NFDM for fluid milk in the manufacture 
of Class II products. Noting the wide price disparity between Class 
III-A and Class II, this witness said that processors will make their 
ingredient selection based on arbitrary and capricious pricing 
regulations if the Class II price is increased. Increasing the Class II 
price would not enhance producer revenue because of the ability to 
substitute lower-priced ingredients in the manufacture of Class II 
products.
    A brief filed on behalf of Friendship, Kraft, Galloway Company, and 
the Sorrento Cheese Company, Buffalo, New York, expressed opposition to 
the 30-cent differential of Proposal One. This brief maintained that 
the appropriate differential should be ten cents and that placing the 
differential at thirty cents would be undue price enhancement of the 
Class II price and would only institutionalize an unintended aberration 
from the target differential. They contend that testimony of the 
proponents of Proposal One is flawed because it is based on the Class 
II prices that prevailed in 1990 when the M-W price recorded some of 
its lowest prices in a decade and because of the effects of the add-
back provision.
    This brief cites past decisions that affirm that the current target 
10-cent differential is appropriate, although because of the add-back 
provision, the target differential could not be met and this resulted 
in high Class II prices. It further revisits past decisions wherein 
concern was expressed that producer milk may not be made available for 
Class II use if the price falls below the Class III price. While 
experience has not borne this out, they say, caution still needs to be 
exercised in the relationship of Class II prices to Class III-A prices 
and substitution of powder for producer milk in the manufacture of 
Class II products. Increasing the differential would only provide 
additional stimulus to reduce handler purchases of producer milk. This 
brief also counters arguments on the role of over-order premiums, 
maintaining that such payments reflect the cost of services incurred by 
producers (such as balancing and transportation) and not the value of 
milk. They contend that such premiums should not be relevant to the raw 
product value of milk.
    Lastly, the brief asserts that Proposal One's differential of 
thirty cents is an undue enhancement of the Class II price and has no 
basis from an economic point-of-view. The view presented is that thirty 
cents represents a differential of convenience between divergent views 
and is not arrived at on the basis of supply and demand considerations 
which, they say, any price change must be predicated upon.
    In support of Proposal Three, a witness representing NFO testified 
that in addition to supporting a 50-cent Class II differential, they 
were also supporting the CMPC proposal that the add-back provision of 
current Class II pricing be retained. This witness testified that the 
record of the previous 43-day National Hearing in 1990 clearly 
supported a Class II differential of at least fifty cents. The witness 
indicated that if the classified pricing structure of Federal orders is 
to be of value, then there has to be meaningful price differences 
between classes. A class price break of only ten cents between Class 
III and Class II was not meaningful in the view of this witness. 
Additionally, said the NFO witness, handlers are already paying much 
more than the effective 30-cent Class II differential to secure Class 
II milk supplies, perhaps as much as $0.70 to $0.80 cents above Class 
III is regularly being paid. According to this witness, this indicates 
that the value of Class II milk is worth at least 50 cents over the 
Class III price. The NFO brief further emphasized that 50 cents 
establishes a differential level which is at least minimally 
significant in a classified price sense. Since Federal milk orders have 
three classes, then there should be a difference in the use value among 
the three categories of products sufficient enough to justify separate 
classes, said NFO.
    Another reason offered by the NFO witness for a 50-cent Class II 
differential is the devaluation of butterfat relative to the nonfat 
component of milk. Because Class II products have a significant 
butterfat content when viewed across all Class II products, Class II 
milk producers have suffered losses in milk used in this class, and 
this represents a reduction in costs to processors. This argument was 
reiterated in their brief.
    The NFO witness testified that even though they would like to see a 
$1.00 Class II differential, a 50-cent level should be sufficient, 
provided that the add-back be retained to maintain the intent that 
Class II prices be equal to or above Class III prices. If the 
differential level were set at $1.00, the NFO witness testified that 
this would negate the need for an add-back because of the unlikelihood 
that the Class III price would exceed the Class II price.
    In their brief, the NFO revisited past decisions that affirmed the 
establishment and intended role of the add-back provision. The NFO 
reasserted that the add-back provides reinforcement to the principle 
that Class II prices by definition should not be less than Class III 
prices. The culprit in the volatility of Class II prices, according to 
NFO, is the basic Class II formula price and not the add-back. However, 
NFO did acknowledge that the add-back does play a role, albeit a minor 
one, in Class II price volatility.
    Opponents to retaining the add-back provision argued in submitted 
briefs that it should be eliminated for a number of reasons. All 
opponents agreed that if the Class II milk pricing method adopts using 
the second preceding month's basic formula price and adding a fixed 
differential, then the add-back can only serve to enhance the Class II 
price.
    The SFG/AE brief dismisses concern that producers won't deliver 
milk for Class II use if the Class II price falls below the Class III 
price. In addition to this not happening in the marketplace, SFG/AE 
points out, it is also a function of when the price is announced. 
Producers don't know until the month is over that the Class II price 
was below the Class III price. Therefore, no purpose beyond price 
enhancement is served by an add-back provision.
    This theme is further developed in a brief filed on behalf of 
Friendship. While CMPC views a ``loss'' to producer revenues without 
retaining the add-back, there is in effect no ``loss'' Friendship 
argues. Class II prices below Class III prices arise only during months 
in which the cheese-driven M-W price is increasing, said Friendship. In 
periods of falling M-W prices, the Class II differential will exceed 
the target differential. Producers will not be denied the benefit of 
the Class II differential--rather its payment is delayed by two months, 
they said. In periods of M-W price volatility, the fact that Class I 
and Class II differentials would be added to the M-W prices for the 
second preceding month will actually serve to restrain, they said, the 
extent to which such volatility is reflected in producer prices. 
Further, the Friendship brief finds it inconsistent to call Class II 
prices below Class III prices a ``loss'' because it is not balanced 
against any concept of gain or a ``pay-back'' in months of a declining 
M-W and the effective Class II differential at windfall levels above 
the M-W.
    It is clear from the record that there is universal endorsement for 
changing how Class II milk is priced under Federal orders. The record 
supports the conclusion that the basic Class II price formula that 
``updates'' the second preceding month's M-W in establishing the Class 
II price is not functioning as intended; is no longer necessary and 
contributes, in part, to price volatility; and results in a distorted 
relationship with other class prices. The record is also clear on the 
unanimous support for retaining the advance-pricing of Class II milk 
and that the Class II price should be announced at the same time as 
Class I prices by using the second preceding month's M-W price and 
adding a fixed differential. The only issues of disagreement regarding 
Class II milk pricing are what is the appropriate Class II differential 
and whether or not the ``add-back'' provision should be retained.

Class II Differential

    Most handlers and producers agree that the appropriate differential 
value for Class II milk is at least thirty cents above the Class III 
price. The record testimony and evidence supports this conclusion on 
the basis that this differential value is representative of the 
additional value of milk used in this class; that it has been the 
effective differential paid for Class II milk on average since 1987; 
and that handlers regularly pay over-order premiums to secure milk for 
Class II uses above and beyond the service feature of over-order 
premiums.
    Past decisions regarding the pricing of Class II milk concluded 
that the basic Class II formula price and target differential of ten 
cents should not be changed. The most recent past decision concluded 
that the target differential of ten cents should be maintained because 
supply and demand conditions revealed that there were adequate reserves 
of Class III milk to meet Class II needs. That decision on the 43-day 
National Hearing of 1990 recognized that many in the industry believed 
that Class II prices should move in the same magnitude and direction as 
Class I. That decision and this hearing clearly reveal that Class I and 
Class II products are frequently processed together and marketed by 
handlers in common distribution channels. However, with a basic 
differential of ten cents, the decision on the 1990 43-day National 
Hearing continued the existing theory of coordinating the Class II 
price with the current month's Class III price because Class III 
products could be used as a source of ingredients for Class II 
products. In this regard, the need to coordinate the Class II price 
with the Class III price was the operative principle in the pricing of 
Class II milk. It was for these reasons that the updating product price 
formula (represented by the basic Class II formula price) was intended 
and retained.
    This decision makes a clear break from the past in that Class II 
milk pricing will function in a manner consistent with Class I pricing 
largely in recognition of the similarity of the distribution and 
marketing channels shared by milk used in both classes. The record 
testimony and evidence in this hearing support the conclusion that 
current Class II pricing results in prices that do not always move in 
the same direction and magnitude as Class I prices even though both 
products tend to move in the same marketing channels. Linking the Class 
II pricing method to that of Class I should better reflect and respond 
to market conditions as well as simplify the procedure.
    As indicated in the brief by CMPC, the Class II price is driven 
largely by changes in the basic formula price--the M-W price. As this 
price changes through movements in the hard product price markets, so 
will the Class II price. Therefore, any change in the Class II price is 
due primarily to hard product market forces, and not due to the level 
of the differential which will not change from month-to-month.
    By establishing the Class II milk price at the second preceding 
month's M-W and adding a fixed differential, as with Class I prices, 
the intent of providing coordination with Class I prices is achieved. 
Additionally, a consistent and predictable relationship between Class I 
and Class II prices is also achieved. However, because of the need to 
retain advance pricing for orderly marketing, there may be times when 
the current month's Class III price will be greater than the Class II 
price. Inversely, it is also true, that there may be times when the 
Class II price is more than 30-cents greater than the current month's 
Class III price. Nevertheless, the intended target differential is 
maintained, as with Class I pricing, albeit with a lag as exists with 
Class I pricing. This is a reality that both producers and handlers 
must accept with the retention of advanced pricing and have accepted 
with regard to the Class I price for many years.
    The record on this hearing expressed concern for the substitution 
of NFDM for fresh producer milk used to make Class II products because 
the price relationship between the Class II price and, for most Federal 
orders, the Class III-A price, may provide the economic incentive to do 
so. In this regard, there was a call on one hand to have the Class II 
price be coordinated with the movement in Class I price and at the same 
time have the Class II price also be coordinated with lower-class 
prices. The impossibility of this is clear. In addition, both handlers 
and producers will know, in advance, the prices for both Class I and 
Class II milk at the same time. Delivery, procurement, and processing 
decisions can be made with surety of what prices will be. However, the 
Class III or Class III-A price will not be known until after the month 
has ended. It would seem that without knowing what the Class III or 
Class III-A price will be in advance, the argument that NFDM will 
substitute for producer milk is weakened. This is not to say that 
substitution will not occur, because the record reveals that it does. 
Substitution may occur if a handler predicts the future price 
relationship between the Class II price and Class III or Class III-A 
price, and predicts that the future relationship will provide the 
economic incentive for substitution. Economic prediction, in and of 
itself, is not a proper basis for determining the appropriate value the 
milk has in Class II uses.
    Significantly different conclusions were reached between the 
proponents of retaining the current 10-cent target differential, the 
proponents for a 30-cent differential, and the proponents for a 50-cent 
differential on the basis of the changing value of milk components. The 
10-cent proponents argue that the increasing value of skim to butterfat 
effectively has raised the costs of Class II products. The 30-cent 
proponents argue that the changing cost structure provides, in part, 
the rationale for maintaining what the recent past's average 
differential has been. The proponents for a 50-cent differential argue 
that because the utilization of butterfat to manufacture Class II 
products is relatively high, processors enjoy a price decrease. The 
arguments presented on the changing cost structure of milk components 
is not an issue for the purposes of establishing the Class II price. 
Rather, it is a butterfat differential issue that has already been 
decided upon in other rulemaking decisions.
    As indicated in the brief submitted by SFG/AE, Federal order 
statistics reveal that there is an abundant supply of milk for all 
class uses of producer milk. As indicated in this brief, and in the 
brief filed on behalf of Friendship, Kraft, Sorrento Cheese Company, 
and Galloway Company, a price increase must be predicated upon supply 
and demand considerations. Establishing the Class II differential for 
any given month at thirty cents above the second preceding month's 
basic formula price is not intended to effectuate a price increase or a 
price decrease for Class II milk. Rather it is a recognition of the 
effective differential that has been functioning for a long period of 
time. The record provides no evidence on any difficulty in procuring 
milk for Class II use under the current pricing structure. However, the 
record does indicate that the pricing structure creates problems 
regarding the timing and certainty of prices, in part, because of its 
reliance on the basic Class II pricing formula used to update the M-W.
    An analysis of the record evidence and officially noticed materials 
does point to the fact that the Class II price has averaged nearly 
thirty cents above the basic formula price for the second preceding 
month since 1987. Additionally, an analysis of the effective 
differential (the difference between the current month's Class III 
price and Class II price since adoption of the add-back provision) for 
the four-year period of 1990 through 1993 indicates that the Class II 
differential has averaged thirty cents above the Class III price. It is 
because of these market realities that there exists so strong an 
agreement between producers and processors that the true differential 
level of thirty cents for Class II milk is warranted. Some describe 
this differential level as the appropriate level, some the minimum 
justifiable differential, and by some, a differential level that 
represents the maximum that can be called for on the basis of supply 
and demand considerations.

The Add-Back Provision

    Only two proponents, CMPC who supported a 30-cent differential, and 
NFO, who advocated a 50-cent differential, called for retention of the 
add-back provision. The add-back provision of current Class II milk 
pricing was established in December 1989 as part of a decision to have 
true advanced pricing for Class II milk. Prior to that time, the Class 
II milk price that was announced was a tentative price which could be 
retroactively updated when the Class III price for the month was 
greater than the tentative Class II price. In this way, the Class II 
price was ``floored'' by the Class III price. The intent of the add-
back provision was to maintain in principle this relationship between 
Class II and Class III prices.
    The decision on the 43-day National Hearing of 1990 recognized 
that, at the time of the hearing, the effective Class II differential 
had averaged about 4 cents higher than the intended differential of ten 
cents per hundredweight. This decision also affirmed the intent of the 
add-back was to ensure that producers not receive less than the Class 
III value for Class II milk in the blend price when the basic formula 
price exceeded the announced Class II price so that returns to 
producers would not be reduced. In this way, the Class II price was 
coordinated with the current month's Class III price.
    Now that there exists much more pricing data under the current 
Class II pricing method, it is clear that the effect of the add-back 
provision resulted in a Class II price that can never achieve the 
intended target differential. While the goal of the add-back was to 
provide a degree of coordination with the Class III price, it did not 
attempt price coordination with the Class III price in months when the 
effective Class II differential was well above the targeted 
differential. Retention of the add-back feature for any proposal 
presented at this hearing would have similar results.
    The add-back provision similarly does not balance prices paid by 
handlers in months when producers receive more (and at times much more) 
than the intended target differential. In this view, the add-back 
feature only works to the price advantage of the producer who, because 
of the unintended effect of a pricing provision, enjoys all protection 
from market price changes that handlers do not.
    To retain the add-back provision under the proposal recommended for 
adoption herein could only result in increasing the minimum Class II 
milk price. An analysis of what the Class II price would have been with 
and without an add-back provision reveals that in 1990 the add-back 
would have enhanced the effective Class II differential by 19 cents; 
for 1991 it would have enhanced the Class II differential by 24 cents; 
for 1992 it would have enhanced the Class II differential by 15 cents; 
and for 1993 the Class II differential would have been enhanced by 34 
cents. Additionally, because this decision makes a clear break from the 
past in that Class II prices are more importantly coordinated with the 
Class I price, there remains no rational argument for its retention. 
The need for advance pricing, as well as the need for coordination with 
Class I price movements, means moving away from price coordination with 
the current month's Class III price. Both objectives can not be 
simultaneously satisfied.
    2. Need for Emergency Action. On the basis of the record evidence 
and testimony, no emergency conditions could be ascertained that would 
warrant the omission of a recommended decision.

Rulings on Proposed Findings and Conclusions

    Briefs and proposed findings and conclusions were filed on behalf 
of certain interested parties. These briefs, proposed findings and 
conclusions, and the evidence in the record were considered in making 
the findings and conclusions set forth above. To the extent that the 
suggested findings and conclusions filed by interested parties are 
inconsistent with the findings and conclusions set forth herein, the 
requests to make such findings or reach such conclusions are denied for 
the reasons previously stated in this decision.

General Findings

    The findings and determinations hereinafter set forth supplement 
those that were made when the New England and other orders were first 
issued and when they were amended. The previous findings and 
determinations are hereby ratified and confirmed, except where they may 
conflict with those set forth herein.
    (a) The tentative marketing agreements and the orders, as hereby 
proposed to be amended, and all of the terms and conditions thereof, 
will tend to effectuate the declared policy of the Act;
    (b) The parity prices of milk as determined pursuant to section 2 
of the Act are not reasonable in view of the price of feeds, available 
supplies of feeds, and other economic conditions which affect market 
supply and demand for milk in the marketing areas, and the minimum 
prices specified in the tentative marketing agreements and the orders, 
as hereby proposed to be amended, are such prices as will reflect the 
aforesaid factors, insure a sufficient quantity of pure and wholesome 
milk, and be in the public interest; and
    (c) The tentative marketing agreements and the orders, as hereby 
proposed to be amended, will regulate the handling of milk in the same 
manner as, and will be applicable only to persons in the respective 
classes of industrial and commercial activity specified in, marketing 
agreements upon which a hearing has been held; and
    (d) All milk and milk products handled by handlers, as defined in 
the tentative marketing agreements and the orders as hereby proposed to 
be amended, are in the current of interstate commerce or directly 
burden, obstruct, or affect interstate commerce in milk or its 
products.

Recommended Marketing Agreements and Orders Amending the Orders

    The recommended marketing agreements are not included in this 
decision because the regulatory provisions thereof would be the same as 
those contained in the orders, as hereby proposed to be amended. The 
following order amending the orders, as amended, regulating the 
handling of milk in the New England and other marketing areas is 
recommended as the detailed and appropriate means by which the 
foregoing conclusions may be carried out.

List of Subjects in 7 CFR Parts 1001, 1002, 1004, 1005, 1006, 1007, 
1011, 1012, 1013, 1030, 1032, 1033, 1036, 1040, 1044, 1046, 1049, 1050, 
1064, 1065, 1068, 1075, 1076, 1079, 1093, 1094, 1096, 1099, 1106, 1108, 
1124, 1126, 1131, 1134, 1135, 1137, 1138, 1139

    Milk marketing orders.

    For the reasons set forth in the preamble, the following 
provision(s) in Title 7, Parts 1001 through 1139 are amended as 
follows:
    1. The authority citation for 7 CFR Parts 1001 through 1139 
continues to read as follows:

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

PART 1001--MILK IN THE NEW ENGLAND MARKETING AREA


Sec. 1001.211  [Removed and Reserved]

    1. Section 1001.21 is removed and reserved.
    2. Section 1001.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1001.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *
    3. Section 1001.51 is amended by revising the section heading, 
removing the paragraph designation ``(a)'' without revising the text of 
the paragraph, and by removing paragraph (b), to read as follows:


Sec. 1001.51  Basic formula price.

* * * * *
    4. Section 1001.54 is revised to read as follows:


Sec. 1001.54  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I and Class II prices for the 
following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1002--MILK IN THE NEW YORK-NEW JERSEY MARKETING AREA


Sec. 1002.19  [Removed]

    1. Section 1002.19 is removed and reserved.
    2. Section 1002.50 is amended by revising paragraph (c) to read as 
follows:


Sec. 1002.50  Class prices.

* * * * *
    (c) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *
    3. Section 1002.51 is amended by revising the section heading, 
removing the paragraph designation ``(a)'' without revising the text of 
the paragraph, and by removing paragraph (b), to read as follows:


Sec. 1002.51   Basic formula price.

* * * * *
    4. Section 1002.56 is amended by revising the introductory text, 
removing the introductory text of paragraph (a), redesignating 
paragraph (a)(1) as paragraph (a), revising paragraph (b), 
redesignating paragraph (a)(2) as paragraph (c), redesignating 
paragraph (a)(3) as paragraph (d), redesignating paragraph (a)(4) as 
paragraph (e), redesignating paragraph (a)(5) as paragraph (f), and 
redesignating paragraph (a)(6) as paragraph (g), to read as follows:


Sec. 1002.56  Announcement of class prices and butterfat differential.

* * * * *
    The market administrator shall announce publicly on or before the 
fifth day of each month, the following:
* * * * *
    (b) The Class II price for the following month applicable at the 
201-210 mile zone and at the 1-10 mile zone.
* * * * *

PART 1004--MILK IN THE MIDDLE ATLANTIC MARKETING AREA


Sec. 1004.21  [Removed]

    1. Section 1004.21 is removed and reserved.
    2. Section 1004.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1004.50  Class and component prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *
    3. Section 1004.51 is amended by revising the section heading, 
removing the paragraph designation ``(a)'' without revising the text of 
the paragraph, and by removing paragraph (b), to read as follows:


Sec. 1004.51  Basic formula price.

* * * * *
    4. Section 1004.53 is amended by revising the introductory text, 
removing the introductory text of paragraph (a), redesignating 
paragraph (a)(1) as paragraph (a), revising paragraph (b), 
redesignating paragraph (a)(2) as paragraph (c), and redesignating 
paragraph (a)(3) as paragraph (d) to read as follows:


Sec. 1004.53  Announcement of class prices and component prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month, the following:
* * * * *
    (b) The Class II price for the following month;
* * * * *

PART 1005--MILK IN THE CAROLINA MARKETING AREA


Sec. 1005.20  [Removed]

    1. Section 1005.20 is removed.
    2. Section 1005.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1005.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1005.52  [Removed and Reserved]

    3. Section 1005.52 is removed and reserved.
    4. Section 1005.54 is revised to read as follows:


Sec. 1005.54  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1006--MILK IN THE UPPER FLORIDA MARKETING AREA


Sec. 1006.19  [Reserved]

    1. Section 1006.19 is removed and reserved. 
    2. Section 1006.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1006.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30. 
* * * * *


Sec. 1006.51a  [Removed]

    3. Section 1006.51a is removed.
    4. Section 1006.53 is revised to read as follows:


Sec. 1006.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the basic formula price for the preceding 
month.

PART 1007--MILK IN THE GEORGIA MARKETING AREA


Sec. 1007.20  [Removed and Reserved]
    1. Section 1007.20 is removed and reserved. 
    2. Section 1007.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1007.50  Class prices. 
* * * * * 
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30. 
* * * * * 
Sec. 1007.51a  [Removed and Reserved]

    3. Section 1007.51a is removed.
    4. Section 1007.53 is revised to read as follows:


Sec. 1007.53   Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA


Sec. 1011.20  [Removed]

    1. Section 1011.20 is removed.
    2. Section 1011.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1011.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1011.51a  [Removed]

    3. Section 1011.51a is removed.
    4. Section 1011.53 is revised to read as follows:


Sec. 1011.53   Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A price for the 
preceding month.

PART 1012--MILK IN THE TAMPA BAY MARKETING AREA


Sec. 1012.19  [Removed and Reserved]

    1. Section 1012.19 is removed and reserved.
    2. Section 1012.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1012.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1012.51a  [Removed]

    3. Section 1012.51a is removed.
    4. Section 1012.53 is revised to read as follows:


Sec. 1012.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the basic formula price for the preceding 
month.

PART 1013--MILK IN THE SOUTHEASTERN FLORIDA MARKETING AREA


Sec. 1013.19  [Removed and Reserved]

    1. Section 1013.19 is removed and reserved.
    2. Section 1013.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1013.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1013.51a  [Removed]

    3. Section 1013.51a is removed.
    4. Section 1013.53 is revised to read as follows:


Sec. 1013.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III price for the preceding month.

PART 1030--MILK IN THE CHICAGO REGIONAL MARKETING AREA


Sec. 1030.20  [Removed and Reserved]

    1. Section 1030.20 is removed and reserved.
    2. Section 1030.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1030.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1030.51a  [Removed]

    3. Section 1030.51a is removed.
    4. Section 1030.53 is revised to read as follows:


Sec. 1030.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1032--MILK IN THE SOUTHERN ILLINOIS-EASTERN MISSOURI MARKETING 
AREA


Sec. 1032.20  [Removed]

    1. Section 1032.20 is removed.
    2. Section 1032.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1032.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1032.51a  [Removed]

    3. Section 1032.51a is removed.
    4. Section 1032.53 is revised to read as follows:


Sec. 1032.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III price for the preceding month.

PART 1033--MILK IN THE OHIO VALLEY MARKETING AREA


Sec. 1033.20  [Removed and Reserved]

    1. Section 1033.20 is removed and reserved.
    2. Section 1033.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1033.50  Class and component prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *
    3. Section 1033.51 is amended by revising the section heading, 
removing the paragraph designation ``(a)'' without revising the text of 
the paragraph, and by removing paragraph (b), to read as follows:


Sec. 1033.51  Basic formula price.

* * * * *
    4. Section 1033.53 is amended by revising the introductory text, 
removing the introductory text of paragraph (a), redesignating 
paragraph (a)(1) as paragraph (a), revising paragraph (b), 
redesignating paragraph (a)(2) as paragraph (c), redesignating 
paragraph (a)(3) as paragraph (d), redesignating paragraph (a)(4) as 
paragraph (e) and redesignating paragraph (a)(5) as paragraph (f), to 
read as follows:


Sec. 1033.53  Announcement of class and component prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month, the following:
* * * * *
    (b) The Class II price for the following month;
* * * * *

PART 1036--MILK IN THE EASTERN OHIO-WESTERN PENNSYLVANIA MARKETING 
AREA


Sec. 1036.20  [Removed and Reserved]

    1. Section 1036.20 is removed and reserved.
    2. Section 1036.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1036.50  Class and component prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1036.51a  [Removed]

    3. Section 1036.51a is removed.
    4. Section 1036.53 is amended by revising the introductory text, 
removing the introductory text of paragraph (a), redesignating 
paragraph (a)(1) as paragraph (a), revising paragraph (b), 
redesignating paragraph (a)(2) as paragraph (c), redesignating 
paragraph (a)(3) as paragraph (d), redesignating paragraph (a)(4) as 
paragraph (e) and redesignating paragraph (a)(5) as paragraph (f), to 
read as follows:


Sec. 1036.53  Announcement of class and component prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month, the following:
* * * * *
    (b) The Class II price for the following month;
* * * * *

PART 1040--MILK IN THE SOUTHERN MICHIGAN MARKETING AREA


Sec. 1040.20  [Removed]

    1. Section 1040.20 is removed.
    2. Section 1040.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1040.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1040.51a  [Removed]

    3. Section 1040.51a is removed.
    4. Section 1040.53 is revised to read as follows:


Sec. 1040.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1044--MILK IN THE MICHIGAN UPPER PENINSULA MARKETING AREA


Sec. 1044.20  [Removed and Reserved]

    1. Section 1044.20 is removed and reserved.
    2. Section 1044.22 is amended by revising paragraph (i)(1)(i) and 
removing paragraph (i)(3), to read as follows:


Sec. 1044.22  Additional duties of the market administrator.

* * * * *
    (i) * * *
    (1) * * *
    (i) The Class I price and Class II price for the following month;
* * * * *
    3. Section 1044.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1044.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *
    4. Section 1044.51 is amended by revising the section heading, 
removing the paragraph designation ``(a)'' without revising the text of 
the paragraph, and by removing paragraph (b), to read as follows:


Sec. 1044.51  Basic formula price.

* * * * *

PART 1046--MILK IN THE LOUISVILLE-LEXINGTON-EVANSVILLE MARKETING 
AREA


Sec. 1046.201  [Removed]

    1. Section 1046.20 is removed.
    2. Section 1046.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1046.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1046.51a  [Removed]

    3. Section 1046.51a is removed.
    4. Section 1046.53 is revised to read as follows:


Sec. 1046.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1049--MILK IN THE INDIANA MARKETING AREA


Sec. 1049.20  [Removed]

    1. Section 1049.20 is removed.
    2. Section 1049.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1049.50  Class and component prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1049.51a  [Removed]

    3. Section 1049.51a is removed.
    4. Section 1049.53 is amended by revising the introductory text, 
removing the introductory text of paragraph (a), redesignating 
paragraph (a)(1) as paragraph (a), revising paragraph (b), 
redesignating paragraph (a)(2) as paragraph (c), redesignating 
paragraph (a)(3) as paragraph (d), redesignating paragraph (a)(4) as 
paragraph (e) and redesignating paragraph (a)(5) as paragraph (f), to 
read as follows:


Sec. 1049.53  Announcement of class and component prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month, the following:
* * * * *
    (b) The Class II price for the following month;
* * * * *

PART 1050--MILK IN THE CENTRAL ILLINOIS MARKETING AREA


Sec. 1050.20  [Removed]

    1. Section 1050.20 is removed.
    2. Section 1050.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1050.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1050.51a  [Removed]

    3. Section 1050.51a is removed.
    4. Section 1050.53 is revised to read as follows:


Sec. 1050.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III price for the preceding month.

PART 1064--MILK IN THE GREATER KANSAS CITY MARKETING AREA


Sec. 1064.20  [Removed]

    1. Section 1064.20 is removed.
    2. Section 1064.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1064.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1064.51a  [Removed]

    3. Section 1064.51a is removed.
    4. Section 1064.53 is revised to read as follows:


Sec. 1064.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III price for the preceding month.

PART 1065--MILK IN THE NEBRASKA-WESTERN IOWA MARKETING AREA


Sec. 1065.20  [Removed]

    1. Section 1065.20 is removed.
    2. Section 1065.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1065.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1065.51a  [Removed]

    3. Section 1065.51a is removed.
    4. Section 1065.53 is revised to read as follows:


Sec. 1065.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1068--MILK IN THE UPPER MIDWEST MARKETING AREA


Sec. 1068.20  [Removed]

    1. Section 1068.20 is removed.
    2. Section 1068.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1068.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1068.51a  [Removed]

    3. Section 1068.51a is removed.
    4. Section 1068.53 is revised to read as follows:


Sec. 1068.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1075--MILK IN THE BLACK HILLS, SOUTH DAKOTA MARKETING AREA


Sec. 1075.20  [Removed]

    1. Section 1075.20 is removed.
    2. Section 1075.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1075.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *
    3. Section 1075.51 is amended by revising the section heading, 
removing the paragraph designation ``(a)'' without revising the text of 
the paragraph, and by removing paragraph (b), to read as follows:


Sec. 1075.51  Basic formula price.

* * * * *
    4. Section 1075.53 is revised to read as follows:


Sec. 1075.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III price for the preceding month.

PART 1076--MILK IN THE EASTERN SOUTH DAKOTA MARKETING AREA


Sec. 1076.20  [Removed]

    1. Section 1076.20 is removed.
    2. Section 1076.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1076.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


1076.51a  [Removed]

    3. Section 1076.51a is removed.
    4. Section 1076.53 is revised to read as follows:


Sec. 1076.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III price for the preceding month.

PART 1079--MILK IN THE IOWA MARKETING AREA


Sec. 1079.20  [Removed]

    1. Section 1079.20 is removed.
    2. Section 1079.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1079.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1079.51a  [Removed]

    3. Section 1079.51a is removed.
    4. Section 1079.53 is revised to read as follows:


Sec. 1079.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1093--MILK IN THE ALABAMA-WEST FLORIDA MARKETING AREA


Sec. 1093.20  [Removed]

    1. Section 1093.20 is removed.
    2. Section 1093.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1093.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1093.51a  [Removed]

    3. Section 1093.51a is removed.
    4. Section 1093.53 is revised to read as follows:


Sec. 1093.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A price for the 
preceding month.

PART 1094--MILK IN THE NEW ORLEANS-MISSISSIPPI MARKETING AREA


Sec. 1094.20  [Removed]

    1. Section 1094.20 is removed.
    2. Section 1094.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1094.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1094.51a  [Removed]

    3. Section 1094.51a is removed.
    4. Section 1094.53 is revised to read as follows:


Sec. 1094.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1096--MILK IN THE GREATER LOUISIANA MARKETING AREA


Sec. 1096.20  [Removed]

    1. Section 1096.20 is removed.
    2. Section 1096.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1096.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1096.51a  [Removed]

    3. Section 1096.51a is removed.
    4. Section 1096.53 is revised to read as follows:


Sec. 1096.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1099--MILK IN THE PADUCAH, KENTUCKY MARKETING AREA


Sec. 1099.20  [Removed]

    1. Section 1099.20 is removed.
    2. Section 1099.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1099.50  Class prices.

* * * * *
    (b) Class II price.  The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1099.51a  [Removed]

    3. Section 1099.51a is removed.
    4. Section 1099.53 is revised to read as follows:


Sec. 1099.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1106--MILK IN THE SOUTHWEST PLAINS MARKETING AREA


Sec. 1106.20  [Removed]

    1. Section 1106.20 is removed.
    2. Section 1106.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1106.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1099.51a  [Removed]

    3. Section 1106.51a is removed.
    4. Section 1106.53 is revised to read as follows:


Sec. 1106.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1108--MILK IN THE CENTRAL ARKANSAS MARKETING AREA


Sec. 1108.20  [Removed]

    1. Section 1108.20 is removed.
    2. Section 1108.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1108.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1108.51a  [Removed]

    3. Section 1108.51a is removed.
    4. Section 1108.53 is revised to read as follows:


Sec. 1108.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1124--MILK IN THE PACIFIC NORTHWEST MARKETING AREA

    1. Section 1124.19 is revised to read as follows:


Sec. 1124.19  Butterfat differential.

    The butterfat differential is the number that results from 
subtracting the computation in paragraph (b) of this section from the 
computation in paragraph (a) of this section and rounding to the 
nearest one-tenth cent:
    (a) Multiply 0.138 times the monthly average Chicago Mercantile 
Exchange Grade A (92-score) butter price as reported by the Dairy 
Division;
    (b) Multiply 0.0028 times the average price per hundredweight, at 
test, for manufacturing grade milk, f.o.b. plants in Minnesota and 
Wisconsin, as reported by the Department for the month.
    2. Section 1124.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1124.50  Class and component prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *
    3. Section 1124.51 is amended by revising the section heading, 
removing the paragraph designation ``(a)'' without revising the text of 
the paragraph, and by removing paragraph (b), to read as follows:


Sec. 1124.51  Basic formula price.

* * * * *
    4. Section 1124.53 is amended by revising paragraph (a), removing 
paragraph (b), and redesignating paragraph (c) as paragraph (b), to 
read as follows:


Sec. 1124.53  Announcement of class and component prices.

* * * * *
    (a) On or before the 5th day of each month, the Class I price and 
the Class II price for the following month, and the Class III and Class 
III-A price for the preceding month.
* * * * *

PART 1126--MILK IN THE TEXAS MARKETING AREA


Sec. 1126.20  [Removed and Reserved]

    1. Section 1126.20 is removed and reserved.
    2. Section 1126.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1126.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1126.51  [Removed]

    3. Section 1126.51a is removed.
    4. Section 1126.53 is revised to read as follows:


Sec. 1126.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1131--MILK IN THE CENTRAL ARIZONA MARKETING AREA


Sec. 1131.20  [Removed and Reserved]

    1. Section 1131.20 is removed and reserved.
    2. Section 1131.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1131.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1131.51a  [Removed]

    3. Section 1131.51a is removed.
    4. Section 1131.53 is revised to read as follows:


Sec. 1131.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A prices for the 
preceding month.

PART 1134--MILK IN THE WESTERN COLORADO MARKETING AREA


Sec. 1134.9  [Removed and Reserved]

    1. Section 1134.19 is removed and reserved.
    2. Section 1134.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1134.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1134.51a  [Removed]

    3. Section 1134.51a is removed.
    4. Section 1134.53 is revised to read as follows:


Sec. 1134.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III price for the preceding month.

PART 1135--MILK IN THE SOUTHWESTERN IDAHO-EASTERN OREGON MARKETING 
AREA

    1. Section 1135.19 is revised to read as follows:


Sec. 1135.19  Butterfat differential.

    The butterfat differential is the number that results from 
subtracting the computation in paragraph (b) of this section from the 
computation in paragraph (a) of this section and rounding to the 
nearest one-tenth cent:
    (a) Multiply 0.138 times the monthly average Chicago Mercantile 
Exchange Grade A (92-score) butter price as reported by the Dairy 
Division;
    (b) Multiply 0.0028 times the average price per hundredweight, at 
test, for manufacturing grade milk, f.o.b. plants in Minnesota and 
Wisconsin, as reported by the Department for the month.
    2. Section 1135.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1135.50  Class and component prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *
    3. Section 1135.51 is amended by revising the section heading, 
removing the paragraph designation ``(a)'' without revising the text of 
the paragraph, and by removing paragraph (b), to read as follows:


Sec. 1135.51  Basic formula prices.

* * * * *
    4. Section 1135.53 is amended by revising paragraph (a), removing 
paragraph (b), and redesignating paragraph (c) as paragraph (b), to 
read as follows:


Sec. 1135.53  Announcement of class and component prices.

* * * * *
    (a) On or before the 5th day of each month, the Class I price and 
the Class II price for the following month, and the Class III and Class 
III-A prices for the preceding month.
* * * * *

PART 1137--MILK IN THE EASTERN COLORADO MARKETING AREA


Sec. 1137.19  [Removed and Reserved]

    1. Section 1137.19 is removed and reserved.
    2. Section 1137.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1137.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1137.51  [Removed]

    3. Section 1137.51a is removed.
    4. Section 1137.53 is revised to read as follows:


Sec. 1137.53  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III price for the preceding month.

PART 1138--MILK IN THE NEW MEXICO-WEST TEXAS MARKETING AREA


1138.20  [Removed and Reserved]

    1. Section 1138.20 is removed and reserved.
    2. Section 1138.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1138.50  Class prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *


Sec. 1138.52  [Removed and Reserved]

    3. Section 1138.52 is removed and reserved.
    4. Section 1138.54 is revised to read as follows:


Sec. 1138.54  Announcement of class prices.

    The market administrator shall announce publicly on or before the 
fifth day of each month the Class I price and the Class II price for 
the following month, and the Class III and Class III-A price for the 
preceding month.

PART 1139--MILK IN THE GREAT BASIN MARKETING AREA


Sec. 1139.19  [Removed and Reserved]

    1. Section 1139.19 is removed and reserved.
    2. Section 1139.50 is amended by revising paragraph (b) to read as 
follows:


Sec. 1139.50  Class prices and component prices.

* * * * *
    (b) Class II price. The Class II price shall be the basic formula 
price for the second preceding month plus $0.30.
* * * * *
    3. Section 1139.51 is amended by revising the section heading, 
removing the paragraph designation ``(a)'' without revising the text of 
the paragraph, and by removing paragraph (b), to read as follows:


Sec. 1139.51  Basic formula price.

* * * * *
    4. Section 1139.53 is amended by revising paragraph (a), removing 
paragraph (b), and redesignating paragraph (c) as paragraph (b), to 
read as follows:


Sec. 1139.53  Announcement of class and component prices.

* * * * *
    (a) The 5th day of each month, the Class I price and the Class II 
price for the following month.
* * * * *
    Dated: August 22, 1994.
Lon Hatamiya,
Administrator.
[FR Doc. 94-20990 Filed 8-25-94; 8:45 am]
BILLING CODE 3410-02-P