[Federal Register Volume 60, Number 25 (Tuesday, February 7, 1995)]
[Proposed Rules]
[Pages 7290-7333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2448]




[[Page 7289]]

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Part II





Department of Agriculture





_______________________________________________________________________



Agricultural Marketing Service



_______________________________________________________________________





CFR Part 1001 et al.





Milk in the New England and Other Marketing Areas; Decision on Proposed 
Amendments to Tentative Marketing Agreements and Orders; Proposed Rule

  Federal Register / Vol. 60, No. 25 / Tuesday, February 7, 1995 / 
Proposed Rules   
[[Page 7290]] 

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, 1139

[Docket No. AO-14-A66, etc.; DA-92-11]
RIN 0581-AA57


Milk in the New England and Other Marketing Areas; Decision on 
Proposed Amendments to Tentative Marketing Agreements and Orders

------------------------------------------------------------------------
  7 CFR                                                                 
  part                   Marketing area                     AO Nos.     
------------------------------------------------------------------------
1001....  New England................................  AO-14-A66        
1002....  New York-New Jersey........................  AO-71-A81        
1004....  Middle Atlantic............................  AO-160-A69       
1005....  Carolina...................................  AO-388-A6        
1006....  Upper Florida..............................  AO-356-A30       
1007....  Georgia....................................  AO-366-A35       
1011....  Tennessee Valley...........................  AO-251-A37       
1012....  Tampa Bay..................................  AO-347-A33       
1013....  Southeastern Florida.......................  AO-286-A40       
1030....  Chicago Regional...........................  AO-361-A30       
1032....  Southern Illinois-Eastern Missouri.........  AO-313-A40       
1033....  Ohio Valley................................  AO-166-A63       
1036....  Eastern Ohio-Western Pennsylvania..........  AO-179-A58       
1040....  Southern Michigan..........................  AO-225-A44       
1044....  Michigan Upper Peninsula...................  AO-299-A28       
1046....  Louisville-Lexington-Evansville............  AO-123-A64       
1049....  Indiana....................................  AO-319-A41       
1050....  Central Illinois...........................  AO-355-A28       
1064....  Greater Kansas City........................  AO-23-A61        
1065....  Nebraska-Western Iowa......................  AO-86-A49        
1068....  Upper Midwest..............................  AO-178-A47       
1075....  Black Hills, South Dakota..................  AO-248-A22       
1076....  Eastern South Dakota.......................  AO-260-A31       
1079....  Iowa.......................................  AO-295-A43       
1093....  Alabama-West Florida.......................  AO-386-A13       
1094....  New Orleans-Mississippi....................  AO-103-A55       
1096....  Greater Louisiana..........................  AO-257-A42       
\1\1097.  Memphis, Tennessee.........................  AO-219-A48       
\1\1098.  Nashville, Tennessee.......................  AO-184-A57       
1099....  Paducah, Kentucky..........................  AO-183-A47       
1106....  Southwest Plains...........................  AO-210-A54       
1108....  Central Arkansas...........................  AO-243-A45       
1124....  Pacific Northwest..........................  AO-368-A22       
1126....  Texas......................................  AO-231-A62       
1131....  Central Arizona............................  AO-271-A31       
1134....  Western Colorado...........................  AO-301-A23       
1135....  Southwestern Idaho-Eastern Oregon..........  AO-380-A12       
1137....  Eastern Colorado...........................  AO-326-A27       
1138....  New Mexico-West Texas......................  AO-335-A38       
1139....  Great Basin................................  AO-309-A32       
------------------------------------------------------------------------
\1\The Memphis, Tennessee, and Nashville, Tennessee, orders were        
  terminated, effective July 31, 1993.                                  

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

SUMMARY: This decision adopts the base month Minnesota-Wisconsin (M-W) 
price updated with a butter/powder/cheese formula as the replacement 
for the Minnesota-Wisconsin price series, which establishes minimum 
prices for milk under all Federal milk orders. The amendments adopted 
in this decision are based on evidence received at a public hearing 
held June 15-19, 1992. The amendments differ from the Recommended 
Decision in that they use the Western Dry Buttermilk and Nonfat Dry 
Milk prices in the updating formula instead of the Central States Dry 
Buttermilk and Nonfat Dry Milk prices. Referenda will be conducted in 
five markets, and dairy farmer cooperatives will be polled in the other 
markets to determine whether dairy farmers approve the issuance of the 
orders as amended to incorporate the base month M-W price updated with 
a butter/powder/cheese formula.

FOR FURTHER INFORMATION CONTACT: John F. Borovies, Branch Chief, USDA/
AMS/Dairy Division, Order Formulation Branch, Room 2968, South 
Building, P.O. Box 96456, Washington, D.C. 20090-6456, (202) 720-6274.

SUPPLEMENTARY INFORMATION: This administrative rule 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 will promote orderly marketing of milk by producers and 
regulated handlers.
    The U.S. Small Business Administration (SBA) objected to the 
previous certification in a letter to the Administrator of the 
Agricultural Marketing Service. The SBA indicated that the 
certification does not comply with the analytical mandate of the 
Regulatory Flexibility Act (RFA) in that at least a brief explanation 
of the reasons for the certification must be provided to inform the 
regulated community of the reasons for the certification. Furthermore, 
the SBA contends that the simple assertion that the amendments would 
promote the orderly marketing of milk by producers and regulated 
handlers is insufficient and is contradicted by the findings in the 
recommended decision. Specifically, the SBA contends that the 
recommended decision ``acknowledges that the proposed modifications 
could result in wide swings in price for any given month (59 FR 
40428).'' The SBA contends that these price changes could be 
significant for small handlers and processors.
    Since the SBA letter refers to a specific finding in the 
recommended decision to question the certification, the letter was 
filed with the Hearing Clerk as an exception to the decision. Also, 
since the ``exception'' refers to a specific finding, it is dealt with 
in the findings and conclusions below. With regards to the basis for 
the certification, SBA ignores the fact that the recommended decision 
contained an extensive analysis of the effect of the proposed 
amendments, as well as numerous alternatives, and their comparative 
effect on the current price series. Reference by SBA only to the 
conclusory statements in the recommended decision, therefore, is not 
justified.
    At this point, we reaffirm that the proposed rule will not have a 
significant economic impact on a substantial number of small entities 
for reasons that are set forth later in this decision. The base month 
M-W price, updated by a product price formula, will continue to apply 
in the same manner as the current M-W price but has a greater degree of 
reliability for reasons that are set forth in this decision.
    These proposed amendments have been reviewed under Executive Order 
12778, Civil Justice Reform. This action is not intended to have 
retroactive effect. If adopted, this proposed rule will 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 (the 
Act), provides that administrative proceedings must be exhausted before 
parties may file suit in court. Under [[Page 7291]] 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 
his or her 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 date of the entry of the 
ruling.
    No amendatory action is taken in this decision for two other 
markets (Memphis, Tennessee, and Nashville, Tennessee) that were 
involved in this proceeding and listed in the original hearing notice. 
These orders were terminated effective July 31, 1993. This proceeding 
is hereby terminated with respect to those two markets. Thus, of the 40 
orders originally involved in this proceeding, the new pricing 
amendments are adopted herein for only 38 orders.
    At the time of publication of this decision in the Federal 
Register, a proposed termination is being considered for the Paducah, 
Kentucky, milk order. If the proposed termination is approved, then a 
referendum on the amendments contained in this decision will not be 
necessary and will not be conducted. However, if the proposed 
termination is not approved for the Paducah, Kentucky, order then 
proper notice will be given in the Federal Register and a referendum 
will be conducted to determine approval of the amendments contained in 
this decision.
    The amendments adopted in this final decision are tailored to 
conform with the amendments adopted on the basis of the national 
hearing adopting a new Class II price.
    Prior documents in this proceeding:
    Notice of Hearing: Issued May 12, 1992; published May 15, 1992 (57 
FR 20790).
    Recommended Decision: Issued August 3, 1994; published August 6, 
1994 (59 FR 40418).

Preliminary Statement

    A public hearing was held upon proposed amendments to the marketing 
agreements and the orders regulating the handling of milk in the New 
England and other specified marketing areas. The hearing was held 
pursuant to the provisions of the Act and the applicable rules of 
practice (7 CFR part 900), in Alexandria, Virginia, on June 15-19, 
1992, pursuant to notice issued May 12, 1992 (57 FR 20790).
    Upon the basis of the evidence introduced at the hearing and the 
record thereof, the Administrator, on August 3, 1994, issued the 
recommended decision containing notice of the opportunity to file 
written exceptions thereto.
    The material issues, findings and conclusions, rulings, and general 
findings of the recommended decision are hereby approved and adopted 
and are set forth in full herein, subject to the following 
modifications:
    1. Four paragraphs are added after paragraph 74;
    2. One paragraph is added after paragraph 76;
    3. Three paragraphs are added after paragraph 88;
    4. One paragraph is added after paragraph 92;
    5. Twelve paragraphs and one table are added after paragraph 93;
    6. Paragraph 95 is revised;
    7. Five paragraphs are added after paragraph 95;
    8. In paragraph 96, subparagraph 3(a) is revised;
    9. Paragraphs 97-98 are revised, the table after paragraph 98 is 
removed, and seven paragraphs are added; and
    10. One paragraph is added after paragraph 99.
    The material issue on the record of the hearing relates to: 
Replacement of the Minnesota-Wisconsin price series used to establish 
minimum prices under the Federal orders.

Findings and Conclusions

    The following findings and conclusions on the material issues are 
based on evidence presented at the hearing and the record thereof:

Background Statement

    This proceeding was initiated in response to concerns expressed 
regarding the reliability of the Minnesota-Wisconsin price series (M-W 
price) as an accurate indicator of the average price of milk used in 
manufactured products because of a continuing decline in manufacturing 
grade (Grade B) milk production and the number of plants that compete 
for the Grade B milk supply. Prior to the announcement of this hearing, 
a study of possible alternative pricing mechanisms was undertaken by 
the Department and was released in November 1991. A study was also 
mandated by Congress in the 1990 Farm Bill, which further required that 
a public hearing be held on the issue and that the statistical 
information developed in the study be made available to the public.
    A Notice of Hearing issued on May 15, 1992, listed ten proposals to 
be considered during the M-W price replacement hearing. The proposals 
fell into four main categories: (1) Competitive pay prices, (2) product 
price formulas, (3) cost-of-production formulas, and (4) the price 
support level. Several of the competitive pay prices were also proposed 
in conjunction with product price formulas for price-updating purposes. 
The hearing was specifically limited to a replacement for the M-W 
price. The hearing notice also specified that any proposals that would 
change the price level would have to be justified under the supply and 
demand pricing standards of the Act (7 U.S.C. 608c(18)).

Replacement for the Minnesota-Wisconsin Price Series

    All Federal milk orders should be amended to provide for a new 
price series that will establish minimum prices under Federal milk 
orders utilizing the base month M-W competitive pay price updated with 
a butter/powder/cheese product price formula.
    Adoption of the updated base month M-W price will result in a basic 
formula price that adequately reflects the value of milk used in 
manufactured products and will allow for the continued use of an 
unregulated, competitive market price. Hence, supply and demand 
conditions will continue to be directly reflected in the basic formula 
price that serves as a basis for minimum pricing of regulated milk.
    Since the M-W price was first adopted in 1961 in the Chicago 
Regional marketing area, it has been used as a basis for setting 
minimum prices paid by regulated handlers. The M-W price is the mover 
of all Class I and Class II prices and is essentially the Class III 
price under all orders. Using the M-W price as the Class III price 
maintains price coordination between Grade B and Grade A milk supplies 
used for manufacturing purposes.
    The M-W price is a competitive price that represents an estimate of 
the average of prices paid for Grade B milk in Minnesota and Wisconsin 
by plants that manufacture butter, nonfat dry milk, and cheese. These 
products are sold in a national market in competition with such 
products made from Grade A milk that is in excess of fluid milk needs. 
Month-to-month changes in the M-W price reflect changes in overall 
supply and demand conditions for milk and its products nationally. 
[[Page 7292]] 
    The M-W price is currently computed by the National Agricultural 
Statistics Service (NASS). It is announced on or before the 5th day of 
every month and applies to Grade B milk delivered during the previous 
month. For example, the M-W price for February is announced on March 5 
(in 1994 it was announced on March 4). The M-W price determination is a 
two-step process. It involves (1) determining the average of actual pay 
prices at a large number of plants purchasing Grade B milk for the base 
month (in the above example, January), and (2) based on a sample of 
these plants, determining what the expected change in pay prices will 
be from the base month (January) to the following month (February), the 
month for which the M-W price is being determined. The reason for the 
updating procedure is that actual pay prices for a month are not 
available until late in the following month. Thus, updating the base 
month M-W price results in an M-W price that better reflects current 
marketing conditions.
    To calculate the base month M-W price, NASS collects actual data 
for the entire previous month from approximately 160-170 plants located 
in Minnesota and Wisconsin. The plants report the total pounds of Grade 
B milk received from producers and the total dollars paid to producers 
for the entire month. These plants represent approximately two-thirds 
of all Grade B milk sold in the two States.
    NASS derives the estimated portion of the M-W price series based on 
reports of a sample of approximately 67 of the base-month plants. These 
plants account for about 35 percent of the total manufacturing grade 
milk sold in the two States. These plants provide actual pay price data 
for the first half of the month and estimate prices for the second half 
of the month to which the M-W price relates. NASS then calculates the 
estimated change in price between the base month and the current month 
and applies this estimated change to the base month M-W price to 
determine the M-W price. According to the NASS witness who testified at 
the hearing, some plants in the estimate survey are unable to provide 
actual price data and can only estimate purchases for the first half of 
the month. Thus, the plants in the estimate survey that report actual 
price information account for about 25 percent of the Grade B milk in 
the two States.
    When the price series was first adopted in 1961, Grade B milk 
production accounted for 68 percent, or 18 billion pounds, of the total 
milk production in the two States. This production was purchased by 
about 1,200 plants. By 1992, Grade B production had declined to five 
billion pounds or 14 percent of the total milk production in the two 
States, with 272 plants purchasing the milk. Due to the decline in 
Grade B production and the number of plants purchasing the milk, along 
with the number of plants which can provide actual pay price data for 
the first half of the month, the statistical reliability of the M-W 
price has been questioned.
    Several proposals considered during this proceeding were based on 
competitive pay prices. There was support by a large majority of the 
witnesses who testified during the hearing and in post-hearing briefs 
for the adoption of a competitive pay price series. Most witnesses 
testified in opposition to the use of product price formulas, the 
support price, and cost-of-production formulas as replacements for the 
M-W price. Three main competitive pay price series were considered 
during the hearing: the A/B price series, the base month M-W (which is 
currently used to calculate the M-W price), and the Agricultural Prices 
M-W. These competitive pay price series were proposed in combination 
with a product price formula to be used to update the previous month's 
price to the current month with one exception which will be addressed 
later.
    An A/B manufacturing price series (A/B price) was developed based 
on industry proposals and comments submitted in connection with the 
Department's study. NASS developed this new competitive pay price 
series that represents prices paid for milk used in the manufacturing 
of dairy products, regardless of grade. NASS collects data from 150 
plants in Minnesota and Wisconsin that receive Grade B and/or Grade A 
milk used primarily to manufacture cheese, butter, and nonfat dry milk. 
The sample represents 78 percent of Minnesota's total milk production, 
of which approximately 75 percent is Grade A, and 65 percent of 
Wisconsin's total milk production, of which about 84 percent is Grade 
A.
    The calculation of the A/B price requires the deduction of the 
``pool draw,'' which is money that the Grade A plants receive from the 
Federal order pool as part of their share of the Class I market. This 
information is obtained by NASS from the Chicago Regional and Upper 
Midwest market administrators. The A/B prices are reported routinely in 
``Dairy Market News.'' As currently calculated, the A/B price that is 
available on or before the 5th day of the month is the price for the 
second preceding month.
    Proponents of proposals one and two, as listed in the hearing 
notice, were the main supporters of the adoption of an A/B price to 
replace the current M-W price. The National Farmers Organization (NFO), 
a cooperative association that proposed proposal one, advocated the 
usage of an
A/B price updated by 50 percent of a product price formula. In 
connection with the A/B price, NFO recommended the adoption of a floor 
price for the basic formula price equal to the cost of production.
    Two witnesses testified on behalf of NFO. The first witness 
primarily focused on the cost-of-production floor price. He stated that 
a fundamental purpose of NFO is to seek the cost of production plus a 
reasonable profit for dairy farmers. To meet this organizational 
purpose, NFO proposed using the national average economic (full 
ownership) costs, as calculated by the Economic Research Service for 
the most recently reported calendar year, as the floor price. The floor 
price would be utilized as the basic formula price whenever the 
competitive A/B price fell below the cost of production. The witness 
contended that establishing a floor price for the basic formula price 
would provide dairy farmers with stability in their milk price. The 
witness further stated that NFO did not believe that establishing a 
floor price at the cost-of-production level would have any impact on 
stimulating production.
    The second witness for NFO testified regarding the need to adopt an 
A/B price with a product price updater as a replacement for the M-W 
price. This witness asserted that a competitive pay price based solely 
on Grade B milk does not represent the true farm value of milk because 
of the decline in competition among plants purchasing Grade B milk. He 
contended that this lack of competition allows plants to shift money 
from Grade B milk producers and use this extra money to attract Grade A 
producers. Accordingly the witness stated that the A/B price series 
needed to be adopted to better reflect the true value of milk used in 
manufacturing.
    The witness addressed the concern of regulated prices being 
reported within the A/B price calculation that may create an upward 
price bias. NFO recognizes that this is a major factor; however, they 
do not propose to deregulate any plants in the A/B survey since a 
majority of the reporting plants are cooperative plants. The witness 
stated that the ``blend down'' of the Grade A price by the Grade B 
price and the non-inclusion of hauling subsidies would provide room 
above federal order [[Page 7293]] minimum prices for flexibility in 
both upward and downward price movements. The witness asserted that 
this would negate any concern about an upward price bias in the A/B 
price series.
    Because the A/B price announced on or before the 5th of each month 
would apply to milk marketed in the second preceding month, NFO 
proposed the use of a product price updating formula in conjunction 
with the A/B price. NFO advanced the use of 50 percent of a product 
price formula which included all primary products and by-products of 
milk. NFO maintains that all products should be used in a product price 
formula to reflect the full value of producer milk. The witness stated 
that NFO chose to use only 50 percent of the updater because producer 
prices are not as volatile as prices in the product markets and because 
NFO believes this would lend a further degree of stability to producer 
prices.
    The Trade Association of Proprietary Plants (TAPP) and Farmers 
Union Milk Marketing Cooperative (FUMMC) also supported the adoption of 
the A/B price series to replace the M-W price. The TAPP and FUMMC's 
proposal (number two) would utilize an A/B price series updated by a 
weekly butter/powder/cheese product price formula. To this value a 
competitive premium would be added and 20 cents deducted yielding a 
tentative weekly M-W price. The final M-W price would be announced on 
or before the 5th of the following month and would be the weighted 
average of the tentative weekly M-W prices for the current month.
    The witness representing these two groups testified that the 
current M-W price, which is based solely on Grade B milk, 
underrepresents the true competitive value of milk for manufacturing 
purposes by 45 to 60 cents per hundredweight. According to the witness, 
this difference is paid to producers in the form of premiums and 
hauling subsidies. The witness said that because these are not 
consistent between plants, this situation is creating chaotic marketing 
conditions. The witness stated that incorporating Grade A milk into the 
Minnesota and Wisconsin price survey would result in a price series 
which would reflect the true competitive value of milk and promote 
orderly marketing conditions.
    The witness further testified that the industry is in need of 
current, or weekly, pricing to assist in marketing decisions. Using the 
A/B price in conjunction with a weekly updater to establish a tentative 
weekly M-W price would provide the industry with current information to 
be used as a pricing guide for the following week. The witness claimed 
that the dairy industry needs this information for buying, selling, and 
determining the value of milk in manufactured products.
    Two additional proposals noticed were based on the A/B price 
series. One proponent of proposal three, the Northeast Ad Hoc Federal 
Order Committee, withdrew its support for this proposal. This proposal 
would have expanded the amount of milk surveyed and/or expanded the 
states included in the survey. No other proponents of an expanded 
survey testified in support of this proposal. Thus, it is considered 
abandoned.
    Land O'Lakes (LOL) was the proponent of proposal four, the A/B 
price updated with a product price formula. At the hearing the witness 
for LOL offered a modification to the proposal as noticed. This 
modification was ruled to be beyond the limited scope of the hearing. 
As a result, LOL removed their support for this proposal. Thus, it is 
considered abandoned.
    One additional proposal, proposal number seven, utilizes the A/B 
price series in conjunction with a product price formula as a 
replacement alternative for the M-W price. This proposal will be 
addressed later in this decision.
    Opposition to the adoption of the
A/B price series was expressed specifically by two witnesses during the 
hearing and subsequently in several briefs. A witness for the Milk 
Industry Foundation and the International Ice Cream Association (MIF/
IICA), trade associations representing a substantial number of dairy 
processors, stated that the adoption of an A/B price survey provides a 
broader sample of milk, but would enhance the basic formula price. 
This, according to MIF/IICA, does not meet the criteria set forth in 
the hearing notice that the M-W replacement alternative be revenue-
neutral. The witness cited statistics which indicated that during the 
period of September 1990 through March 1992, the A/B price averaged 65 
cents higher than the M-W price. The witness further expressed concern 
regarding an upward bias that is built into the A/B price because some 
of the milk included in the survey is regulated.
    A second witness representing Kraft General Foods (Kraft), opposed 
the adoption of the A/B price and further addressed the question of the 
upward bias in the A/B price. The witness stated that the A/B price 
uses regulated Grade A prices in the survey which are not competitively 
determined and therefore cannot truly reflect the value of milk used in 
manufacturing. The witness further explained that the A/B price also 
incorporates the highly competitive premium price structures that exist 
in the Midwest. Together these two factors, according to the Kraft 
witness, result in the upward price bias. The witness stated that this 
higher price level cannot be justified based on current supply and 
demand conditions as a replacement for the M-W price.
    Briefs filed on behalf of Anderson-Erickson and Southern Foods 
Group (AE/SFG), Kraft, Southern Coalition of Dairy Farmers (SCDF), 
United Dairymen of Arizona (UDA), Wisconsin Farm Bureau Federation and 
Minnesota Milk Producers Association (WFBF/MMPA), and the United States 
Department of Justice reiterated that the nature of the A/B price 
survey results in an upward bias in the reported price because of the 
inclusion of the regulated Grade A milk and the lack of adjustment for 
some price premiums. The briefs also maintained that adopting the A/B 
price as a replacement for the M-W price would result in higher prices 
under the Federal order program, an outcome which has no economic 
justification based on current supply and demand conditions.
    Substantial opposition to the adoption of a cost-of-production 
floor price was expressed by numerous witnesses at the hearing and 
subsequently in post-hearing briefs. The brief filed by
AE/SFG specifically addressed the concept of establishing floor prices. 
The brief stated that ``establishing floor prices would disassociate 
prices from the market needs.'' Official Notice is taken of the Final 
Decision (58 FR 12634, published March 5, 1993) from the 1990 National 
Hearing. The brief also pointed out that in the 1990 National Hearing 
final decision floor prices for Class I and Class II milk were 
rejected. The AE/SFG brief alleged that the proponents failed to 
provide supply and demand evidence which demonstrates that marketing 
conditions have changed substantially within the last two years to 
warrant a change from the Department's earlier decision. Additional 
opposition to proposals replacing the M-W price with cost-of-production 
formulas is addressed later in this decision.
    The second competitive pay price series considered as a replacement 
for the M-W price is the base month M-W price. As explained previously, 
the base month M-W price is one component currently used by NASS to 
compute the M-W price. Adoption of the base month M-W price was 
advanced by five proponents in the notice of hearing. The MIF/IICA and 
AE/SFG proposed the use of the base month M-W price in 
[[Page 7294]] conjunction with a product price formula updater. This 
price would be available on or before the 5th day of the month and 
would be based on the price for the second preceding month updated by 
the change in a product price formula for the preceding month.
    The witness representing the MIF/IICA testified that a basic 
formula price, based on an expanded, unregulated competitive pay price 
for Grade B milk in Minnesota and Wisconsin, would best reflect the 
supply and demand conditions for all major uses of manufactured dairy 
products and would provide the industry with a reliable price series. 
The witness stated that the base month M-W price survey represents 
about 60 percent of all Grade B milk in Minnesota and Wisconsin and 
incorporates a representative sample of both twice-a-month pay plants, 
as in the current M-W price, and once-a-month pay plants. Because the 
base month
M-W price available on or before the 5th day of the month is for the 
second preceding month, the witness stated the need for a product price 
formula to update the base month M-W price. The MIF/IICA proposed 
adopting a butter/powder/cheese formula using annual product yields and 
Minnesota and Wisconsin product weights to update the base month M-W 
price. This formula was utilized in the Department's study to update 
the Agricultural Prices M-W. For example, the use of an updating 
formula would result in the price announced on March 5th being based on 
January pay prices updated by changes in product prices between January 
and February.
    The witness testified that this proposal would be essentially 
revenue-neutral when compared to the current M-W price. Their 
comparison of these two price series from January 1988 through April 
1992 resulted in an updated base month M-W price that averaged only 
five cents per hundredweight higher than the current M-W price.
    A witness representing Country Fresh, Inc., the Morningstar Group, 
Inc., and Oak Farms Dairy (Country Fresh, et al.) also testified in 
support of the adoption of the updated base month M-W price as a 
replacement for the current M-W price. The witness supported this 
proposal for four main reasons: (1) It uses actual Grade B milk prices 
in Minnesota and Wisconsin, thus linking Federal order prices to the 
competitive markets; (2) it expands the Grade B survey to alleviate 
NASS' statistical concerns; (3) prices remain relatively equal to 
current M-W prices; and (4) the proposal provides the same amount of 
advance pricing currently available under the Federal order program.
    Kraft also supported the adoption of the base month M-W price as 
the replacement for the current M-W price. However, Kraft's proposal 
does not include an updater. Thus, the price announced on the 5th of 
each month would be the price for the second preceding month. For 
example, the price announced on March 5th would represent January pay 
prices. The witness representing Kraft testified that the adoption of 
the base month M-W without an updating adjuster would accomplish the 
following objectives: (1) Eliminate the use of estimated prices; (2) 
Keep the M-W price determined in a non-regulated market; (3) Reflect 
competitive conditions for milk rather than products; (4) Result in a 
more competitively determined price; and (5) Remain free from fine 
tuning.
    The Kraft witness testified in opposition to the use of an updater 
in conjunction with the base month M-W price for two reasons. First, 
although he agreed that product prices and milk prices are related, he 
stated that changes in competitive milk prices do not correspond 
exactly with changes in product prices. Secondly, the witness asserted 
that product price formulas are subject to controversy based on which 
product prices, product yields, and weight factors are used.
    The Kraft witness acknowledged that the additional lag created by 
Kraft's proposal may affect the way the industry conducts business, as 
the lag may create month-to-month differences in processor margins. 
However, the witness contended that over time this proposal does not 
change the competitive value of milk to either producers or processors.
    Opposition to the adoption of the base month M-W price was 
presented by witnesses representing NFO, TAPP/FUMMC, and the United 
States Cheese Makers Association, the American Producers of Italian 
Type Cheese Association, the Ohio Swiss Cheese Association, and the 
Wisconsin Cheese Makers Association (Cheese Makers) and in briefs filed 
on behalf of these organizations and WFBF/MMPA. The witnesses for these 
organizations objected to the adoption of the base month M-W price for 
two primary reasons. First, the decline in the amount of Grade B milk 
production raises uncertainty about the statistical reliability of any 
survey based only on Grade B milk. Secondly, a Grade B only survey does 
not reflect the true value of milk used for manufacturing purposes.
    The opposition recited statistics regarding the decline in Grade B 
milk producers and processors that they claim has resulted in a lack of 
competition for the Grade B milk supply and an increased competition 
for the Grade A milk supply. The opposition further contended that as 
manufacturers shift money away from the Grade B supply, they can use 
this money to attract the Grade A milk supply. This results in Grade B 
prices which do not truly reflect the value of milk used for 
manufacturing purposes. The opponents argued that merely enlarging the 
sample size would neither affect the amount of competition nor the 
value of the milk.
    The Cheese Makers also argued that the continued use of a Grade B 
survey results in the extended use of an untimely price announcement, 
announcing the price for the milk after it has been manufactured into 
products. The witness stated that the dairy industry is one of the last 
industries to engage in the receipt of a raw commodity, manufacture it 
into finished products, and price and sell these products before 
knowing the cost of the raw ingredient. This, according to the witness, 
is resulting in an unstable market.
    To follow through on the argument presented by the Cheese Makers 
regarding the untimeliness of a Grade B survey, several witnesses 
opposed the additional lag in pricing created by Kraft's proposal. In 
fact, most witnesses who supported the adoption of a competitive pay 
price series advocated the use of a product formula for updating 
purposes. One witness for the Central Milk Producers Cooperative (CMPC) 
stated that the industry has long recognized one problem with the 
current M-W price being the time lag between changes in product markets 
and milk prices both on the upside and downside of the market. The 
combination of the M-W price lag and the forward pricing used in the 
Federal order program further complicates the timing problem and any 
additional lag would be unacceptable. In its brief, CMPC further 
asserted that an additional lag could create an opportunity for 
exploitation of the market by manufacturers.
    The witness for Country Fresh, et al., stated that these 
organizations strongly oppose any reduction in the amount of forward 
notice the industry currently receives on its raw milk costs. This 
point of view was further addressed by the National Milk Producers 
Federation witness who stated that Federal order prices should, to the 
maximum extent possible, reflect current market conditions. The brief 
filed on behalf of AE/SFG stated that although we ``understand Kraft's 
proposal * * * less [[Page 7295]] current pricing does not benefit 
anyone in the industry.''
    The third competitive pay price series advanced as an alternative 
to the current M-W price is the Agricultural Prices
M-W (Ag Prices M-W), which was developed for the study in response to 
an industry request to make the least amount of change necessary to 
replace the current M-W price. The Ag Prices M-W is an approximation of 
the base month M-W price and is calculated from NASS' ``Prices 
Received'' series, which includes estimates of manufacturing grade milk 
prices for Minnesota and Wisconsin. The ``Prices Received'' estimates 
are computed approximately two weeks prior to the tabulation of the 
base month M-W price. These estimates are published around the end of 
each month in ``Agricultural Prices'', a NASS publication.
    The ``Prices Received'' estimates are derived from reports of 
plants that are part of the base month sample. These prices for 
Minnesota and Wisconsin are weighted together using the same weights as 
in the M-W price to determine the Ag Prices M-W. Thus, the Ag Prices M-
W available on the 5th day of the month would be the price for the 
second preceding month. The price announced March 5th would represent 
January pay prices. The volume of Grade B milk represented in the 
``Prices Received'' sample represents about 30 percent of all Grade B 
milk sold in Minnesota and Wisconsin.
    The adoption of the Ag Prices M-W updated with a product price 
formula was supported by numerous producer organizations during the 
hearing. One proponent of this replacement option, proposal number six, 
was the National Milk Producers Federation (NMPF), a federation that 
represents a substantial number of dairy cooperative marketing 
associations. A witness speaking on behalf of NMPF testified that there 
are currently sufficient quantities of Grade B milk being marketed in 
Minnesota and Wisconsin to allow NASS to collect reliable price 
information received by dairy producers for Grade B milk in those 
States.
    The NMPF witness further stated that the Ag Prices M-W ``will 
reflect a price level determined by competitive conditions which are 
affected by supply and demand in all the major uses of manufactured 
dairy products. It is a free market pay price resulting from 
competitive bidding among unregulated processors for milk for various 
manufacturing uses and is a good measure of changes in the value of 
milk for manufacturing.'' The witness also testified to the need for 
updating the Ag Prices M-W because Federal order prices should reflect 
current market conditions as much as possible and the one-month lag 
created by this formula would be unacceptable. The proponents of the Ag 
Prices M-W recommended the use of the same product price updating 
formula that is currently used to update Class II prices. Use of the Ag 
Prices
M-W was also supported by Darigold, Farmers Cooperative Creamery, 
Northwest Independent Milk Producers Association, and Tillamook 
Cooperative Creamery Association (Darigold, et al.), all of whom are 
additional proponents of the Ag Prices M-W. A witness representing 
Darigold, et al., concluded that an important element of this price 
series is its relative price stability compared with the current M-W 
price.
    Opposition to the use of the Ag Prices M-W was advanced by the same 
organizations who opposed the adoption of the base month M-W price. The 
opposition cited the identical arguments for opposing the Ag Prices M-W 
as for the base month M-W price.
    In post-hearing briefs, all of the proponents of the base month M-W 
price and the Ag Prices M-W reiterated the need for the adoption of a 
competitive pay price series as a replacement for the current M-W 
price. Most of the proponents of these two proposals, with the 
exception of Kraft, stated that the primary difference between the 
updated base month M-W price and the updated Ag Prices M-W was the 
sample size. Most of these proponents expressed a willingness to 
support either competitive pay price series based on the amount of milk 
the Department determined would be necessary to obtain an accurate 
estimate of the price paid for Grade B milk in Minnesota and Wisconsin.
    Three other types of proposals were considered at the hearing: 
Product price formulas, the support price, and cost-of-production 
formulas. All three types of proposals received substantial opposition. 
One other proposal listed in the hearing notice, proposal number eight, 
would have established the basic formula price on wholesale prices of 
manufactured products. Two proponents, Lamers Dairy, Inc., and Empire 
Cheese, Inc., withdrew their support for this proposal. There was no 
other support for proposal eight during the hearing. Thus, it is 
considered abandoned.
    The Cheese Makers proposed the adoption of a product price formula 
updated by a competitive pay price factor as a replacement for the M-W 
price, listed as proposal number seven in the hearing notice. This 
proposal is based on a current competitive pricing mechanism designed 
to reflect the current true value for milk. This proposal would require 
the announcement of weekly prices based on a butter/powder/cheese 
formula using the most recent weekly product prices. This weekly basic 
formula price would be announced on Friday and would apply to the 
following Monday through Sunday. The weekly prices would then be used 
to compute a monthly average product price formula value. A competitive 
differential, the difference between the monthly A/B price and the 
average product price value, would be multiplied by 50 percent to yield 
a preliminary adjustor. The preliminary adjustor would be added to the 
monthly product price formula value to determine the calculated basic 
formula price. The final industry price would then be computed based on 
75 percent of the difference between the competitive A/B price and the 
calculated basic formula price plus the blend price for the second 
preceding month. The intended result is a price to producers which 
would be more representative of the value of manufacturing grade milk.
    The witness testifying on behalf of the Cheese Makers stated that 
their proposal would determine the true manufacturing value of milk by 
using a product price formula updated with a competitive pay price. The 
witness also testified to the need within the industry for current 
pricing or announcing a price on Friday of each week that could be used 
as a guideline for pricing milk the following week. According to the 
witness, current pricing is crucial to the dairy industry because the 
price of the raw milk used in manufacturing is unpriced when the 
finished product is sold.
    Opposition to the Cheese Makers use of a product price formula as 
the basis for the basic formula price was presented by several 
organizations during the hearing and in post-hearing briefs. The 
witness representing Country Fresh, et al., stated that although 
product prices reflect supply and demand conditions in the marketplace, 
translating these into raw milk prices presents problems. According to 
the Country Fresh, et al., witness a product formula price has three 
key components: product prices, yield factors, and manufacturing 
allowances. Selecting the appropriate product prices, yield factors and 
manufacturing allowance to be used in the formula is difficult. The 
witness explained that there are several products and by-products of 
milk which can be used in a product price formula. Determining which 
products, and to a lesser extent [[Page 7296]] which by-products, are 
included directly influences the value represented by the formula. 
Selecting appropriate yield factors is also difficult because these 
vary both seasonally and annually. Finally, establishing appropriate 
manufacturing allowances that vary with each plant based on the 
modernness of the facility, management practices, milk supplies, and 
product yields further complicates a product price formula. Factors 
that may be appropriate at one time can quickly become unacceptable, 
said the Country Fresh, et al., witness. Kraft's witness reiterated the 
points set forth by the Country Fresh, et al., witness, stating that 
changes in competitive milk prices do not correspond exactly with 
changes in product prices.
    In the post-hearing brief filed by AE/SFG, three supplementary 
reasons for opposing the Cheese Makers proposal were presented. 
According to the brief, product price formulas are unable to properly 
fulfill market-clearing functions. In addition to the assumptions 
concerning which products, yield factors, and manufacturing allowances 
are included in the formula, the AE/SFG brief contended that product 
price formulas will not send producers the needed production signals to 
increase or decrease production as quickly as would competitive pay 
prices. A second issue raised by AE/SFG related to the effect of the 
final price adjustor. According to the AE/SFG brief, the final price 
adjustor provides for more current pricing for cheese manufacturers at 
the expense of less current pricing for fluid processors. The final 
issue addressed in this brief concerned the price enhancement that AE/
SFG projected would occur for which they believe there is no supporting 
economic analysis under current supply and demand conditions. The brief 
filed by Country Fresh, et al., also addressed the concern that this 
proposal would eliminate advance pricing, a result the brief considered 
unacceptable.
    A brief filed by Alto Dairy Cooperative (Alto) stated that the 
Cheese Makers proposal attempts to set the stage for a long-run 
solution because it moves the industry toward a pricing system that 
reflects the value of milk products and their milk components. Alto 
felt that with some simplification and revisions, this proposal could 
form the basis for a long-term solution. However, Alto further stated 
that in this proceeding the revisions needed are not possible because 
the proceeding does not allow for consideration of the relationship 
between the Class I and Class III prices.
    The Minnesota Milk Producers Association and the Wisconsin Farm 
Bureau Federation (MMPA/WFBF) proposed replacing the M-W price with the 
support price (proposal number nine in the hearing notice). Four 
witnesses testified in support of this proposal. In addition, Lamers 
Dairy, Inc., and Hansen's Dairy, Inc., stated support for this proposal 
during the hearing.
    The first witness for MMPA/WFBF testified that the adoption of the 
support price as the basic formula price would establish consistency 
between the price support program and the Federal milk order program. 
The witness stated that this proposal would establish easily determined 
minimum prices for all classes of milk and would not set an effective, 
or market, price. According to the witness, this proposal would allow 
local market over-order pricing and over-order premiums to set the 
price for milk, resulting in a more market-driven system.
    The second witness for MMPA/WFBF elaborated on the benefit created 
by this proposal, as perceived by the witness, because it would 
decouple classified pricing from the Upper Midwest. He contended that 
the supply and demand situation in this area is unique because 
competition for manufacturing milk is driving producer pay prices year 
round. He described the effect of adopting the support price as a 
decrease in class prices where the order prices are the effective 
prices, and little change in markets where competition is determining 
the effective prices. A third witness for MMPA/WFBF reiterated these 
points and testified that the adoption of this proposal would guarantee 
that minimum order prices were not leading to disparate regional 
profitability levels.
    The final witness for MMPA/WFBF testifying in favor of adopting the 
support price as the basic formula price expounded on the points 
advanced by the previous witnesses. The witness also reiterated that 
this proposal would make the Federal milk order program consistent with 
the price support program in pursuing the objective of minimum prices. 
He observed that the minimum prices in all Federal orders are linked to 
the M-W price, not local supply and demand conditions. Thus, he stated, 
these prices are impacted by supply and demand conditions in Minnesota 
and Wisconsin regardless of what local marketing conditions may 
warrant. According to the witness, minimum prices established without 
regard to local supply and demand conditions result in disparate 
regional profitability. This witness testified that the adoption of the 
support price may or may not have an impact on the producer prices. If 
the competitive conditions of the market warrant the current price then 
this price would remain. If not, it would decline to the support level. 
He argued that adoption of the support price as the basic formula price 
would succeed in establishing minimum prices and thus would allow the 
Federal order program to establish true minimum prices.
    The witness stated that Federal order prices are intended to be 
minimum prices. However, he stated that the extent to which the Federal 
order prices represent minimum prices instead of effective prices 
varies among the orders as is evident by the cooperative pay prices. He 
asserted that if the cooperative pay price is above the order minimum 
blend price, then local marketing conditions are establishing the 
effective price. However, the witness concluded, if the cooperative pay 
price is below the order minimum blend price, the minimum prices are 
too high.
    Besides the brief filed by the proponents, two additional briefs 
were filed in support of this proposal, one by the U.S. Department of 
Justice (DOJ) and the second on behalf of Lamers Dairy, Inc., and 
Hansen's Dairy, Inc. The DOJ brief stated that the adoption of the 
support price as the basic formula price would establish a low minimum 
price which would allow market forces to play the greatest possible 
role in determining milk production and price. The DOJ contended that a 
low minimum price would not result in inadequate milk supplies or harm 
efficient producers, but would facilitate the transition towards a free 
market; would provide for more efficient industry performance; and 
would result in lower prices to consumers.
    Substantial opposition to the adoption of the support price as the 
basic formula price was presented during the hearing and in post-
hearing briefs. A witness representing Pennmarva Dairymen's Federation 
and its member cooperatives and Milk Marketing, Inc. (Pennmarva, et 
al.), offered extensive testimony in opposition to adopting the support 
price. First, the witness stated that the milk value established under 
the Federal order program should be based on the competitive value of 
milk used to produce manufactured dairy products. Since 1990, he 
observed, the support price of $10.10, adjusted to 3.5 percent 
butterfat, has yielded a price between $9.88 and $9.97 per 
hundredweight, depending on the support price calculation. He stated 
that during the same period, the M-W price at 3.5 percent butterfat has 
ranged from $10.02 to $13.94 per hundredweight. [[Page 7297]] The 
witness contended that these price fluctuations have provided the 
necessary signals to Federal order producers to make adjustments in 
supply according to demand.
    The next point of objection by the Pennmarva, et al., witness 
focused on the disruption of orderly marketing conditions which he 
feared would be created by the adoption of the support price. According 
to the witness, this disruption would result because the Federal order 
price would be below the competitive value of milk. During the period 
between April 1988 through April 1992, the M-W price has exceeded the 
support price by amounts ranging from $.12 to $4.58.
    The Pennmarva, et al., witness then explained that the Federal 
order program and the price support program have different objectives. 
He described the order program objective as maintaining an adequate 
supply of milk to meet the fluid needs of the market, while the support 
program provides a price floor for milk used to manufacture dairy 
products. Another point of opposition addressed by the witness was the 
fact that Federal order class prices would no longer be influenced by 
seasonal and other supply and demand factors.
    Further objection by the Pennmarva, et al., witness addressed the 
fact that milk not regulated under the Federal order program would 
still be priced on a competitive basis, creating differences in price 
levels and further resulting in disorderly marketing. A substantial 
increase in over-order prices would become the means of improving the 
competitiveness of regulated handlers, resulting in greater inequities 
between producers and handlers. The witness projected that this would 
lead to increased instability between producers and handlers because of 
the increase in risks by both parties.
    Several other witnesses, including but not limited to MIF/IICA, 
NMPF, CMPC, AE/SFG, Darigold, et al., SCDF, Dairylea and its affiliated 
cooperatives, and Country Fresh, et al., expounded on the points of 
opposition addressed by the Pennmarva, et al., witness during the 
hearing and in post-hearing briefs. The consensus of those opposing the 
adoption of the support price was that it would result in disorderly 
marketing conditions with the price received by dairy farmers being 
lowered. They contended that Federal order prices would no longer 
reflect supply and demand conditions but would be based on a 
politically determined price.
    The final M-W price replacement alternative considered at the 
hearing, proposal number ten, was the use of a cost-of-production 
formula to determine the basic formula price. Several independent dairy 
farmers and dairy farmer organizations proposed this alternative. 
Proposal number ten in the hearing notice listed a formula that might 
be utilized to determine the cost of production although none of the 
witnesses testifying in support of this proposal discussed the listed 
formula. The witness testifying on behalf of the Progressive 
Agriculture Organization and several other groups (PAO) and the witness 
representing the National Farmers Union (NFU) proposed using the 
national average cost of production published by USDA, adjusted 
annually, as the basic formula price.
    The PAO witness stated that all dairy farmers should be treated 
equally and that the current basic formula price results in an 
inadequate pay price for producer milk. The witness contended that due 
to the inadequacy of this price, several dairy farmers have been either 
forced out of business or forced to increase production to maintain a 
constant cash flow. According to the witness, the PAO proposal would 
benefit producers, processors, and consumers because it would result in 
long-term price stability by eliminating the volatile price swings the 
industry currently experiences. Although the witness stated that this 
proposal would increase prices, he maintained that it would not 
stimulate production. Basically, these viewpoints were expressed by 
other witnesses representing the American Dairy Farmer Campaign and 
several other groups, Empire State Family Farm Alliance and several 
other groups, and the NFU. As mentioned previously, NFO also supported 
the adoption of the cost of production as a floor price for the basic 
formula price.
    A witness from the University of Wisconsin--River Falls, testified 
exclusively in opposition to the cost of production as a replacement 
for the M-W price. The witness based his opposition on the theory that 
the price received for milk determines the cost of production. He cited 
historical data which he maintained proved that dairy farmers do adjust 
their inputs in response to milk prices. He further reiterated the 
point that the adoption of a cost-of-production formula would not 
monitor changes in national supply and demand conditions.
    In addition to this witness, an overwhelming amount of opposition 
to the adoption of a cost-of-production formula was presented during 
the hearing and in post-hearing briefs. The general consensus of the 
opposition is that a cost-of-production formula accounts for only 
factors affecting supply conditions; it does not factor demand 
conditions into the calculation. Also, the opposition argued that 
basing the cost of production on the national average would not account 
for the regional variations in production costs and would tend to 
advantage the larger, more efficient producers. It was further agreed 
by the opponents that the ultimate result of adopting a cost-of-
production formula as the basic formula price would be an increase in 
production. Another problem cited with this proposal is the 
availability of data; USDA cost-of-production numbers tend to lag 
current production costs by two years.
    The Agricultural Marketing Agreement Act of 1937, as amended (the 
Act), authorizes the Federal milk order program. 7 U.S.C. section 602 
sets forth the declaration of policy and 7 U.S.C. section 608c(18) sets 
forth certain milk pricing requirements. Part of the policy of the 
Federal milk order program is to

    Establish and maintain such orderly marketing conditions * * * 
as will provide, in the interests of producers and consumers, an 
orderly flow of the supply, thereof * * * to avoid unreasonable 
fluctuations in supplies and prices * * *.

    The pricing provisions state in part, that

    Whenever the Secretary finds, upon the basis of evidence adduced 
at the hearing * * *, that the parity prices of such commodities are 
not reasonable in view of the price of feeds, the available supplies 
of feeds, and other economic conditions which affect market supply 
and demand for milk and its products in the marketing area * * * he 
shall fix such prices as he finds will reflect such factors, insure 
a sufficient quantity of pure and wholesome milk to meet current 
needs and further to assure a level of farm income adequate to 
maintain productive capacity sufficient to meet anticipated future 
needs, and be in the public interest.

    The hearing notice stated that any change in price levels must be 
justified under the supply and demand pricing standards mentioned 
above. The hearing record indicates that current price levels are 
achieving a reasonable balance between supply and demand for milk. 
Present price levels are ensuring consumers of an adequate supply of 
milk while maintaining sufficient reserve supplies.
    The record conclusively demonstrates that three types of the 
proposals considered--product price formulas (except for updating 
purposes), the support price, and cost-of-production formulas--would 
change current price levels and do not have sufficient justification in 
the evidentiary record for such changes. In addition, the latter 
[[Page 7298]] two proposals do not comply with the criteria specified 
in the Act. Consequently, such proposals are denied.
    A host of economic conditions affect both supply and demand. The 
interaction of supply and demand results in a ``market'' price. Thus, 
the M-W price, as a competitive pay price, reflects all of the economic 
conditions that affect both supply and demand and is automatically 
responsive to any changes that affect economic conditions.
    The cost-of-production formulas and the price support level, as 
replacements for the M-W price, would ignore these economic factors and 
would establish price levels on a limited and different basis. While 
the cost of milk production is an economic factor that affects supply, 
it is not a price indicator that reflects all economic supply and 
demand factors. Likewise, the price support level is a price floor that 
is designed to prevent further price reductions that might otherwise be 
warranted by supply and demand conditions. As a result of not 
encompassing all economic supply and demand factors, these two types of 
proposals would establish prices on factors that are not in conformance 
with the requirements of the Act.
    The use of cost-of-production formulas also would substantially 
enhance price levels, a result which was not justified on the basis of 
the evidentiary record of this proceeding. During the five-year period 
1988-1992, the economic (full ownership) costs of producing a 
hundredweight of milk, as published by the Economic Research Service 
(ERS), annually averaged $1.77 greater than the current M-W price, 
ranging from $0.27 to $3.04 more. The cost of production exceeded the 
M-W price during these five years in all but seven months, September 
1989 through January 1990, and May and June 1990. This was an atypical 
period within the dairy industry that resulted in record level prices 
as milk production declined and demand in both the domestic and foreign 
markets increased. Official Notice is taken of ``Economic Indicators of 
the Farm Sector, Costs of Production--Major Field Crops & Livestock and 
Dairy, 1991,'' February 1994, Economic Research Service.
    The same five-year comparison of NFO's proposal, which is based on 
an A/B updated price with a cost-of-production floor price as the basic 
formula price, disclosed that the cost-of-production value would have 
been in effect for all but 14 months during this 60-month period. NFO's 
proposal results in a basic formula price that would have exceeded the 
current M-W price by an annual average of $2.01, ranging from $0.93 to 
$3.04.
    The opposite of the price enhancement generated by the cost-of-
production formula as the basic formula price could occur if the 
support price were adopted as a replacement. The support price as the 
basic formula price would result in a significant decrease in Federal 
order minimum prices, an outcome which was not justified on the basis 
of the evidentiary record of this proceeding. The same five-year 
comparison (1988-1992) of the support price to the current M-W price 
shows that the M-W price on a yearly basis averaged $1.60 greater than 
the support price, ranging from a low in 1988 of $0.70 to a high in 
1990 of $2.32. On a monthly basis, the M-W price equalled the support 
price only once during this period and exceeded the support price by as 
much as $4.58. Official notice is taken of ``Dairy Market News'', 
Volume 60, Report 31, Agricultural Marketing Service. As a result, 
Federal order minimum prices would be static and would be virtually 
meaningless as indicators of supply and demand conditions and changes 
in such conditions. Minimum prices established on such a basis would 
not be consistent with the requirements of the Act.
    The exception filed on behalf of WFBF/MMPA objected to the adoption 
of a competitive pay price based solely on Grade B milk. The exception 
stated that the recommended decision failed to recognize the decline in 
Grade B milk production and use and the increase in the use of Grade A 
milk for manufacturing purposes. The exception contends that Grade B 
milk prices in Minnesota and Wisconsin do not reflect national supply 
and demand conditions and is discriminatory to Upper Midwest producers, 
thus it should not be adopted.
    The exception also states that the recommended decision rejected 
the support price proposal as a replacement for two reasons. According 
to the exception, these reasons were: 1) the support price was opposed 
by several witnesses testifying at the hearing and in several briefs, 
and 2) the support price would result in federal order minimum prices 
less than those that currently exist. The exception further reiterates 
WFBF/MMPA's position supporting the adoption of the support price as 
the replacement for the M-W price and attempts to discredit the 
Department's reasons for denying the proposal.
    In fact, as the recommended decision concluded, there is not 
sufficient justification in the evidentiary record for any significant 
change in current price levels, whether higher or lower. Furthermore, 
WFBF/MMPA fails to recognize that another important reason for denying 
the support price proposal is that it does not comply with the criteria 
specified in the Act requiring prices to be established based on the 
economic conditions that affect supply and demand. The price support 
level does not adequately reflect all of the factors that affect supply 
and demand. The recommended decision recognized the decline in Grade B 
milk production, but concluded that there is still ample competition 
for this milk in Minnesota and Wisconsin. The Department continues to 
believe, contrary to WFBF/MMPA arguments, that at this time the base 
month M-W price does represent supply and demand conditions throughout 
the United States because it is an area of significant reserve milk 
supplies. The additional information in the recommended decision 
regarding the support price proposal, which is mentioned in the WFBF/
MMPA exception, further supports the denial of the proposal. Although 
the Pennmarva witness is referenced frequently in the summary of 
evidence within the record, this witness was supported by numerous 
other witnesses and in several briefs. The arguments presented by this 
witness serve to provide specific information as to the projected 
impact of adopting the support price. Consequently, the arguments 
advanced in the WFBF/MMPA exception are rejected.
    The National Family Farm Coalition filed an exception requesting 
that the Department consider replacing the current M-W price with a 
cost-of-production formula. The exception does not provide any 
additional evidence supporting this proposal that has not already been 
discussed completely in the recommended decision. Therefore, the 
exception is denied.
    As was indicated in the brief filed by Alto, the Cheese Makers 
formula needs to be further developed to be considered as a viable 
alternative for replacing the M-W price. The formula as presented 
during the hearing would still require the use of a competitive pay 
price series to be utilized in computing the final adjustor. The Cheese 
Makers proposed the use of the A/B price but stated that any 
competitive pay price could be utilized in their proposal. However, 
they provided no analysis as to what impact other competitive pay 
prices may have on the formula.
    The Cheese Makers proposal, as presented, is also likely to be 
revenue-enhancing, and such enhancement is not justified on the basis 
of the evidentiary record of this proceeding. [[Page 7299]] The 
proponents contend that the proposal does not change current price 
levels. However, the proponents are comparing their proposal to the A/B 
price series, which increases price levels from the current M-W price, 
as previously discussed. The calculated basic formula price advanced by 
the Cheese Makers results in a moderate price increase over the M-W 
price. In 1989 the calculated basic formula price averaged $0.29 above 
the M-W price and in 1990 averaged $0.33 greater than the M-W price. A 
substantial increase in the M-W price is evident when the final 
adjustor is included in the comparison. This computation resulted in a 
1989 price $0.54 greater than the M-W price and $0.62 greater in 1990. 
The use of the final adjustor, which adjusts the price after wholesale 
prices for fluid milk products have been determined, would effectively 
eliminate the advance Class I pricing feature that currently exists 
under the orders. The proposal also does not specify a clear procedure 
for the computation of minimum Class II prices. As a result of all the 
changes that would need to be adopted to make this a workable 
replacement, the Cheese Makers proposal goes beyond the scope of the 
hearing to consider a replacement for the M-W price as the basic 
formula price under all Federal milk orders.
    Exceptions filed by the Wisconsin Cheese Makers Association (WCMA) 
object to the continued use of a competitive pay price and support the 
adoption of the Cheese Makers proposal. WCMA reiterated the positions 
stated on behalf of the Cheese Makers during the hearing in support of 
this proposal. WCMA's exception also contended that a number of 
statements in the recommended decision about the Cheese Makers proposal 
were misleading. The arguments presented by WCMA have not provided the 
Department with any substantial basis for changing the conclusion 
reached in the recommended decision regarding the deficiencies of the 
Cheese Makers proposal.
    As demonstrated throughout the hearing record, the obvious problem 
with the current M-W price survey is the declining amount of Grade B 
milk and the declining number of plants that purchase such milk. These 
trends have resulted in concern about the validity of the M-W price as 
a measure of the competitive value of milk for manufacturing purposes. 
However, this was not an immediate concern of a large number of the 
parties that participated in this proceeding. The immediate concern 
expressed was the reliability of the procedure to update the base month 
M-W price to compute the current month's M-W price. The NASS witness 
testified that the number of plants available for updating the base 
month has been declining as fewer plants pay twice a month. However, 
the NASS witness did not express any reservations about the reliability 
of the base month M-W price.
    When the M-W price was first adopted in 1961 as the basic formula 
price in the Chicago order, the Secretary determined that a competitive 
pay price was superior to product formulas or the support price in 
establishing the basic formula price. That decision states:

    The use of the competitive pay price method of pricing milk is 
based upon the premise that in a highly competitive economy dairy 
concerns will tend to purchase milk at prices commensurate with the 
more efficient concerns' ability to pay for the product. As shifts 
occur in the relationship between finished products prices, one 
group of processors may be able to pay higher prices. The other 
processors must meet or approximate these prices or lose their 
supplies. If a dairy concern fails to make the necessary 
adjustments, it will in time be forced out of business. Increasing 
labor and other costs will tend to reduce prices paid for milk. On 
the other hand, the use of new assembling, processing, packaging and 
marketing techniques which reduce costs or increase product returns 
will tend to increase prices paid for milk. These upward or downward 
adjustments in costs would be automatically reflected in reserve 
prices by using the competitive pay prices method of pricing.

The economic rationale stated when the M-W price was first adopted 
remains sound today. Consequently, the basic formula price replacement 
should continue to be based on a competitive pay price series.
    Of the three competitive pay price series considered at the 
hearing, the evidence on the record supports the adoption of either the 
base month M-W price or the Ag Prices M-W, both updated by a product 
price formula. Each price series has tracked the M-W price in the past, 
thus reflecting the same supply and demand conditions. The majority of 
participants in this proceeding indicated that either price series 
would be acceptable, leaving the determination of the amount of milk 
and number of plants included in the sample size to the discretion of 
the Secretary. In cross examination, the NASS witness stated that the 
base month M-W price is expected to outlive the Ag Prices M-W in terms 
of statistical reliability because it relies on a larger sample size of 
actual pay prices compared to the Ag Prices M-W. Thus, this decision 
recommends adopting the base month M-W price updated with a butter/
powder/cheese formula, because this price is based on actual pay prices 
from a larger Grade B sample size and is projected to have greater 
statistical longevity than the Ag Prices M-W.
    The price levels that would have resulted under the three 
alternative competitive pay price series, as compared to the M-W price, 
support the above recommendation. The degree of coordination between 
the current M-W price and the alternative replacements is a substantial 
indicator of the ability of the pricing alternatives to echo the supply 
and demand conditions reflected by the current M-W price. An accurate 
comparison of these prices without updaters could not be made on a 
monthly basis because each of these prices lags the M-W price by a 
month. However, a three-year comparison essentially eliminates this 
problem.
    During both 1990 and 1991, the average A/B price per hundredweight 
exceeded the M-W price per hundredweight by 63 cents, and by 85 cents 
in 1992. The average Ag Prices M-W per hundredweight exceeded the M-W 
price per hundredweight by nine cents in 1990, equalled the M-W price 
per hundredweight in 1991, and was two cents greater in 1992. The base 
month M-W price per hundredweight yielded an average of six cents more 
in 1990 and resulted in the same price differences as the Ag Prices M-W 
per hundredweight in 1991 and 1992. Over the three-year period, the 
base month M-W price per hundredweight and Ag Prices M-W per 
hundredweight averaged nearly the same as the current M-W price per 
hundredweight while the A/B price per hundredweight averaged about 70 
cents higher. The most recently published information indicates that 
this trend is continuing. Official notice is taken of ``Dairy Market 
News,'' Jan. 3-7, 1994, Volume 61, Report 1, Agricultural Marketing 
Service; ``Agricultural Prices, 1992 Summary,'' July 1993, National 
Agricultural Statistics Service; ``Minnesota-Wisconsin Manufacturing 
Grade Milk Price,'' monthly release, June 1992-February 1994, Wisconsin 
Agricultural Statistics Service; ``Prices Received--Minnesota-Wisconsin 
Manufacturing Grade Milk, 1992 Summary,'' June 1993, National 
Agricultural Statistics Service.
    The evidence on the record indicates that a large amount of Grade A 
milk is being manufactured into dairy products. However, the record 
does not validate the argument that this Grade A milk should be 
factored into the basic formula price. Additionally, there was no 
substantial evidence submitted regarding current supply and demand 
[[Page 7300]] conditions that warrants price increases of the magnitude 
generated by the A/B price.
    The A/B proponents may be correct to state that this option 
represents an average value for a large proportion of milk used for 
manufacturing purposes in the Midwest. However, it does not represent a 
market-clearing price for supplies of milk in excess of fluid demand. 
This is evident by the amount of milk that is currently sold at prices 
below the A/B price, that is, at the current M-W price. The hearing 
record indicates that adopting this price series would tend to be 
revenue-enhancing.
    To be considered in the future as a viable alternative, the A/B 
price series needs to address two inherent problems. First the A/B 
price is based in part on a regulated price. Regulated plants included 
in the survey that use Grade A milk for manufacturing are subject to 
minimum order pricing. This factor results in an upward bias in the A/B 
price. The price for this milk cannot be directly reduced to pay price 
levels warranted by supply and demand conditions for such milk. After 
the first month of implementation, survey plants would be reporting a 
pay price which could not be less than the minimum price required to be 
paid for Grade A milk under the Federal order program. Consequently, 
after the first month of implementation, supply and demand conditions 
would have a limited influence on the price.
    The proponents of this series maintained that the ``blend down'' of 
the Grade A price with the Grade B price will eliminate this problem. 
However, a review of the amount of milk included in this survey, 
approximately 70 percent of the total milk production in the States of 
Minnesota and Wisconsin, of which almost 80 percent is Grade A, 
indicates that it is unlikely the Grade B price would have a ``blending 
down'' impact or effect on the Grade A price.
    Secondly, Grade A premiums are built into the A/B price unless 
specifically deducted. This, too, results in an upward bias as premiums 
are added one month into the reported price and the same premium is 
then added in the second month to the already existing premium.
    As a result of lack of justification for price enhancement in the 
evidentiary record, as well as the problems associated with the upward 
price bias, the proposals to replace the M-W price with an A/B price 
are denied. Potential solutions addressing the upward bias were not 
considered during this proceeding.
    An exception filed by NFO supports the adoption of a competitive 
pay price to replace the current M-W price. This exception, as well as 
one filed by TAPP and FUMMC, strongly argue against the adoption of a 
competitive pay price based solely on Grade B milk marketings. The 
exceptions reiterated many of the points supporting the adoption of a 
competitive pay price based on both Grade A and Grade B pay prices. 
They contend that a Grade B only pay price series establishes too low 
of a price and does not reflect the true competitive national value for 
milk used for manufacturing purposes. NFO, TAPP and FUMMC take further 
exception to the conclusions in the recommended decision that the A/B 
price series does not represent a market clearing price and has an 
inherent ``upward bias'' due to the inclusion of premiums and the use 
of regulated plants reporting regulated pay prices for the Grade A 
portion of the milk included in the survey. They also object to the 
Department's discussion of the ``revenue neutrality'' or ``revenue 
enhancing'' effects of various proposals.
    In addition to the above arguments, NFO requested that non-pooled 
Grade A milk be included in the base month survey and TAPP and FUMMC 
argued that all class prices should be considered simultaneously in 
order to obtain price levels that actually reflect supply and demand 
conditions. The TAPP and FUMMC exception contended that Class I 
differentials should be changed to offset an increase in the basic 
formula price.
    The basic reasons for denial of the A/B price series stated in the 
recommended decision remain valid. NFO, TAPP and FUMMC reiterated the 
arguments advanced in the hearing and in post-hearing briefs and did 
not provide any new information supporting their positions. 
Furthermore, the NFO request that unregulated Grade A milk be included 
in the base month survey is denied. The evidentiary record of this 
proceeding did not address this issue; therefore, there is no basis at 
this time to allow the use of unregulated Grade A milk in the base 
month survey. With regards to the TAPP and FUMMC request to consider 
all class prices, the scope of this hearing was specifically limited to 
a replacement of the current M-W price; thus, the Department has no 
further opinion or conclusion regarding this issue.
    A comparison of the survey size for May 1991 data demonstrates that 
the Ag Prices M-W survey included 131.6 million pounds of milk reported 
by 71 plants. The base month M-W price survey included 316.5 million 
pounds of milk reported by 168 plants. Simply waiting a few additional 
days results in a sample size of milk which is 140 percent greater than 
the Ag Prices M-W. The base month M-W price sample size of milk is over 
four and one-half times greater than the current M-W price estimate 
survey, which included actual pay price reports on only 56.8 million 
pounds of milk reported by 69 plants. Thus, the base month M-W price 
best reflects the competitive pay prices of a much larger volume of 
milk and sample of plants and should be the primary component in the 
basic formula price.
    The hearing record also supports the use of a product price formula 
to update the base month M-W price to the current month. The base month 
M-W price available on the 5th day of a month would represent milk 
prices for the second preceding month. For example the price announced 
March 5th would be based on January prices. A product price formula 
updater would enable the base month M-W price to reflect more 
accurately current supply and demand conditions taking into account 
price changes for wholesale manufactured products during the preceding 
month, in this example February. Although product prices do not 
translate directly into milk prices, the record indicates that the 
industry views these as a good indicator of changes in milk prices for 
updating purposes.
    The price delay that would be created by adopting this proposal 
without an updating method would result in the minimum price required 
to be paid by regulated plants varying significantly from what 
unregulated plants were actually paying for milk for manufacturing uses 
in the same month. Because of this inequity, adoption of the base month 
M-W price without a product price updater cannot be justified as a 
replacement for the M-W price.
    An analysis of the effects of various updating formulas on the 
competitive pay prices resulted in minor differences. Most hearing 
participants advocated the use of the change in gross values yielded by 
a product price formula between the preceding month and the current 
month. Only NFO advocated using 50 percent of this change, stating that 
producer prices and product markets do not change at the same rate. NFO 
claimed that using 50 percent would not reflect the volatility of 
product markets on a penny-for-penny basis and further lends a degree 
of stability to producer prices.
    The NFO exception reiterated their argument that only 50 percent of 
the product price formula updater be used [[Page 7301]] when computing 
the updated base month M-W price. The recommended decision fully 
discussed the basis for using 100 percent of the product price formula 
adjuster to update the base month survey. This conclusion has not 
changed after full consideration of NFO's exception.
    All hearing participants promoted the use of a butter/powder/cheese 
formula with minor differences expressed regarding the inclusion of 
specific by-products. After reviewing the various formulas, it is 
concluded the best updater would include the following products and 
representative price series: Grade AA butter, Chicago Mercantile 
Exchange (AAB); nonfat dry milk, Central States production area (NFDM); 
dry buttermilk, Central States production area (DBM); Cheddar cheese, 
40-pound block, National Cheese Exchange (NCE); and Grade A butter, 
Chicago Mercantile Exchange (AB). Dry whey is not included in the 
formula because not all cheese manufacturers process whey, and the 
disposal of it is a cost to many manufacturers. Furthermore, dry whey 
is no longer included in calculating the cheese purchase price under 
the dairy price support program.
    The Coffee, Sugar and Cocoa Exchange, Inc. (CSCE), filed an 
exception supporting the use in the recommended decision of an updated 
base month M-W price to replace the current M-W price. However, CSCE 
did offer a modification of the updating formula. CSCE proposed 
replacing the average monthly NCE 40-pound block Cheddar cheese price 
used in the formula with an average of the NCE monthly cheese price and 
an average price for the spot CSCE Cheddar cheese futures contract for 
the month. Since this modification is beyond the evidentiary record of 
this proceeding, it cannot be considered at this time.
    After further review of the production and market for the products 
included in the product price updating formula, the Department is 
revising this formula. The Western Nonfat Dry Milk price and Dry 
Buttermilk price will be used in the updating formula. The use of these 
product prices will be more representative in determining the price 
change in the overall market for these products because a larger 
proportion of actual movements of these products will be considered.
    The updating formula in the recommended decision utilized both the 
Central States Dry Buttermilk price and Nonfat Dry Milk price as 
reported by the Department, typically in Dairy Market News (DMN). Both 
of these price series report the ``spot'' market for carlot/trucklot 
quantities of dry buttermilk and nonfat dry milk, FOB Central States 
production area manufacturing plants. ``Spot'' transactions are sales 
of product that have no regular or committed outlet and are sold on the 
open market for immediate delivery or delivery within a few days, also 
referred to as the ``cash market.'' To the extent possible, both 
sellers and buyers are interviewed. The price carried each week in DMN 
is a range consisting of the low and high prices that are considered 
representative of the market for the entire week. Monthly averages are 
based on weekly prices and are time-weighted according to the number of 
workdays in the month. When market activity is very limited, the market 
may be reported ``too few to report'' (TFEWR) and no price information 
is provided. No monthly average is computed if one or more weekly 
prices is missing.
    A review of the dry buttermilk values used in the updating formula 
revealed that for two months of 1992 and three months of 1993, a 
Central States Dry Buttermilk average price was not published by the 
Department. Consequently, the dry buttermilk prices used in the 
updating formula in the recommended decision for these months were 
equivalent prices determined by the Department. The use of an 
equivalent price for Central States Nonfat Dry Milk also occurred once 
during 1992 when DMN was unable to report a price.
    Reviewing dry buttermilk production data as published in the 
``Dairy Products 1993 Summary'' shows that the production and the 
number of manufacturers is declining in the Central States region. 
During 1993, seven plants were located in the Central States region 
manufacturing 7.1 million pounds of dry buttermilk, or 14 percent of 
the U.S. total production. In 1990, 14 plants reported 13 million 
pounds of production representing 23 percent of the U.S. total. This 
data represents the total market for dry buttermilk in the Central 
States region; thus, the potential spot market is significantly 
smaller. Due to the small market, there were six weeks during 1993 when 
the dry buttermilk powder price was TFEWR.
    The Western dry buttermilk market statistics represent a greater 
amount of production. During 1993, dry buttermilk production in 
California alone accounted for 26.8 million pounds, or 53 percent of 
the U.S. total. Monthly production ranged from a high of 3.1 million 
pounds in January to a low of 1.6 million pounds in August. During the 
same period, the Central States production of dry buttermilk powder 
ranged from a high of 1.4 million pounds in January to a low of 193,000 
pounds in August and September. Western dry buttermilk production is 
over 275 percent greater than the Central States production. Due to the 
large volumes of dry buttermilk powder sold in the Western Region, the 
spot market is considered to be active since there has not been a 
period of time from 1990 through 1993 when there has been TFEWR 
compared with six weeks during 1993 for the Central States Dry 
Buttermilk price.
    Reviewing the nonfat dry milk production data for the Central 
States region also reveals a decline in production and manufacturers. 
In 1990, 19 plants in the Central region reported 101.5 million pounds 
of production, representing 12 percent of the U.S. total. By 1993, the 
same comparison of Central region states shows 13 plants producing 42.4 
million pounds of nonfat dry milk, or 4 percent of the U.S. total. The 
``Dairy Products 1993 Summary'' does report data for the East North 
Central and West North Central regions in total. When combined, 23 
plants in these two regions are producing 128.8 million pounds of 
nonfat dry milk, or 14 percent of the U.S. total.
    Analysis of the Western nonfat dry milk production statistics also 
reveals an increasingly stronger market. During 1993, nonfat dry milk 
production by 11 plants in California accounted for 415.5 million 
pounds or 44 percent of the U.S. total. The total Western region 
production represented 20 plants producing 575.1 million pounds or 61 
percent of the U.S. total. In 1990, 12 plants in California 
manufactured 321.6 million pounds.
    As is evident from these statistics, the Western dry buttermilk and 
nonfat dry milk production represent a significantly larger volume of 
milk than does the Central States production. In cross examination, the 
Department's witness from the Agricultural Marketing Service agreed 
that in the Department's study, the focus was on the M-W replacement 
and since Minnesota and Wisconsin are in the Central States region, the 
Central States powder prices were used. The witness further stated that 
arguments could be made to use other prices. Specifically, the witness 
stated that ``if the M-W price is considered as representing a national 
price series an argument can be made to use a nonfat dry milk price 
series that represents a larger proportion of nonfat dry milk.'' The 
witness went on to state that the Western Nonfat Dry Milk price series 
represented a larger amount of production than the Central States 
price.
[[Page 7302]]

    The Department believes, based on the evidentiary record of this 
proceeding, that the base month M-W price represents national supply 
and demand conditions. Therefore, it is concluded that the larger 
production volumes and marketings of dry buttermilk powder and nonfat 
dry milk in the Western states will reflect changes in national market 
values more precisely than will the Central States prices. There is 
also concern about the use of equivalent prices that would need to be 
determined whenever a price or pricing constituent is not reported. 
Consequently, the Department is revising the product price updating 
formula to use the Western Dry Buttermilk price and the Western Nonfat 
Dry Milk price. The Department concludes that the adoption of the 
Western prices in the updating formula will provide for a reliable 
measure of market changes for these two products.
    Due to the fact that the updating formula measures only the changes 
in product prices and does not establish a price level, an analysis of 
the impact of substituting the Western powder prices shows that they 
have little effect on the updated base month M-W price. During the four 
year period from 1990-1993, the updated price using Western prices 
yielded the same 12-month average as the recommended updating formula 
during 1990, 1992, and 1993. During 1991, the use of the Western prices 
would have resulted in an average price that was one cent less than the 
recommended M-W price.
    The following table provides a comparison of the current M-W price, 
recommended decision updated base month M-W price, and the final 
decision updated base month M-W price:

                                         Monthly Price Comparisons--1993                                        
----------------------------------------------------------------------------------------------------------------
                                                                                       Difference:              
                                                                Rec.      Final dec.   rec dec. M-   Difference:
            Month/year (col.1)                Current M-W   decision M-  M-W\1\(col.    W--final    final dec. M-
                                               (col. 2)      W (col. 3)       4)        dec. M-W    W--current M-
                                                                                        (col. 5)     W (col. 6) 
----------------------------------------------------------------------------------------------------------------
Jan 93....................................          $10.89       $11.02       $11.02        $0.00         $0.13 
Feb 93....................................           10.74        10.72        10.72         0.00         (0.02)
Mar 93....................................           11.02        11.19        11.19         0.00          0.17 
Apr 93....................................           12.15        12.61        12.61         0.00          0.46 
May 93....................................           12.52        12.37        12.37         0.00         (0.15)
Jun 93....................................           12.03        11.82        11.82         0.00         (0.21)
Jul 93....................................           11.42        11.30        11.31         0.01         (0.11)
Aug 93....................................           11.17        11.18        11.17        (0.01)         0.00 
Sep 93....................................           11.90        12.29        12.29         0.00          0.39 
Oct 93....................................           12.46        12.19        12.19         0.00         (0.27)
Nov 93....................................           12.75        12.62        12.62         0.00         (0.13)
Dec 93....................................           12.51        12.44        12.44         0.00         (0.07)
Ave 93....................................           11.80        11.81        11.81         0.00          0.01 
                                                                                                                
----------------------------------------------------------------------------------------------------------------
\1\Uses Western Dry Buttermilk and Nonfat Dry Milk prices in the updating formula.                              

    Most hearing participants advocated the use of either support price 
yield factors or annual yield factors in the formula. The study 
released by the Department developed and used annual yield factors for 
each month. These annual yield factors will be used in the updating 
formula. Basically these yields are those used under the price support 
program adjusted to milk containing 3.5 percent butterfat. The yields 
used in the formula are: butter--4.27 pounds per hundredweight of milk; 
nonfat dry milk--8.07 pounds per hundredweight of milk; dry 
buttermilk--.42 pounds per hundredweight of milk; Cheddar cheese--9.87 
pounds per hundredweight of milk; and whey cream butter--.238 pounds 
per hundredweight of milk.
    Hearing participants also advocated the use of factors to weight 
the butter-nonfat dry milk and cheese components of the formula. These 
weights are based on the proportion of milk used in the production of 
butter-nonfat dry milk and in the production of American cheese in the 
Minnesota and Wisconsin area. Nonfat dry milk is used to compute the 
butter-nonfat dry milk weighting factor because significant proportions 
of butter are manufactured in Minnesota and Wisconsin from the 
butterfat that is in excess of fluid milk operations. Cheese accounts 
for about 95 percent of the milk used in these products in the two 
States and about 75 percent in the United States. The Minnesota and 
Wisconsin weights are being used in the product price formula because 
the competitive pay price adopted is a Minnesota and Wisconsin pay 
price series. The milk equivalent used will typically be for the second 
preceding month.
    In their exception, WCMA requested that Grade A skim milk used to 
produce a Class III-A product be eliminated from the weighting 
calculation. WCMA believes that the use of this powder in the formula 
will lower the recommended replacement price.
    Nonfat dry milk production is not divided into that produced from 
Grade A milk and that produced from Grade B milk. The nonfat dry milk 
price is based on the sales of all nonfat dry milk as described 
earlier. The weighting percentages should continue to be based on the 
entire volume of milk used to make both cheese and nonfat dry milk 
regardless of the grade of milk used. The WCMA request to remove powder 
produced from Grade A milk from production data is denied.
    The exception filed on behalf of CMPC strongly supported the 
recommended replacement for the current M-W price. In their exception, 
CMPC did express concern about the proposed weighting method used in 
the updating formula. CMPC pointed out that the section of the decision 
that contained the written computation (59 FR 40428) did not set forth 
a specific definition as to the month that will be used to weight the 
production of cheese and butter/nonfat dry milk in Minnesota and 
Wisconsin. However, the order language contains the phrase ``most 
recent reporting period'' to indicate the production data to be used. 
CMPC's concern regards exactly which monthly data will be used in the 
updating formula.
    As is stated in the order language, the most recent reporting 
period data will [[Page 7303]] be used in the updating formula. The 
production data used in the formula is published by NASS in the monthly 
``Dairy Products'' report. The ``Dairy Products'' report is released at 
the beginning of each month and contains data for the second preceding 
month. For example, the ``Dairy Products'' report issued on January 5, 
1993, contained data for November 1992. The ``Dairy Products'' report 
is issued at 3:00 p.m. EST.
    If a Dairy Products report is published on the same day as the M-W 
price is announced, that production data cannot be used in the updating 
formula because it is not known until after the release of the M-W 
price at 1:00 p.m. EST. Therefore, in most cases the most recent 
production data available for use in the updating formula is for the 
second preceding month from the month the M-W price applies. On 
occasion (typically about once per year), NASS will release the ``Dairy 
Products'' report prior to the announcement of the M-W price. In these 
months, the most recent data available to be used in the updating 
formula is for the preceding month and this data is used to determine 
the weighting percentages. Although this may result in production data 
for one month being used twice, stating that the most recent reporting 
period data will be used in the updating formula allows the Department 
to use the most current data available when calculating the M-W price.
    The butter/powder/cheese formula recommended in this decision was 
developed and tested in the Department's study. The gross value change 
in the product price formula from the preceding month to the current 
month will be used to update the base month M-W price. The gross value 
change for each month will be computed as follows:
    (1) Determine the gross value of milk used to manufacture Cheddar 
cheese and butter/nonfat dry milk:
    (a) The gross value of milk used to manufacture Cheddar cheese 
equals (9.87 x NCE)+(.238 x AB); and
    (b) The gross value of milk used to manufacture butter-nonfat dry 
milk equals (4.27 x AA)+(8.07 x NFDM)+(.42 x DBM).
    (2) Determine the amount by which these gross values exceed or are 
less than the respective gross values for the preceding month.
    (3) Compute weighting factors to be applied to the gross value 
changes. The weighting factors will be calculated as follows:
    (a) Determine the milk equivalent for the most recent reporting 
period for both American cheese and butter-nonfat dry milk by using the 
American cheese production in Minnesota and Wisconsin divided by 9.87 
to determine the cheese milk equivalent and the nonfat dry milk 
production in Minnesota and Wisconsin divided by 8.07 to determine the 
butter-nonfat dry milk equivalent;
    (b) Add the cheese milk equivalent and the butter-nonfat dry milk 
equivalent together to calculate the total milk equivalent; and
    (c) Divide the milk equivalent for cheese by the total milk 
equivalent to yield the cheese weighting factor and divide the butter-
nonfat dry milk equivalent by the total milk equivalent to yield the 
butter-nonfat dry milk weighting factor.
    (4) Use these weighting factors to compute a weighted average of 
changes in the gross values described above.
    An analysis of the base month M-W price updated by the full gross 
value change in the butter/powder/cheese formula, as revised in this 
decision, and by 50 percent of the gross value change, revealed that 
using the full gross value change results in an updated base month M-W 
price which better reflects current price levels. During 1990 the full 
gross value change in the butter/powder/cheese updating formula 
resulted in an average updated base month M-W price eight cents greater 
than the current M-W price, and in 1991 the updated price averaged two 
cents less. During 1992 and 1993, the average updated base month M-W 
price was greater than the current M-W price by three cents and one 
cent, respectively. The base month M-W price updated by 50 percent of 
the same formula resulted in a 1990 average price which exceeded the M-
W price by 31 cents, in 1991 the average price was 11 cents less, in 
1992 the average price was seven cents greater, and in 1993 the average 
price was three cents less. Official Notice is taken of ``Dairy Market 
Statistics'', 1992 and 1993 Annual Summaries, Agricultural Marketing 
Service; and ``Dairy Products'', 1992 and 1993 Annual Summaries, 
National Agricultural Statistic Service. From evidence in the record, 
and the results of this analysis, it is concluded that the full value 
of gross change between the preceding month and the current month using 
the butter/powder/cheese formula described above results in an updated 
price that best reflects the current value of manufacturing milk.
    Although the updated base month M-W price will result in annual 
price levels that nearly maintain the current annual price levels, the 
updated base month M-W price will not track the current M-W price 
precisely from month-to-month. This is because the month-to-month price 
variability will increase as a result of the use of a product price 
formula that will allow the updated base month price to react quicker 
to marketing conditions both on the upside and downside of the market. 
Column six of the preceding table compares the monthly updated base 
month M-W price as modified in this decision to the current monthly M-W 
price for 1993. During this period, the greatest monthly differences 
occurred in April when the updated base month M-W price of $12.61 per 
hundredweight, exceeded the current M-W price by 46 cents, and in 
October when the updated base month M-W price of $12.19 per 
hundredweight, was 27 cents lower than the current M-W price. However, 
for the entire 12 month period the updated base month M-W price 
exceeded the M-W price by only one cent.
    As previously indicated, the SBA objected to the certification that 
the proposed rule would not have a significant economic impact on a 
substantial number of small entities. The SBA contended that the 
certification was suspect as a result of an alleged previous finding 
``that the proposed modifications could result in wide swings in price 
for any given month.''
    First of all, the previous finding does not indicate that the 
modification could result in wide price swings. Wide price changes from 
month-to-month have occurred with the current M-W price. Over the last 
four years, the M-W price has increased by as much as $1.13 from the 
previous month and decreased by as much as $2.02 from the previous 
month. The findings in the recommended decision indicated that the 
modified price would be expected to be more variable from month-to-
month than the current M-W price during periods of both increasing and 
decreasing prices. Over the last four years the modified price 
contained herein, which is almost identical to the price modification 
in the recommended decision, increased by as much as $1.42 from the 
previous month and decreased by as much as $2.03 from the previous 
month. These maximum month-to-month changes occurred during the same 
months that the M-W price registered its greatest month-to-month 
changes.
    Over the long run, the modified price tracks the M-W price very 
closely, as previously stated, and thus reflects the same changes in 
supply and demand conditions that are represented by the current M-W 
price. The price modification represents the best alternative to the M-
W price compared to other pricing options considered at the hearing. 
Since the continued [[Page 7304]] statistical reliability of the 
updating procedure used to determine the current M-W price has been 
questioned by many who are knowledgeable of the industry, a replacement 
is necessary to continue a milk order program that promotes the orderly 
marketing of milk by producers and handlers. Without a replacement at 
this time, in effect, there would be no pricing mechanism to carry out 
the program.
    The new price modification has responded more quickly to changes in 
supply and demand conditions than the current M-W price; however, the 
record's price data for the analyzed period reveals that the price 
modification has not been more variable from month-to-month. In fact, 
over the 48-month period from 1990 through 1993, the modified price has 
changed by a lessor amount than the M-W price during 22 months, changed 
by the same amount during two months, and changed by a greater amount 
during 24 months. Over the entire period of the data, the modified 
price exhibited about the same month-to-month variability as the M-W 
price. All that can really be said is that the modified price tends to 
respond more quickly to changes in marketing conditions than the M-W 
price. As a result, there are months over the four-year period when the 
modified price would have increased when the M-W price decreased, and 
vice versa. Price movements in opposite directions, however, say 
nothing about the magnitude of the price change from the previous 
month.
    The greatest increase in price variability on the upside between 
the modification and the M-W was 47 cents per hundredweight or 4.0 
cents per gallon. This is relatively small compared to the greatest 
month-to-month increases in the M-W price, $2.02 per hundredweight, or 
17.4 cents per gallon.
    The most important element of the price changes is that all fluid 
milk handlers, large and small alike, would know the magnitude of the 
price changes in advance of purchasing the milk and would have the 
opportunity to make any finished product pricing changes just as they 
do now. In addition, all Class II pricing changes would be known in 
advance. The Class II handlers, large or small, who are regulated would 
continue to compete on the same basis as currently. Class II processors 
who are not regulated would not be subject to any minimum order prices 
and would not be affected by the price modification. Likewise, 
manufacturing plants and handlers who divert milk to such plants would 
not be affected by the price modifications unless they choose to be 
regulated or decide to associate milk with a Federal order pool for 
their own reasons. The manufacturing plants and the handlers who divert 
milk to such plants are not required to be regulated.
    For the previous reasons, the price modifications will not have a 
significant economic impact on a substantial number of small entities. 
The price modifications will continue to apply to all handlers and 
processors in the same manner as current Federal order pricing. 
Although most of the regulated plants are considered to be small 
businesses, the price modifications should not affect small businesses 
differently than large businesses, or differently than the current 
price series.
    This decision recognizes that the adoption of the base month M-W 
price, or any Grade B milk series, is only a short-term solution since 
the amount of Grade B milk production is expected to continue 
declining. This decision agrees with the MIF/IICA witness who stated 
that the adoption of a Grade B survey, although it would not be a long-
term solution, would provide the industry with a reliable basic formula 
price for a few more years allowing the industry additional time to 
carefully consider longer-term solutions. Adoption of the base month M-
W price will provide the Department and the industry with more time to 
jointly develop a viable, long-term solution.
    Several exceptions were filed in support of the updated base month 
M-W price. Some of these exceptions reiterated the view expressed by 
the Department that this is only a short-term solution. The Department 
continues to recognize that this replacement is only temporary and 
alternative pricing options will need to be considered in the near 
future.
    Several organizations made specific requests regarding the adoption 
of a M-W price replacement. National All-Jersey, Inc., a national dairy 
farmer organization, and the American Jersey Cattle Club, a breed 
registry association, requested that the Secretary continue adjusting 
the M-W replacement to a 3.5 percent butterfat standard, continue 
collecting and reporting the protein content of the milk in the survey, 
and adopt a price replacement which will not restrict the further 
implementation of multiple component pricing plans. The adoption of the 
base month M-W as the replacement for the current M-W price will not 
change any of the adjustments and announcements that are currently 
reported and will not hinder adoption of multiple component pricing 
plans. The NFO and Cheese Makers further requested the continued 
collection and possible publication of the hauling subsidies paid to 
producers by plants in Minnesota and Wisconsin. It is expected that 
this information will continue to be collected by NASS and published by 
NASS in their ``Prices Received'' publication.

Conforming Changes

    As proposed in the Notice of Hearing, conforming changes are 
provided in the butterfat differential section to allow for the use of 
the updated base month M-W price in the butterfat differential 
calculation. To calculate a butterfat differential that will reflect 
the most current marketing conditions, the preceding month's base month 
M-W price at test, updated by the current month's product formula 
updater, will be used in conjunction with the current month's butter 
price. A comparison between the above butterfat differential and the 
current butterfat differential results in slight differences. This 
method of calculating the butterfat differential was supported in the 
CMPC and NFO briefs.
    Additional changes have been made to the Black Hills, South Dakota, 
Pacific Northwest, Southwestern Idaho-Eastern Oregon, and Great Basin 
orders. One change has been made to the Black Hills order to provide 
for uniform implementation and use of the basic formula price in all 
Federal orders. This has been accomplished by removing the butter/
powder formula price. One conforming change each has been made to the 
Pacific Northwest, Southwestern Idaho-Eastern Oregon, and Great Basin 
orders to provide for more uniform location of the butterfat 
differential provision within these orders.

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 [[Page 7305]] 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.

Rulings on Exceptions

    In arriving at the findings and conclusions, and the regulatory 
provisions of this decision, each of the exceptions received was 
carefully and fully considered in conjunction with the record evidence. 
To the extent that the findings and conclusions and the regulatory 
provisions of this decision are at variance with any of the exceptions, 
such exceptions are hereby overruled for the reasons previously stated 
in this decision.

Marketing Agreement and Order

    Annexed hereto and made a part hereof are two documents, a 
Marketing Agreement regulating the handling of milk, and an Order 
amending the orders regulating the handling of milk in the New England 
and other marketing areas, which have been decided upon as the detailed 
and appropriate means of effectuating the foregoing conclusions.
    It is hereby ordered that this entire decision and the two 
documents annexed hereto be published in the Federal Register.

Referendum Order To Determine Producer Approval; Determination of 
Representative Period; and Designation of Referendum Agent

    It is hereby directed that a referenda be conducted and completed 
on or before the 30th day from the date this decision is issued, in 
accordance with the procedure for the conduct of referenda (7 CFR 
900.300-311), to determine whether the issuance of the orders as 
amended and as hereby proposed to be amended, regulating the handling 
of milk in the New York-New Jersey, Georgia, Eastern Ohio-Western 
Pennsylvania, Alabama-West Florida, and Southwestern Idaho-Eastern 
Oregon marketing areas is approved or favored by producers, as defined 
under the terms of each of the orders, as amended and as hereby 
proposed to be amended, who during such representative period were 
engaged in the production of milk for sale within the aforesaid 
marketing areas.
    The representative period for the conduct of such referenda is 
hereby determined to be June 1994 for the New York-New Jersey order; 
and November 1994 for the Southwestern Idaho-Eastern Oregon, Georgia, 
Eastern Ohio-Western Pennsylvania, and Alabama-West Florida orders.
    The agents of the Secretary to conduct such referenda are hereby 
designated to be the respective market administrators of the aforesaid 
orders.

Determination of Producer Approval and Representative Period for 
All Other Orders

    August 1994 is hereby determined to be the representative period 
for the purpose of ascertaining whether the issuance of the order, as 
amended and as hereby proposed to be amended, regulating the handling 
of milk in the New England marketing area; and November 1994 for orders 
regulating the handling of milk in all other marketing areas except 
those for which referenda are provided, is approved or favored by 
producers, as defined under the terms of each of the orders as amended 
and as hereby proposed to be amended, who during such representative 
period were engaged in the production of milk for sale within the 
aforesaid marketing areas.

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.

    Dated: January 27, 1995.
Patricia Jensen,
Acting Assistant Secretary, Marketing and Regulatory Programs.

Order Amending the Orders Regulating the Handling of Milk in the 
New England and Other Marketing Areas

    (This order shall not become effective unless and until the 
requirements of Sec. 900.14 of the rules of practice and procedure 
governing proceedings to formulate marketing agreements and marketing 
orders have been met.)

Findings and Determinations

    The findings and determinations hereinafter set forth supplement 
those that were made when the 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) Findings. A public hearing was held upon certain proposed 
amendments to the tentative marketing agreement and to the orders 
regulating the handling of milk in the New England and other marketing 
areas. The hearing was held pursuant to the provisions of the 
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), and the applicable rules of practice and procedure (7 CFR Part 
900).
    Upon the basis of the evidence introduced at such hearing and the 
record thereof, it is found that:
    (1) The said orders as hereby amended, and all of the terms and 
conditions thereof, will tend to effectuate the declared policy of the 
Act;
    (2) 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 aforesaid marketing areas. The 
minimum prices specified in the orders as hereby 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
    (3) The said orders as hereby amended regulate the handling of milk 
in the same manner as, and are applicable only to persons in the 
respective classes of industrial or commercial activity specified in 
marketing agreements upon which a hearing has been held.

Order Relative to Handling

    It is therefore ordered, that on and after the effective date 
hereof, the handling of milk in the New England [[Page 7306]] and other 
marketing areas shall be in conformity to and in compliance with the 
terms and conditions of the order, as amended, and as hereby amended, 
as follows:
    The provisions of the proposed marketing agreements and order 
amending the orders contained in the recommended decision issued by the 
Administrator, Agricultural Marketing Service, on August 3, 1994, and 
published in the Federal Register on August 8, 1994 (59 FR 40418), as 
modified herein, shall be and are the terms and provisions of this 
order, amending the orders, and are set forth in full herein.
    Accordingly, this decision proposes 7 CFR chapter X be amended as 
follows:

PART 1001--MILK IN THE NEW ENGLAND MARKETING AREA

    The authority citation for 7 CFR Parts 1001 through 1139 is revised 
to read as follows:

    Authority: 7 U.S.C. 601-674.

    1. Section 1001.51 is revised to read as follows:


Sec. 1001.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1001.76 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent reporting period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent reporting period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1001.76 is amended by revising paragraph (b) to read as 
follows:


Sec. 1001.76  Butterfat differential.

* * * * *
    (b) Round to the nearest one-tenth cent, which shall be 0.138 times 
the current month's butter price less 0.0028 times the preceding 
month's average pay price per hundredweight, at test, for manufacturing 
grade milk in Minnesota and Wisconsin, using the ``base month'' series, 
adjusted pursuant to Sec. 1001.51 (a) through (e), as reported by the 
Department. The butter price means the simple average for the month of 
the Chicago Mercantile Exchange, Grade A butter price as reported by 
the Department.

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

    1. Section 1002.51 is revised to read as follows:


Sec. 1002.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1002.81 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and [[Page 7307]] 
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent reporting period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1002.56 is amended by revising paragraphs (e), (f) and 
(g) and by adding a new paragraph (h), to read as follows:


Sec. 1002.56  Announcement of class prices and butterfat differential.

* * * * *
    (e) The basic formula price for the preceding month, pursuant to 
Sec. 1002.51, as reported by the United States Department of 
Agriculture.
    (f) The average price per hundredweight for manufacturing grade 
milk, f.o.b. plants in Wisconsin and Minnesota, using the base month 
series, for the second preceding month, as reported by the United 
States Department of Agriculture.
    (g) The average price per pound, of Grade A (92-score) butter, at 
the Chicago Mercantile Exchange, for the preceding month, as reported 
by the United States Department of Agriculture.
    (h) The average price per pound, of nonfat dry milk f.o.b. Western 
Area, for the preceding month, as reported by the United States 
Department of Agriculture.
    3. Section 1002.81 is revised to read as follows:


Sec. 1002.81  Butterfat differential.

    The butterfat differential for the adjustment of prices as 
specified in this part shall be plus or minus for each one-tenth of one 
percent of butterfat above or below 3.5 percent by an amount computed 
as follows: Round to the nearest one-tenth cent, 0.138 times the 
current month's butter price less 0.0028 times the preceding month's 
average pay price per hundredweight, at test, for manufacturing grade 
milk in Minnesota and Wisconsin, using the ``base month'' series, 
adjusted pursuant to Sec. 1002.51 (a) through (e), as reported by the 
Department. The butter price means the simple average for the month of 
the Chicago Mercantile Exchange, Grade A butter price as reported by 
the Department.

PART 1004--MILK IN THE MIDDLE ATLANTIC MARKETING AREA

    1. Section 1004.50 is amended by revising paragraph (d)(1) to read 
as follows:


Sec. 1004.50  Class and component prices.

* * * * *
    (d) *  *  *
    (1) Compute a butterfat differential per one percent butterfat, 
rounded to the nearest one-tenth cent, by multiplying the current 
month's butter price by 1.38, and subtract from the result an amount 
determined by multiplying 0.028 by the preceding month's average pay 
price per hundredweight, at test, for manufacturing grade milk in 
Minnesota and Wisconsin, using the ``base month'' series, adjusted 
pursuant to Sec. 1004.51 (a) through (e), as reported by the 
Department. The butter price means the simple average for the month of 
the Chicago Mercantile Exchange, Grade A butter price as reported by 
the Department.
* * * * *
    2. Section 1004.51 is revised to read as follows:


Sec. 1004.51  Basic formula prices.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1004.50(d)(1) and rounded to 
the nearest cent, plus or minus the change in gross value yielded by 
the butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations: [[Page 7308]] 
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.

PART 1005--MILK IN THE CAROLINA MARKETING AREA

    1. Section 1005.51 is revised to read as follows:


Sec. 1005.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1005.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1005.74 is revised to read as follows: [[Page 7309]] 


Sec. 1005.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price(s) shall be increased or decreased, respectively, for 
each one-tenth percent butterfat variation from 3.5 percent by a 
butterfat differential, rounded to the nearest one-tenth cent, which 
shall be 0.138 times the current month's butter price less 0.0028 times 
the preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1005.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1006--MILK IN THE UPPER FLORIDA MARKETING AREA

    1. Section 1006.51 is revised to read as follows:


Sec. 1006.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1006.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1006.74 is revised to read as follows:


Sec. 1006.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1006.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1007--MILK IN THE GEORGIA MARKETING AREA

    1. Section 1007.51 is revised to read as follows:


Sec. 1007.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1007.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    [[Page 7310]]
    
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1007.74 is revised to read as follows:


Sec. 1007.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform prices for base and excess milk shall be increased or 
decreased, respectively, for each one-tenth percent butterfat variation 
from 3.5 percent by a butterfat differential, rounded to the nearest 
one-tenth cent, which shall be 0.138 times the current month's butter 
price less 0.0028 times the preceding month's average pay price per 
hundredweight, at test, for manufacturing grade milk in Minnesota and 
Wisconsin, using the ``base month'' series, adjusted pursuant to 
Sec. 1007.51 (a) through (e), as reported by the Department. The butter 
price means the simple average for the month of the Chicago Mercantile 
Exchange, Grade A butter price as reported by the Department.

PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA

    1. Section 1011.51 is revised to read as follows:


Sec. 1011.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1011.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the [[Page 7311]] annual yield 
factor for nonfat dry milk, 8.07, to determine the quantity (in 
hundredweights) of milk used in the production of butter-nonfat dry 
milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1011.74 is revised to read as follows:


Sec. 1011.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price(s) shall be increased or decreased, respectively, for 
each one-tenth percent butterfat variation from 3.5 percent by a 
butterfat differential, rounded to the nearest one-tenth cent, which 
shall be 0.138 times the current month's butter price less 0.0028 times 
the preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1011.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1012--MILK IN THE TAMPA BAY MARKETING AREA

    1. Section 1012.51 is revised to read as follows:


Sec. 1012.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1012.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1012.74 is revised to read as follows:


Sec. 1012.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1012.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1013--MILK IN THE SOUTHEASTERN FLORIDA MARKETING AREA

    1. Section 1013.51 is revised to read as follows:


Sec. 1013.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis [[Page 7312]] using the butterfat differential 
for the preceding month computed pursuant to Sec. 1013.74 and rounded 
to the nearest cent, plus or minus the change in gross value yielded by 
the butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1013.74 is revised to read as follows:


Sec. 1013.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1013.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1030--MILK IN THE CHICAGO REGIONAL MARKETING AREA

    1. Section 1030.51 is revised to read as follows:


Sec. 1030.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1030.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile [[Page 7313]] Exchange 
Grade A butter price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1030.74 is revised to read as follows:


Sec. 1030.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1030.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

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

    1. Section 1032.51 is revised to read as follows:


Sec. 1032.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1032.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1032.74 is revised to read as follows:


Sec. 1032.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding [[Page 7314]] month's average pay price per hundredweight, at 
test, for manufacturing grade milk in Minnesota and Wisconsin, using 
the ``base month'' series, adjusted pursuant to Sec. 1032.51 (a) 
through (e), as reported by the Department. The butter price means the 
simple average for the month of the Chicago Mercantile Exchange, Grade 
A butter price as reported by the Department.

PART 1033--MILK IN THE OHIO VALLEY MARKETING AREA

    1. Section 1033.51 is revised to read as follows:


Sec. 1033.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1033.73 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1033.73 is revised to read as follows:


Sec. 1033.73  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1033.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

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

    1. Section 1036.51 is revised to read as follows:


Sec. 1036.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1036.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and [[Page 7315]] 
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1036.74 is revised to read as follows:


Sec. 1036.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1036.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1040--MILK IN THE SOUTHERN MICHIGAN MARKETING AREA

    1. Section 1040.51 is revised to read as follows:


Sec. 1040.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1040.51 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and 
[[Page 7316]] 
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1040.74 is revised to read as follows:


Sec. 1040.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform prices shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1040.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

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

    1. Section 1044.51 is revised to read as follows:


Sec. 1044.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1044.62 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1044.62 is revised to read as follows:


Sec. 1044.62  Butterfat differential.

    The applicable uniform prices to be paid pursuant to Sec. 1044.70 
shall be increased or decreased, for each one-tenth of one percent 
butterfat variation from 3.5 percent by a butterfat differential, 
rounded to the nearest one-tenth cent, which shall be 0.138 times the 
current month's butter price less 0.0028 times the preceding month's 
average pay price per hundredweight, at test, for manufacturing grade 
milk in Minnesota and Wisconsin, using the ``base month'' series, 
adjusted pursuant to Sec. 1044.51 (a) through (e), as reported by the 
Department. The butter price means the simple average for the month of 
the Chicago Mercantile Exchange, Grade A butter price as reported by 
the Department.

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

    1. Section 1046.51 is revised to read as follows:


Sec. 1046.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1046.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to [[Page 7317]] paragraphs (a) through (e) of this 
section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1046.74 is revised to read as follows:


Sec. 1046.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform prices shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1046.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1049--MILK IN THE INDIANA MARKETING AREA

    1. Section 1049.51 is revised to read as follows:


Sec. 1049.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1049.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per [[Page 7318]] hundredweight of milk used to 
manufacture Cheddar cheese for the current month exceed or are less 
than the respective gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1049.74 is revised to read as follows:


Sec. 1049.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1049.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1050--MILK IN THE CENTRAL ILLINOIS MARKETING AREA

    1. Section 1050.51 is revised to read as follows:


Sec. 1050.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1050.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1050.74 is revised to read as follows:


Sec. 1050.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota [[Page 7319]] and Wisconsin, 
using the ``base month'' series, adjusted pursuant to Sec. 1050.51 (a) 
through (e), as reported by the Department. The butter price means the 
simple average for the month of the Chicago Mercantile Exchange, Grade 
A butter price as reported by the Department.

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

    1. Section 1064.51 is revised to read as follows:


Sec. 1064.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1064.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1064.74 is revised to read as follows:


Sec. 1064.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1064.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

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

    1. Section 1065.51 is revised to read as follows:


Sec. 1065.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1065.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average [[Page 7320]] for the month of the Chicago Mercantile Exchange, 
Grade AA butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1065.74 is revised to read as follows:


Sec. 1065.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1065.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1068--MILK IN THE UPPER MIDWEST MARKETING AREA

    1. Section 1068.51 is revised to read as follows:


Sec. 1068.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1068.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in 
[[Page 7321]] hundredweights) of milk used in the production of 
American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1068.74 is revised to read as follows:


Sec. 1068.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1068.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

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

    1. Section 1075.50 is amended by revising paragraph (c) to read as 
follows:


Sec. 1075.50  Class prices.

* * * * *
    (c) Class III price. The Class III price shall be the basic formula 
price for the month.
    2. Section 1075.51 is revised to read as follows:


Sec. 1075.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1075.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    3. Section 1075.74 is revised to read as follows:


Sec. 1075.74  Butterfat differential.

    The uniform price shall be increased or decreased, respectively, 
for each one-tenth percent butterfat variation from 3.5 percent by a 
butterfat differential, rounded to the nearest one-tenth cent, which 
shall be 0.138 times the current month's butter price less 0.0028 times 
the preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1075.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

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

    1. Section 1076.51 is revised to read as follows:


Sec. 1076.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1076.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to [[Page 7322]] paragraphs (a) through (e) of this 
section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1076.74 is revised to read as follows:


Sec. 1076.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1076.51 (a) through (e), as 
reported by the Department. the basic formula price for the month 
computed pursuant to Sec. 1076.51, as reported by the Department. The 
butter price means the simple average for the month of the Chicago 
Mercantile Exchange, Grade A butter price as reported by the 
Department.

PART 1079--MILK IN THE IOWA MARKETING AREA

    1. Section 1079.51 is revised to read as follows:


Sec. 1079.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1079.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry Buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department. [[Page 7323]] 
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1079.74 is revised to read as follows:


Sec. 1079.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1079.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

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

    1. Section 1093.51 is revised to read as follows:


Sec. 1093.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1093.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1093.74 is revised to read as follows:


Sec. 1093.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota [[Page 7324]] and Wisconsin, 
using the ``base month'' series, adjusted pursuant to Sec. 1093.51 (a) 
through (e), as reported by the Department. The butter price means the 
simple average for the month of the Chicago Mercantile Exchange, Grade 
A butter price as reported by the Department.

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

    1. Section 1094.51 is revised to read as follows:


Sec. 1094.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1094.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1094.74 is revised to read as follows:


Sec. 1094.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1094.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1096--MILK IN THE GREATER LOUISIANA MARKETING AREA

    1. Section 1096.51 is revised to read as follows:


Sec. 1096.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1096.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section: [[Page 7325]] 
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1094.74 is revised to read as follows:


Sec. 1096.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1096.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

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

    1. Section 1099.51 is revised to read as follows:


Sec. 1099.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1096.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the [[Page 7326]] annual yield 
factor for Cheddar cheese, 9.87, to determine the quantity (in 
hundredweights) of milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1099.74 is revised to read as follows:


Sec. 1099.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1099.51(a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1106--MILK IN THE SOUTHWEST PLAINS MARKETING AREA

    1. Section 1106.51 is revised to read as follows:


Sec. 1106.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1106.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1106.74 is revised to read as follows:


Sec. 1106.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1106.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1108--MILK IN THE CENTRAL ARKANSAS MARKETING AREA

    1. Section 1108.51 is revised to read as follows:


Sec. 1108.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1108.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section. 
[[Page 7327]] 
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1108.74 is revised to read as follows:


Sec. 1108.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1108.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1124--MILK IN THE PACIFIC NORTHWEST MARKETING AREA


Sec. 1124.19  [Removed and Reserved]

    1. Section Sec. 1124.19 is removed and reserved.
    2. Section 1124.50 is amended by revising the reference in 
paragraph (e) and paragraph (f)(2) from ``Sec. 1124.19(e)'' to 
``paragraph (f)(3) of this section'' and adding a new paragraph (f)(3) 
to read as follows:


Sec. 1124.50  Class and component prices.

* * * * *
    (f) * * *
    (3) Compute a butterfat differential rounded to the nearest one-
tenth cent, by multiplying the current month's butter price by 0.138, 
and subtract from the result an amount determined by multiplying 0.0028 
by the preceding month's average pay price per hundredweight, at test, 
for manufacturing grade milk in Minnesota and Wisconsin, using the 
``base month'' series, adjusted pursuant to Sec. 1124.51 (a) through 
(e), as reported by the Department. The butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade A 
butter price as reported by the Department.
* * * * *
    3. Section 1124.51 is revised to read as follows:


Sec. 1124.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1124.50(f)(3) and rounded to 
the nearest cent, plus or minus the change in gross value yielded by 
the butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section: [[Page 7328]] 
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    4. Section 1124.75 is amended by revising the reference in 
paragraph (a)(2)(i) from ``Sec. 1124.19'' to ``Sec. 1124.50(f)(3)''.

PART 1126--MILK IN THE TEXAS MARKETING AREA

    1. Section 1126.51 is revised to read as follows:


Sec. 1126.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1126.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1126.74 is revised to read as follows:


Sec. 1126.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the [[Page 7329]] nearest one-tenth cent, 
which shall be 0.138 times the current month's butter price less 0.0028 
times the preceding month's average pay price per hundredweight, at 
test, for manufacturing grade milk in Minnesota and Wisconsin, using 
the ``base month'' series, adjusted pursuant to Sec. 1126.51 (a) 
through (e), as reported by the Department. The butter price means the 
simple average for the month of the Chicago Mercantile Exchange, Grade 
A butter price as reported by the Department.

PART 1131--MILK IN THE CENTRAL ARIZONA MARKETING AREA

    1. Section 1131.51 is revised to read as follows:


Sec. 1131.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1131.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1131.74 is revised to read as follows:


Sec. 1131.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1131.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1134--MILK IN THE WESTERN COLORADO MARKETING AREA

    1. Section 1134.51 is revised to read as follows:


Sec. 1134.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1134.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations: [[Page 7330]] 
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1134.74 is revised to read as follows:


Sec. 1134.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1134.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

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


Sec. 1135.19  [Removed and Reserved]

    1. Section 1135.19 is removed and reserved.
    2. Section 1135.50 is amended by revising the reference in 
paragraph (e) and paragraph (f)(2) from ``Sec. 1135.19'' to ``paragraph 
(f)(3) of this section'' and adding a new paragraph (f)(3) to read as 
follows:


Sec. 1135.50  Class and component prices.

* * * * *
    (f) * * *
    (3) Compute a butterfat differential rounded to the nearest one-
tenth cent, by multiplying the current month's butter price by 0.138, 
and subtract from the result an amount determined by multiplying 0.0028 
by the preceding month's average pay price per hundredweight, at test, 
for manufacturing grade milk in Minnesota and Wisconsin, using the 
``base month'' series, adjusted pursuant to Sec. 1135.51 (a) through 
(e), as reported by the Department. The butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade A 
butter price as reported by the Department.
* * * * *
    3. Section 1135.51 is revised to read as follows:


Sec. 1135.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1135.50(f)(3) and rounded to 
the nearest cent, plus or minus the change in gross value yielded by 
the butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department. [[Page 7331]] 
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    4. Section 1135.74 is amended by revising the reference in 
paragraphs (b)(2)(i) and (b)(2)(ii) from ``Sec. 1135.19'' to 
``Sec. 1135.50(f)(3)''.

PART 1137--MILK IN THE EASTERN COLORADO MARKETING AREA

    1. Section 1137.51 is revised to read as follows:


Sec. 1137.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1137.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1137.74 is revised to read as follows:


Sec. 1137.74    Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1137.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

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

    1. Section 1138.51 is revised to read as follows: [[Page 7332]] 


Sec. 1138.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1138.74 and rounded to the 
nearest cent, plus or minus the change in gross value yielded by the 
butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month and 
separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.
    2. Section 1138.74 is revised to read as follows:


Sec. 1138.74  Butterfat differential.

    For milk containing more or less than 3.5 percent butterfat, the 
uniform price shall be increased or decreased, respectively, for each 
one-tenth percent butterfat variation from 3.5 percent by a butterfat 
differential, rounded to the nearest one-tenth cent, which shall be 
0.138 times the current month's butter price less 0.0028 times the 
preceding month's average pay price per hundredweight, at test, for 
manufacturing grade milk in Minnesota and Wisconsin, using the ``base 
month'' series, adjusted pursuant to Sec. 1138.51 (a) through (e), as 
reported by the Department. The butter price means the simple average 
for the month of the Chicago Mercantile Exchange, Grade A butter price 
as reported by the Department.

PART 1139--MILK IN THE GREAT BASIN MARKETING AREA

    1. Section 1139.50 is amended by revising the reference in 
paragraph (d) from ``Sec. 1139.51(a)'' to ``paragraph (e)(1) of this 
section'' and by revising paragraph (e), to read as follows:


Sec. 1139.50  Class and component prices.

* * * * *
    (e) Butterfat price. The butterfat price per pound shall be the 
total of paragraphs (e)(2) and (e)(3) of this section computed as 
follows:
    (1) Compute a butterfat differential rounded to the nearest one-
tenth cent, by multiplying the current month's butter price by 0.138, 
and subtract from the result an amount determined by multiplying 0.0028 
by the preceding month's average pay price per hundredweight, at test, 
for manufacturing grade milk in Minnesota and Wisconsin, using the 
``base month'' series, adjusted pursuant to Sec. 1139.51 (a) through 
(e), as reported by the Department. The butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade A 
butter price as reported by the Department.
    (2) The skim milk value per hundredweight for the month, computed 
pursuant to paragraph (d) of this section, divided by 100; and
    (3) The butterfat differential for the month computed pursuant to 
paragraph (e)(1) of this section multiplied by 10.
* * * * *
    2. Section 1139.51 is revised to read as follows:


Sec. 1139.51  Basic formula price.

    The basic formula price shall be the preceding month's average pay 
price for manufacturing grade milk in Minnesota and Wisconsin using the 
``base month'' series, as reported by the Department, adjusted to a 3.5 
percent butterfat basis using the butterfat differential for the 
preceding month computed pursuant to Sec. 1139.50(e)(1) and rounded to 
the nearest cent, plus or minus the change in gross value yielded by 
the butter-nonfat dry milk and Cheddar cheese product price formula 
computed pursuant to paragraphs (a) through (e) of this section.
    (a) The gross values of per hundredweight of milk used to 
manufacture butter-nonfat dry milk and Cheddar cheese shall be 
computed, using price data determined pursuant to paragraph (b) of this 
section and annual yield factors, for the preceding month 
[[Page 7333]] and separately for the current month as follows:
    (1) The gross value of milk used to manufacture butter-nonfat dry 
milk shall be the sum of the following computations:
    (i) Multiply the Grade AA butter price by 4.27;
    (ii) Multiply the nonfat dry milk price by 8.07; and
    (iii) Multiply the dry buttermilk price by 0.42.
    (2) The gross value of milk used to manufacture Cheddar cheese 
shall be the sum of the following computations:
    (i) Multiply the Cheddar cheese price by 9.87; and
    (ii) Multiply the Grade A butter price by 0.238.
    (b) The following product prices shall be used pursuant to 
paragraph (a) of this section:
    (1) Grade AA butter price. Grade AA butter price means the simple 
average for the month of the Chicago Mercantile Exchange, Grade AA 
butter price, as reported by the Department.
    (2) Nonfat dry milk price. Nonfat dry milk price means the simple 
average for the month of the Western Nonfat Dry Milk Low/Medium Heat 
price, as reported by the Department.
    (3) Dry buttermilk price. Dry buttermilk price means the simple 
average for the month of the Western Dry Buttermilk price, as reported 
by the Department.
    (4) Cheddar cheese price. Cheddar cheese price means the simple 
average for the month of the National Cheese Exchange 40-pound block 
Cheddar cheese price, as reported by the Department.
    (5) Grade A butter price. Grade A butter price means the simple 
average for the month of the Chicago Mercantile Exchange Grade A butter 
price, as reported by the Department.
    (c) Determine the amounts by which the gross value per 
hundredweight of milk used to manufacture butter-nonfat dry milk and 
the gross value per hundredweight of milk used to manufacture Cheddar 
cheese for the current month exceed or are less than the respective 
gross values for the preceding month.
    (d) Compute weighting factors to be applied to the changes in gross 
values determined pursuant to paragraph (c) of this section by 
determining the relative proportion that the data included in each of 
the following paragraphs is of the total of the data represented in 
paragraphs (d)(1) and (d)(2) of this section:
    (1) Combine the total nonfat dry milk production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
nonfat dry milk, 8.07, to determine the quantity (in hundredweights) of 
milk used in the production of butter-nonfat dry milk; and
    (2) Combine the total American cheese production for the States of 
Minnesota and Wisconsin, as reported by the Department, for the most 
recent preceding period, and divide by the annual yield factor for 
Cheddar cheese, 9.87, to determine the quantity (in hundredweights) of 
milk used in the production of American cheese.
    (e) Compute a weighted average of the changes in gross values per 
hundredweight of milk determined pursuant to paragraph (c) of this 
section in accordance with the relative proportions of milk determined 
pursuant to paragraph (d) of this section.

[This marketing agreement will not appear in the Code of Federal 
Regulations]

Marketing Agreement Regulating the Handling of Milk in Certain 
Marketing Areas

    The parties hereto, in order to effectuate the declared policy of 
the Act, and in accordance with the rules of practice and procedure 
effective thereunder (7 CFR Part 900), desire to enter into this 
marketing agreement and do hereby agree that the provisions referred to 
in paragraph I hereof as augmented by the provisions specified in 
paragraph II hereof, shall be and are the provisions of this marketing 
agreement as if set out in full herein.
    I. The findings and determinations, order relative to handling, and 
the provisions of Secs. ____________\1\ to ________, all inclusive, of 
the order regulating the handling of milk in the (________ Name of 
order ________) marketing area (7 CFR Part ________\2\) which is 
annexed hereto; and

    \1\First and last sections of order.
    \2\Appropriate Part number.
---------------------------------------------------------------------------

    II. The following provisions: Sec. ____________\3\ Record of milk 
handled and authorization to correct typographical errors.

    \3\Next consecutive section number.
---------------------------------------------------------------------------

    (a) Record of milk handled. The undersigned certifies that he/she 
handled during the month of ________________\4\, ________ hundredweight 
of milk covered by this marketing agreement.

    \4\Appropriate representative period for the order.
---------------------------------------------------------------------------

    (b) Authorization to correct typographical errors. The undersigned 
hereby authorizes the Director, or Acting Director, Dairy Division, 
Agricultural Marketing Service, to correct any typographical errors 
which may have been made in this marketing agreement.
    Sec. __________\3\ Effective date. This marketing agreement shall 
become effective upon the execution of a counterpart hereof by the 
Secretary in accordance with Section 900.14(a) of the aforesaid rules 
of practice and procedure.
    In Witness Whereof, The contracting handlers, acting under the 
provisions of the Act, for the purposes and subject to the limitations 
herein contained and not otherwise, have hereunto set their respective 
hands and seals.

Signature

By (Name)--------------------------------------------------------------

(Title)----------------------------------------------------------------

(Address)--------------------------------------------------------------

(Seal)
Attest

[FR Doc. 95-2448 Filed 2-6-95; 8:45 am]
BILLING CODE 3410-02-P