[Federal Register Volume 60, Number 242 (Monday, December 18, 1995)]
[Proposed Rules]
[Pages 65023-65032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30670]



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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 60, No. 242 / Monday, December 18, 1995 / 
Proposed Rules  

[[Page 65023]]


DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1005, 1011, and 1046

[Docket No. AO-388-A8 et al.; DA-94-12]


Milk in the Carolina, Tennessee Valley, and Louisville-Lexington-
Evansville Marketing Areas; Decision on Proposed Amendments to 
Marketing Agreements and to Orders

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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------------------------------------------------------------------------
 7 CFR                                                                  
 part           Marketing area                       AO Nos.            
------------------------------------------------------------------------
1005..  Carolina......................  AO-388-A8                       
1011..  Tennessee Valley..............  AO-251-A39                      
1046..  Louisville-Lexington-           AO-123-A66                      
         Evansville.                                                    
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SUMMARY: This final decision proposes to amend the pooling standards of 
the Tennessee Valley and Carolina orders; modifies the marketing areas 
of the Tennessee Valley and Louisville-Lexington-Evansville orders; 
changes the location adjustment under the Carolina order for plants 
located in the Middle Atlantic marketing area; and changes the base-
paying months under the Carolina order. The decision is based upon 
industry proposals presented at a public hearing in Charlotte, North 
Carolina, on January 4, 1995.

FOR FURTHER INFORMATION CONTACT: Nicholas Memoli, Marketing Specialist, 
USDA/AMS/Dairy Division, Order Formulation Branch, Room 2971, South 
Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 690-1932.

SUPPLEMENTARY INFORMATION: This administrative action is governed by 
the provisions of Sections 556 and 557 of Title 5 of the United States 
Code and therefore is excluded from the requirements of Executive Order 
12866.
    The Regulatory Flexibility Act (5 U.S.C. 601-612) requires the 
Agency to examine the impact of a proposed rule on small entities. 
Pursuant to 5 U.S.C. 605(b), the Administrator of the Agricultural 
Marketing Service has certified that this rule will not have a 
significant economic impact on a substantial number of small entities. 
The amended orders will promote more orderly marketing of milk by 
producers and regulated handlers.
    These proposed amendments have been reviewed under Executive Order 
12778, Civil Justice Reform. This rule is not intended to have a 
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 (7 
U.S.C. 601-674), provides that administrative proceedings must be 
exhausted before parties may file suit in court. Under section 
608c(15)(A) of the Act, any handler subject to an order may file with 
the Secretary a petition stating that the order, any provision of the 
order, or any obligation imposed in connection with the order is not in 
accordance with the law and requesting a modification of an order or to 
be exempted from the order. A handler is afforded the opportunity for a 
hearing on the petition. After a hearing, the Secretary would rule on 
the petition. The Act provides that the district court of the United 
States in any district in which the handler is an inhabitant, or has 
its principal place of business, has jurisdiction in equity to review 
the Secretary's ruling on the petition, provided a bill in equity is 
filed not later than 20 days after the date of the entry of the ruling.
    Prior documents in this proceeding;
    Notice of Hearing: Issued November 21, 1994; published November 25, 
1994 (59 FR 60574).
    Recommended Decision: Issued August 17, 1995; published August 24, 
1995 (60 FR 43986).

Preliminary Statement

    A public hearing was held upon proposed amendments to the marketing 
agreements and the orders regulating the handling of milk in the 
Carolina, Tennessee Valley, and Louisville-Lexington-Evansville 
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 (7 CFR Part 900), at 
Charlotte, North Carolina, on January 4, 1995. Notice of such hearing 
was issued on November 21, 1994, and published November 25, 1994 (59 FR 
60574).
    Upon the basis of the evidence introduced at the hearing and the 
record thereof, the Administrator, on August 17, 1995, issued a 
recommended decision containing notice of the opportunity to file 
written exceptions thereto. Two comments were received in response to 
the notice, both of which fully support the findings and conclusions of 
the recommended decision.
    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, with no material modifications.
    The material issues on the record of the hearing relate to:
    1. Marketing area modifications to the Tennessee Valley and 
Louisville-Lexington-Evansville orders;
    2. Where to regulate a distributing plant that meets the pooling 
standards of more than one order;
    3. Supply plant pooling standards under the Tennessee Valley order;
    4. Distributing plant pooling standards under the Carolina order;
    5. Location adjustments under the Carolina order; and
    6. Base-paying months under the Carolina order.

Findings and Conclusions

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

1. Marketing Area Modifications to the Tennessee Valley (Order 11) and 
Louisville-Lexington-Evansville (Order 46) Orders

    Six now-unregulated Kentucky counties between the Order 11 and 
Order 46 marketing areas should be added to the Order 11 marketing area 
and one county that is now part of the Order 46 marketing area should 
be removed and added to the Order 11 marketing area.
    A spokesman for Southern Belle Dairy Company, Inc., testified that 
the six unregulated counties--Clay, Jackson, Laurel, McCreary, Owsley, 
and Rockcastle--and the one Order 46 

[[Page 65024]]
county--Pulaski--are in an area that is closely associated with the 
Tennessee Valley marketing area. He pointed out, for example, that two 
Order 11 pool plants--the Flav-O-Rich plant at London and the Southern 
Belle plant at Somerset--are in Laurel and Pulaski Counties, 
respectively.
    The witness indicated that Southern Belle had sales in each of the 
counties proposed to be added to the marketing area. He also introduced 
data showing that 79 percent of the fluid milk sales in the seven-
county area came from the Southern Belle and Flav-O-Rich plants. He 
said that a majority of the sales in Pulaski County also came from 
Order 11 plants.
    There was no opposition to this proposal either at the hearing or 
in post-hearing briefs.
    The six now-unregulated Kentucky counties should be added to the 
Order 11 marketing area and Pulaski County should be removed from the 
Order 46 marketing area and added to the Order 11 marketing area. This 
seven-county area is closely associated with the Tennessee Valley 
market and its addition to the Order 11 marketing area, in conjunction 
with the pooling standards adopted in this decision, will add 
regulatory stability for the plants with sales in this area. There are 
no plants in this seven-county area other than the Southern Belle and 
Flav-O-Rich plants and none outside of this area that would become 
regulated as a result of the addition of this territory to the 
Tennessee Valley marketing area.
    A conforming change should be made in Sec. 1011.52(a)(3) to include 
the counties of Jackson, Owsley, and Rockcastle with the other Kentucky 
counties now included in the minus 32-cent location adjustment zone. 
Although there are no plants located in these three counties, should a 
plant be built there the appropriate location adjustment should be 
minus 32 cents, the same location adjustment that is applicable in the 
neighboring counties of Laurel, Pulaski, Clay, and Breathitt.

2. Where To Regulate a Distributing Plant That Meets the Pooling 
Standards of More Than One Order

    The pooling standards of the Tennessee Valley and Carolina orders 
should be modified to fully regulate a distributing plant that is 
located within their respective marketing areas and that meets the 
pooling standards of Secs. 1011.7(a) or 1005.7(a), respectively, even 
if the plant meets the pooling standards of another order and has more 
route disposition in such other order's marketing area.
    These amendments will allow a distributing plant at Kingsport, 
Tennessee, that is located within the Tennessee Valley marketing area 
and that meets all of the pooling standards of the Tennessee Valley 
order to be regulated under that order rather than under the Carolina 
order, despite the plant's having greater sales in the Carolina 
marketing area. Similarly, they will allow a distributing plant located 
at Somerset, Kentucky--which, as recommended under Issue No. 1, would 
be part of the Order 11 marketing area--to be regulated under Order 11 
even if the plant should develop greater sales in the marketing area of 
Order 46 or some other order's marketing area. Finally, the amendments 
will permit a plant located at Greenville, South Carolina (in the Order 
5 marketing area), to be regulated under Order 5 even if the plant has 
more sales in the Southeast marketing area (Order 7).
    These amendments and the proposals which prompted them stem from 
various pricing problems under these orders that have come about for a 
variety of reasons, including the fact that the marketing areas may not 
have grown as fast as handlers' distribution areas. The pricing 
problems identified on the record of this proceeding relate to Land-O-
Sun Dairies, Inc., at Kingsport, Tennessee; Southern Belle Dairy 
Company at Somerset, Kentucky; and Superbrand Dairy Products, Inc., at 
Greenville, South Carolina.
    Land-O-Sun Dairies, Inc., operates a plant at Kingsport, Tennessee, 
which is in the Tennessee Valley marketing area. Because of this 
plant's greater route disposition in the Carolina marketing area, it 
has been regulated under that order. During the past three years 
(January 1992-November 1994), the blend price at Kingsport under Order 
5 has averaged 14 cents below the blend price at that location under 
Order 11. In some months, the difference has been as high as 32 cents. 
Although the Class I price at Kingsport is identical under both of 
these orders, the Tennessee Valley order's higher Class I utilization--
e.g., 82.03 percent for Order 11 compared to 77.96 percent for Order 5 
during the first 10 months of 1994--has led to a higher blend price 
under that order at Kingsport during nearly every month for the past 
three years.
    A spokesman for Land-O-Sun testified that the Kingsport plant 
handles approximately 12 million pounds of milk per month and that 
about one-third of its Class I sales are distributed on routes within 
the Tennessee Valley marketing area and the remaining two-thirds within 
the Carolina marketing area.
    The witness testified that Land-O-Sun purchases its raw milk supply 
from 140 dairy farmers located in northeast Tennessee and southwest 
Virginia within 100 miles of the Kingsport plant. He noted that this 
area is also the supply area for other Order 11 pool plants. As a 
result, he said, any blend price difference to producers in this common 
supply area leads to market instability. Because the Order 11 blend 
price is higher than the Order 5 blend price, he stated, Land-O-Sun is 
forced to pay over-order prices to retain its producers. He indicated 
that Land-O-Sun could not consistently pay these higher prices and 
remain a viable business entity.
    Southern Belle Dairy at Somerset, Kentucky, has been regulated 
under Order 11 since 1989. In recent years, the plant has had nearly 
equal sales in the Order 46 and Order 11 marketing areas. If regulation 
of the plant had shifted to Order 46, the applicable Class I 
differential price would be 19 cents lower than under Order 11 (i.e., 
$2.26 compared to $2.45), but the blend price difference would be even 
more substantial. For example, in the past 35 months (January 1992-
November 1994), the Order 46 blend price averaged 30 cents below the 
Order 11 blend price at Somerset. In some months during this period, 
the difference in blend prices was as much as 67 cents.
    At the hearing, a Southern Belle spokesman testified that the 
handler sought the marketing stability that would be provided by 
regulating the plant under Order 11 based upon its location within the 
Order 11 marketing area. The spokesman stated that Southern Belle would 
experience procurement problems if it could only pay its producers the 
Order 46 blend price in competition with Order 11 handlers--such as the 
Flav-O-Rich plant at London, Kentucky, 37 miles east of Somerset--which 
also procure milk from the same supply area. He also cited the 
marketing instability that would result from the plant shifting back 
and forth between the two orders, particularly in view of the differing 
base and excess payment plans to producers in each of these orders.
    Superbrand Dairy Products at Greenville, South Carolina, has been 
regulated under the Georgia order since May 1992 despite the fact that 
it is located within the marketing area of the Carolina order and meets 
the pooling standards of that order.
    A spokesman for Mid-America Dairymen, Inc. (Mid-Am), which has a 
full supply contract with the Superbrand plant, testified that the 
Carolina order should be amended to 

[[Page 65025]]
provide the same type of pooling standard that has been proposed for 
the Tennessee Valley order and that was incorporated in the 
Department's recommended [and final] decisions for the new Southeast 
order.\1\ Inclusion of this provision in each of these orders will 
provide regulatory compatibility throughout the Southeast, he said.

    \1\Official notice is taken of the final decision for the 
Southeast order issued on May 3, 1995 (60 FR 25014).
---------------------------------------------------------------------------

    The witness stated that the Mid-Am proposal would return the 
Superbrand plant to its former status as a pool plant under Order 5. In 
terms of its sales and procurement pattern, the plant is more closely 
associated with the Carolina market, he added.
    The Mid-Am spokesman testified that the proposed change in pooling 
standards is a departure from the traditional method of determining 
where a distributing plant should be regulated when it meets the 
pooling standards of more than one order. The traditional method, he 
explained, regulated a plant wherever it had the most sales. He said 
that the principle behind that practice was to insure that all handlers 
having sales in an order area were subject to the same regulatory 
provisions as their competition. However, he added, with the advent of 
large processing plants with sales distribution over wide geographic 
areas, the traditional method of pooling distributing plants has become 
obsolete.
    There was no opposition to this proposal either at the hearing or 
in post-hearing briefs.
    For the most part, Federal milk orders have traditionally regulated 
plants according to where they had the most sales. The reasoning behind 
that policy has been to ensure that all handlers having sales in a 
Federal order marketing area were subject to the same minimum prices 
(adjusted for plant location) and other regulatory provisions as their 
competition. When these provisions were first incorporated in orders, 
markets were primarily local in nature. At any given location, it was 
common for Class I prices to differ among orders, and it was common for 
each order to have a unique set of provisions.
    Most of the provisions in Federal milk orders today are 
standardized. For example, all orders have uniform classification and 
allocation provisions. Similarly, most Federal order Class I prices are 
properly aligned. As noted above, for example, the Class I price at 
Kingsport, Tennessee, is the same whether Land-O-Sun's plant is 
regulated under Order 5 or Order 11; the Southern Belle plant at 
Somerset, Kentucky, would be subject to a higher Class I price under 
Order 11 than would apply at the plant under Order 46; and the 
Superbrand plant at Greenville would be subject to the same Class I 
price whether it was regulated under Order 5 or Order 7.
    Consequently, it must be concluded that the competitive equity that 
was, and continues to be, sought by having competing handlers subject 
to the same rules and Class I prices can be achieved in these marketing 
areas by pooling distributing plants under the orders applicable to the 
marketing areas in which the plants are located. Specifically, the 
pooling standards of the Tennessee Valley and Carolina orders should be 
amended to fully regulate all distributing plants that meet the orders' 
pooling standards and that are located within their respective 
marketing areas.
    Under the provisions adopted here for the Carolina and Tennessee 
Valley orders, a plant that qualifies as a pool distributing plant and 
which is located within the marketing area will be regulated under the 
order applicable to that marketing area even if it meets the pooling 
standards of another order and has greater sales in such other order's 
marketing area. The nearby Southeast order, Louisville-Lexington-
Evansville order, and Upper Florida order contain provisions 
(Secs. 1007.7(g)(4), 1046.7(e)(3), and 1006.7(d)(3), respectively) that 
conform to the proposed provisions by yielding regulation of such 
plants to the other order.
    Orders 5 and 11 also should be modified to recognize another 
order's primacy to regulate a plant that meets such other order's 
pooling standards and that is within the other order's marketing area. 
This is accomplished in Secs. 1005.7(e)(3) and 1011.7(e)(3).
    A clarifying change should also be made to Secs. 1005.7(e)(5) and 
1011.7(e)(5). At present, these paragraphs, which are designated as 
Secs. 1005.7(d)(4) and 1011.7(d)(4), state that ``the term pool plant 
shall not apply to a plant qualified pursuant to paragraph (b) of this 
section which also meets the pooling requirements for the month under 
another Federal order.'' A problem could arise with this language 
because during certain months of the year a supply plant may qualify as 
a pool plant by shipping less than 50 percent of its receipts to 
distributing plants. For example, if a supply plant shipped 40 percent 
of its receipts to pool distributing plants under Order 5 and 40 
percent of its receipts to distributing plants under Order 11, both 
orders, pursuant to the language quoted above, would yield regulation 
of the plant to the other order, leaving the plant in a state of 
regulatory limbo. To prevent this unlikely event from occurring, the 
paragraph should be modified to read: ``The term pool plant shall not 
apply to a plant qualified pursuant to paragraph (b) of this section if 
the plant has automatic pooling status under another Federal order or 
if the plant meets the pooling requirements of another Federal order 
during the month and makes greater qualifying shipments to plants 
regulated under such other order than to plants regulated under this 
order.''

3. Supply Plant Pooling Standards Under the Tennessee Valley Order

    The supply plant pooling provisions for the Tennessee Valley order 
should be amended to provide automatic pooling status for a supply 
plant which met the order's shipping standards during the preceding 
months of July through February.
    Armour Food Ingredients Company (Armour) proposed the change in 
supply plant pooling standards. A spokesman for Armour testified that 
the company operates a supply plant at Springfield, Kentucky, that has 
been a pool plant under Order 11 since August 1992. He said that the 
facility is a ``dual Grade A/Grade B plant.'' The Grade A part of the 
plant is used to assemble Grade A milk from producers' farms for 
transshipment to pool distributing plants, while the Grade B facility 
is used to process surplus milk into Class III products, he explained.
    The witness testified that Order 11 now requires Armour to ship 
milk to distributing plants every month of the year. However, much less 
milk is needed from Armour during the spring than during the other 
months of the year, he said. Consequently, he concluded, Armour and its 
distributing plant customers are incurring receiving and hauling costs 
for no other purpose than to satisfy the order's shipping requirements.
    The witness introduced an exhibit which showed that from August 
1992 through October 1994 Armour shipped a monthly average of 71 
percent of its receipts to pool distributing plants. The exhibit also 
showed that when shipments of surplus milk from these same pool 
distributing plants to Armour were subtracted from the receipts from 
Armour, the distributing plants, on average, kept 34 percent of the 
milk that was sent to them.
    There was no opposition to this proposal either at the hearing or 
in post-hearing briefs.
    The provision proposed by Armour is included in many Federal milk 
orders 

[[Page 65026]]
because of the seasonal variation in milk production. This variation is 
also evident in the Tennessee Valley market. In 1993, the average daily 
production per producer in this market was 2,220 pounds. However, this 
daily average reached a low of 1,941 pounds during the month of July 
and peaked at 2,481 pounds during May. As a group, the months of March 
through June had a daily average of 2,375 pounds, compared to 2,149 
pounds during the months of July through February.
    There is no merit in requiring supply plants to receive, reload, 
and ship milk to distributing plants if the milk is not needed or if 
closer milk is available directly from producers' farms. In addition to 
the statistics suggesting that supply plant shipments during the months 
of March through June are unnecessary, the lack of any contradictory 
testimony from Order 11 distributing plant operators must be 
interpreted as concurrence with the view that supply plant shipments 
are simply not needed during the months of March through June. In view 
of this evidence, the proposal should be adopted.
    Section 1011.7(b)(3) of the Tennessee Valley order, as proposed to 
be amended here, also should be modified to clarify what would happen 
if a shipping requirement were instituted during the months of March 
through June pursuant to Sec. 1011.7(b)(4). First, it should be 
understood that a new supply plant or one that did not meet the order's 
shipping requirements during the months of July through February would 
be subject to the 40 percent supply plant shipping requirement now in 
the order.
    If the market is short of milk during the ``free-ride'' months of 
March through June and the market administrator determines that 
additional milk is needed from pool supply plants pursuant to 
Sec. 1011.7(b)(4), any increase in shipping percentage would be added 
to the percentage that is then applicable to the plant. For instance, 
if the market administrator determines that a 10-percentage point 
increase in shipments is needed, a plant that would have had to ship 40 
percent of its receipts would be required to ship 50 percent. However, 
a plant in ``free-ride'' status, which normally would not have had to 
make any shipments, would have to ship 10 percent. The market 
administrator's ability to require additional milk from supply plants, 
even during the free-ride period of March through June, will help to 
ensure that the market has adequate supplies of milk for fluid use 
during all months of the year.
    At the present time, Secs. 1005.7(b) and 1011.7(b) of the Carolina 
and Tennessee Valley orders, respectively, authorize the Director of 
the Dairy Division to adjust supply plant shipping standards to obtain 
needed shipments of milk or to prevent uneconomic shipments. This 
provision was not an issue at the hearing. However, in conjunction with 
the other changes in pooling provisions that were adopted, the 
recommended decision stated that authority to adjust supply plant 
shipping standards should be given to the market administrator of 
Orders 5 and 11. Although interested parties were invited to comment on 
this, as on other recommendations, no comments were received in 
opposition to this suggestion.
    With all of the marketing information immediately available to him 
or her, the market administrator is in an ideal position to sense the 
changing needs of the market and to obtain industry views concerning 
the desirability of adjusting supply plant shipping requirements. As a 
result, the market administrator will be able to attend to the need for 
such temporary revisions in a timely fashion and will be able to better 
serve the changing needs of handlers and producers under the Carolina 
and Tennessee Valley orders.
    A similar conforming change also should be made in 
Sec. 1011.13(e)(3) of the Tennessee Valley order for the same reasons. 
This change will allow the market administrator to increase or 
decrease, by 10 percentage points, the diversion limitations applicable 
to a proprietary bulk tank handler.

4. Distributing Plant Pooling Standards Under the Carolina Order

    Proposals to amend the Order 5 in-area route disposition 
requirement for pool distributing plants should not be adopted.
    At the present time, a distributing plant must dispose of at least 
60 percent of its fluid milk product receipts in Class I during the 
months of August through November, January, and February and at least 
40 percent in each of the other months to qualify as a pool plant under 
Order 5. In addition, at least 15 percent of the plant's route 
disposition must be in the marketing area.
    Milkco, Inc., testified in support of its proposal to change the 
in-area route disposition standard of Order 5 from 15 percent to 10 
percent. At the hearing, Milkco modified its proposal to the lesser of 
1500 pounds daily or 10 percent of a plant's fluid milk receipts sold 
as Class I.
    A witness representing Milkco, Carolina Dairies, Hunter Farms, 
Inc., Dairy Fresh, Inc., and Pine State Creamery testified that the 
original proposal had been modified to include language similar to that 
contained in the recommended decision of the proposed Southeast Federal 
order.
    The witness testified that the reason for proposing a change in the 
in-area route disposition requirement was that partially regulated 
handlers were constantly increasing their Class I distribution into the 
Order 5 marketing area. He estimated that the average distribution for 
1994 was between 25 million and 35 million pounds. He claimed that this 
distribution is attributed to sales from partially regulated plants 
located in Virginia.
    The witness explained that the Virginia State Milk Commission 
prices Class I sales made outside the State of Virginia at the Federal 
order Class II price. He said that this creates a problem of 
accountability for those Class I sales moving from Virginia to another 
state. He claimed that the possibility exists that, in some instances, 
not all of those sales may be accounted for and paid for at the 
appropriate price.
    The witness stated that the proposed amendment would provide 
uniformity between Order 5 and surrounding orders. He also claimed that 
the proposed change would not be burdensome to handlers located in 
Virginia if these handlers are already paying prices equivalent to, or 
greater than, the Order 5 Class I price.
    The general manager for Carolina Virginia Milk Producers 
Association (CVMPA) also testified in support of the revised proposal. 
He stated that the proposal would provide uniformity between Order 5 
and neighboring orders and that it would eliminate potential inequities 
between Order 5 handlers and handlers regulated by the Virginia Milk 
Commission.
    The CVMPA representative asserted that the proposal would regulate 
some partially regulated plants that may be subject to a lower price 
for milk used in fluid milk products than fully regulated plants under 
Order 5. He explained that handlers regulated under Order 5 must pay at 
least the minimum Federal order class prices for their milk. He claimed 
that plants located in Virginia and regulated by the Virginia Milk 
Commission have a competitive advantage on raw milk costs compared to 
handlers fully regulated under Order 5. The witness indicated that the 
Class I price established and regulated by the Virginia Milk Commission 
has historically been higher than the Order 5 price but that the 
Commission 

[[Page 65027]]
requires that only the Class II price be paid for sales out of the 
State.
    The CVMPA witness testified that sales from partially regulated 
handlers located in Virginia into the Carolina marketing area have a 
significant impact on the market. Since January 1992, he pointed out, 
sales from these plants have ranged from one to three million pounds of 
Class I sales or between .84 and 2.26 percent of total route 
disposition in Order 5. He said that while these Class I sales from 
Virginia partially regulated plants are confined to a small portion of 
the marketing area, they have had a disruptive effect on the market in 
eastern North Carolina.
    The CVMPA representative testified that Federal orders contiguous 
to the Carolina marketing area have more restrictive pool plant 
requirements than the Carolina order. He noted that the Tennessee 
Valley order's in-area route disposition requirement was 10 percent and 
that the recommended Southeast order would fully regulate handlers if a 
plant distributed either 10 percent of its total fluid milk receipts or 
at least 1500 pounds of Class I sales per day in the marketing area. 
Such requirements are appropriate for orders with relatively high Class 
I utilization, he said.
    Maryland & Virginia Milk Producers Cooperative Association, Inc. 
(MVMPCA), proposed a change to the Order 5 in-area route disposition 
requirement that would have exactly the opposite effect of Milkco's 
proposal. The MVMPCA proposal would base the in-area requirement on 15 
percent of ``dairy farmer receipts'' rather than 15 percent of ``total 
route disposition.'' Because dairy farmer receipts would be larger than 
total route disposition, the proposal would have the effect of making 
it more difficult to qualify for full regulation under Order 5.
    A spokesman for MVMPCA testified that the proposed change would 
amend the Order 5 provision to conform more closely with the provisions 
of the Middle Atlantic order (Order 4). He said that these definitions 
should be more closely aligned to allow distributing plants in the 
Commonwealth of Virginia, which are partially regulated under both 
Orders 4 and 5, to be subject to the same in-area route distribution 
standard under either Federal order.
    Without alignment of these provisions, he said, there could be 
results which are neither intended nor orderly. For instance, he 
stated, a plant could have more route sales in Order 4 but become fully 
regulated under Order 5.
    The witness stated that there are currently three dairies partially 
regulated in both Orders 4 and 5: Richfood at Richmond, Virginia; Land-
O-Sun Dairies, Inc., at Portsmouth, Virginia; and Marva Maid Dairy at 
Newport News, Virginia. He said that these Virginia plants are the only 
partially regulated distributing plants subject to Order 5 other than 
the several plants which distribute long-shelf-life fluid milk products 
in a broad geographic area over most of the United States. 
Consequently, he concluded, the MVMPCA proposal would not have a 
substantial impact upon any other plants.
    A witness representing Richfood Dairy, Inc. (Richfood), Richmond, 
Virginia, testified in opposition to Milkco's proposal to reduce the 
Order 5 in-area route disposition requirement and in support of 
Richfood's proposal to increase the requirement from 15 percent to 20 
percent.
    The witness stated that Richfood has about 83 percent of its fluid 
milk product sales in that part of Virginia that is outside the Middle 
Atlantic (Order 4) marketing area. The plant has approximately 12 
percent of its sales in the Carolina marketing area, 4 percent in the 
Order 4 marketing area, and the remaining 1 or 2 percent in the Ohio 
Valley marketing area. Richfood's sales into the Carolina marketing 
area account for about 1 percent of the market's total in-area sales, 
according to the witness.
    The Richfood witness stated that Richfood primarily has fluid milk 
sales in the eastern Virginia market with some in the western Virginia 
market. During October 1994, the witness noted, the eastern and western 
markets' Class I prices were $16.29 and $16.02, respectively. He said 
that these Virginia prices, based on the way in which Federal order 
Class I prices are set, would represent October Class I differentials 
of $4.56 for the eastern market and $4.29 for the western market. 
Federal order Class I differentials of this magnitude, he emphasized, 
are not even found in Miami, the highest priced location under the 
Federal order system. These facts, he claimed, show that purchasers of 
raw milk in Virginia do not have an unfair competitive advantage over 
handlers regulated under a Federal order. He concluded that a plant 
with 10 percent of its sales in the Carolina marketing area and 80 
percent in Virginia should not be forced to be fully regulated under 
Order 5.
    The administrator of the Virginia State Milk Commission (the 
Commission) testified in opposition to Milkco's original proposal. The 
administrator stated that pooling Virginia plants that have less than 
15 percent of their total sales in a Federal order marketing area would 
be disruptive to the Commission's ability to price and pool milk in the 
Virginia marketing areas. He argued that there are less intrusive ways 
to accomplish class price integrity for pooling producer milk.
    The witness stated that the Commission was willing to assist the 
Department to ensure proper reporting and pricing within Federal milk 
marketing areas to alleviate the concerns of those who have doubts that 
Virginia's out-of-area prices are being enforced. The witness explained 
that the Commission has the ability to report sales by Virginia plants 
into Federal orders in a timely and accurate manner, and is willing to 
provide such information to the appropriate Federal order market 
administrator to help enforce proper pricing.
    Neither Milkco's proposal, which would make it easier to fully 
regulate an out-of-area plant, nor MVMPCA's or Richfood's proposal, 
which would make it harder to fully regulate an out-of-area plant, 
should be adopted.
    Proponents of Milkco's proposal argued that the amount of sales 
into the Carolina marketing area from partially regulated plants 
located in Virginia is constantly increasing due to the presence of 
these plants. Record evidence does not support this argument. For 
instance, route disposition in Order 5 by partially regulated plants 
during the months of July through October 1994 was lower than for the 
same period of 1993. In addition, statistics show that in-area route 
disposition into Order 5 from partially regulated plants located in 
Virginia have been at a relatively constant level over the past two 
years. For example, in 1993 and 1994, the average share of total Order 
5 Class I route disposition from these plants was 2.05 and 1.95 
percent, respectively.
    No evidence presented at the hearing supported the arguments 
advanced by Milkco and CVMPA concerning the alleged competitive 
advantage that partially regulated plants in Virginia have in the 
Carolina marketing area. The record is devoid of any data to support 
this claim.
    With respect to proponents' arguments that changes in Order 5 would 
bring this order into conformance with the Middle Atlantic order or the 
Southeast order, marketing conditions in the Carolina order do not 
warrant any change to the in-area route disposition requirement for 
this reason. Moreover, it is not clear why differences in the in-area 
route disposition requirements of these orders would matter in most 
circumstances. The only area where this 

[[Page 65028]]
issue seems to be particularly acute is in Virginia. Even in Virginia, 
however, there is an insufficient basis to conclude that any 
competitive advantage exists that would warrant undermining of the 
Virginia State Milk Commission regulation.
    The in-area route disposition requirement is a locally tailored 
standard that indicates when a plant is sufficiently associated with a 
market to warrant full regulation under the order regulating that 
marketing area. Whether the standard should be 10 percent or 15 percent 
depends upon particular circumstances in that area and the demonstrated 
need for one standard or the other. Based on the testimony and data in 
this hearing record, the present 15 percent in-area route disposition 
requirement under Order 5 should remain unchanged.
    MVMPCA submitted comments in support of the findings and 
conclusions of the recommended decision regarding the Order 5 in-area 
route disposition requirement.

5. Location Adjustments Under the Carolina Order

    The location adjustment under the Carolina order for a location 
within the Middle Atlantic Federal order marketing area should be 
determined by subtracting the Order 4 Class I price at that location 
from the base zone Class I price specified in Order 5.
    At the present time, the Order 5 location adjustment for a plant 
located in the State of Maryland is based upon the shortest hard-
surfaced highway distance, as determined by the market administrator, 
that such plant is from Greensboro, North Carolina. Once that distance 
is determined, it is broken down into 10-mile increments (except for 
the last increment, which may be smaller than 10 miles), which are then 
multiplied by 2.5 cents to determine the location adjustment. Thus, for 
example, the location adjustment for a plant that is located 295 miles 
from Greensboro would be 75 cents (i.e., 30  x  2.5 = .75).
    Maryland and Virginia Milk Producers Cooperative Association 
proposed a change in the location adjustment applicable to its butter/
powder plant at Laurel, Maryland. Initially, the cooperative proposed 
treating the Laurel plant as if it were within the State of Virginia; 
this would result in a zero location adjustment at Laurel. However, at 
the hearing a spokesman for the cooperative stated that it would 
support an alternative proposal that would subtract the Order 4 Class I 
differential price at Laurel (i.e., $3.03) from the Order 5 Class I 
price at Greensboro (i.e., $3.08), which results in a location 
adjustment of minus 5 cents. The witness stated that ``our only caveat 
to this pricing formula is that the Order 5 language should be amended 
so that the price at Strasburg, Virginia, is established on the same 
basis as the price at Laurel, Maryland.''
    The cooperative's spokesman testified that MVMPCA supplies the 
Kroger Westover Dairy Order 5 pool distributing plant at Lynchburg, 
Virginia, on a year-round basis. In addition, he said that since 1992 
the cooperative has supplied supplemental milk to nine other Order 5 
distributing plants on a seasonal basis.
    The witness said that MVMPCA has served as a seasonal balancing 
agent in supplying Order 5 plants. He introduced an exhibit showing 
that MVMPCA's monthly sales to Order 5 plants reach a peak during the 
short production months of July through October.
    The witness stated that when producers' milk is not needed by Order 
5 plants, it is diverted to MVMPCA's butter-powder plant at Laurel, 
which serves as a major balancing plant for the Middle Atlantic region. 
The witness also noted that there is another balancing facility for 
Order 5 surplus milk--the Valley Milk butter/powder plant located at 
Strasburg, Virginia--which is approximately 80 miles west of Laurel and 
outside of any Federal order marketing area. He said that Order 5 now 
prices milk in an inequitable manner by providing a base zone uniform 
price for milk that is diverted to Strasburg, but a minus 75-cent 
location adjustment for milk that is diverted to Laurel.
    There was no opposition to this proposal either at the hearing or 
in the post-hearing briefs that were filed.
    MVMPCA's argument and alternative proposal for pricing milk at 
Laurel is persuasive and should be adopted. The location adjustment at 
Laurel clearly should not be minus 75 cents. It should be minus 5 
cents, the difference between the Order 5 base zone Class I price and 
the Order 4 Class I price at Laurel.
    The appropriate Federal order Class I price at Laurel, Maryland, is 
the price established for that location under the Middle Atlantic 
Federal order, which encompasses Laurel. Thus, if a distributing plant 
located at Laurel were to become regulated under Order 5, its Class I 
price would be the same as the price that would apply under Order 4. 
This would ensure competitive pricing among competing handlers. 
Determining location adjustments for plants in this manner helps to 
assure the proper alignment of Class I prices throughout the Federal 
order system and to minimize procurement problems for plants that are 
located in one Federal order marketing area but regulated under a 
different order.
    The evidence introduced by MVMPCA shows that its producers 
supplying the Order 5 market are located as far south as the Virginia/
North Carolina border and as far north as Cumberland County, Maryland. 
The exhibit, for example, shows that MVMPCA has producers in Halifax 
County, Virginia, just north of the Order 5 base zone. When producer 
milk from Halifax is delivered to a distributing plant at Lynchburg or 
to a North Carolina handler in the base zone, the milk is priced at the 
base zone price. Yet, under present order provisions, if the milk is 
not needed for fluid use by an Order 5 distributing plant and must be 
diverted to MVMPCA's butter-powder plant at Laurel, 247 miles away, it 
receives 75 cents less than the base zone price. Consequently, not only 
does MVMPCA receive a much lower price for this milk, it also absorbs 
the hauling cost to get the milk to Laurel.
    A location adjustment of minus 5 cents at Laurel will narrow the 
difference to 5 cents between the Laurel and Strasburg plants. This 
adjustment should alleviate the inequity that now exists in pricing 
between the two plants. To further reduce the difference in price by 
imposing a minus 5-cent location adjustment at Strasburg, as suggested 
by MVMPCA, would entail changing location adjustments throughout the 
State of Virginia, which goes beyond the scope of the hearing 
proposals.
    MVMPCA filed comments supporting the Order 5 proposed location 
adjustment change.

6. Base-Paying Months Under the Carolina Order

    Maryland & Virginia Milk Producers Cooperative Association, Inc., 
originally submitted a proposal to delete the month of June from the 
base-paying period of the Order 5 base and excess payment plan. At the 
hearing, however, the cooperative modified its proposal to add the 
month of February as well as delete the month of June. As modified, the 
base-paying months would be February through May.
    The MVMPCA witness stated that the purpose of the base-excess plan 
is to provide producers with an incentive to level their production on 
a seasonal basis. He indicated that the plan encourages production 
during the months when milk is needed for fluid use and discourages 
production during flush production months. Under current marketing 
conditions, he contended, June is not a surplus month but a month 

[[Page 65029]]
when supplemental supplies are frequently needed by Order 5 
distributing plants. Likewise, he asserted that February is a month of 
substantial surplus production and should be added to the base-paying 
period rather than remain a base neutral month.
    During 1992 and 1993, the MVMPCA witness noted, daily average 
production per Order 5 producer from May to June declined about 8 
percent, from 4,259 pounds per day to 3,978, and from 4,424 to 4,076, 
respectively. However, he indicated that daily average production in 
Order 5 in February 1993 of 4,684 pounds was the highest production 
month of the year, and production in February 1992 was the third 
highest month.
    The witness also testified that a collateral consequence of 
including June as a base-paying month is that when supplemental 
supplies are needed under Order 5, unnecessary and inefficient 
movements of milk are required to avoid the penalty of absorbing the 
excess price for supplies of milk that are required for the market's 
Class I needs. The witness explained that when supplemental milk is 
needed during the month of June, MVMPCA avoids the penalty of receiving 
only the excess price for milk delivered directly from producers' farms 
by instead delivering plant milk from its Laurel plant. To do this, 
however, the cooperative must receive the milk at Laurel, reload it 
onto a tank truck, and ship it to an Order 5 distributing plant. He 
said that the modified proposal would eliminate unnecessary and 
inefficient movements of milk for the sole purpose of avoiding the 
order's excess price.
    There was no opposition to this proposal either at the hearing or 
in post-hearing briefs.
    The modified proposal to change the base-paying period from March 
through June to February through May should be adopted. The removal of 
June and the addition of February to the base-paying period will bring 
the base-paying months into closer conformity with the Class I needs of 
the market.
    For the past three years, the average Class I utilization in 
January has been 77.8 percent while the June Class I utilization has 
averaged 79.8 percent for this same time period. By comparison, the 
average Class I utilization for the months of February through May has 
been 75.6, 75.7, 73.9, and 75.1 percent, respectively. The record also 
shows that June is a month in which supplemental supplies of milk are 
needed to meet the Class I needs of the market.
    On the basis of the statistical data and the testimony presented at 
the hearing, the month of February should be included in the base-
paying period and June deleted to change the base-paying period to 
February through May. These changes should result in a base and excess 
plan that better serves the needs of the market and that will avoid the 
unnecessary and inefficient movements of needed supplemental milk 
described by MVMPCA.
    Several conforming changes in order language have been made in 
response to the addition of February and the removal of June as a base-
paying month. In Sec. 1005.32(a), dealing with ``other reports,'' the 
words ``March through June'' should be changed to ``February through 
May''. In the introductory text of Sec. 1005.61(a) and in 
Sec. 1005.61(a)(5), the words ``July through February'' must be changed 
to ``June through January'', and in Sec. 1005.61(b) the words ``March 
through June'' must be changed to ``February through May''. In 
Secs. 1005.90, 1005.91, and 1005.93(b) the words ``March through June'' 
must be changed to ``February through May'', and the words ``February 
1'' in Sec. 1005.93(b) and Sec. 1005.94 should be changed to ``January 
1'' to maintain the existing relationship between the start of the 
base-paying period and the time when transfers must be completed 
without the imposition of conditions concerning the receipt or transfer 
of additional base. Finally, ``March 1'' should be changed to 
``February 1'' in Sec. 1005.93(e).
    MVMPCA submitted comments in support of the proposed modifications 
to the Order 5 base-excess plan.

Motion for a New Hearing

    Purity Dairy and Fleming Dairy, both of Nashville, Tennessee, 
argued that the remedies proposed at this hearing were not sufficient 
to address some major problems. They maintain that while the proposed 
amendments would temporarily correct some problems, in the long run 
these remedies would only make the problems worse. They urged the 
Secretary to hold a new hearing to consider a merger of Orders 5, 11, 
and 46 or the merger of Orders 5 and 11 with the proposed Southeast 
marketing area.
    A major study of Orders 5, 11, and 46 and other marketing areas is 
currently underway at Cornell University. One of the purposes of this 
study is to develop recommendations for a merged order in this area.
    There have been several major changes in cooperative 
representation, supply arrangements, and plant ownership in these 
markets. Milk has been shifting among the markets. The alleged problem 
in south central Kentucky of misaligned uniform prices causing Purity 
and Fleming to be at a competitive disadvantage for milk supplies has 
been corrected by the association of additional milk with Order 11, 
which has lowered that order's Class I utilization. There is no point 
in considering a merger of orders in this area until such time as 
producers and handlers propose such a merger. For all of these reasons, 
the motion to hold a new hearing is denied.

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 aforesaid orders were first issued and 
when they were amended. The previous findings and determinations are 
hereby ratified and confirmed, except where they may conflict with 
those set forth herein.
    (a) The tentative marketing agreements and the orders, as hereby 
proposed to be amended, and all of the terms and conditions thereof, 
will tend to effectuate the declared policy of the Act;
    (b) The parity prices of milk as determined pursuant to section 2 
of the Act are not reasonable in view of the price of feeds, available 
supplies of feeds, and other economic conditions which affect market 
supply and demand for milk in the marketing area, 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;
    (c) The tentative marketing agreements and the orders, as hereby 
proposed to be amended, will regulate the handling of milk in the same 
manner as, and will be applicable only to persons in the respective 
classes of industrial and commercial activity specified in, marketing 
agreements upon which a hearing has been held; and 

[[Page 65030]]

    (d) All milk and milk products handled by handlers, as defined in 
the tentative marketing agreements and the orders as hereby proposed to 
be amended, are in the current of interstate commerce or directly 
burden, obstruct, or affect interstate commerce in milk or its 
products.

Rulings on Exceptions

    No exceptions were received in opposition to the proposed 
amendments set forth in the recommended 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 Carolina, 
Tennessee Valley, and Louisville-Lexington-Evansville 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.

Determination of Producer Approval and Representative Period

    August 1995 is hereby determined to be the representative period 
for the purpose of ascertaining whether the issuance of the orders, as 
amended and as hereby proposed to be amended, regulating the handling 
of milk in the aforesaid marketing areas is approved or favored by 
producers, as defined under the terms of the individual 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 1005, 1011, and 1046

    Milk marketing orders.

    Dated: December 4, 1995.
Shirley R. Watkins,
Acting Assistant Secretary, Marketing and Regulatory Programs.

Order Amending the Orders Regulating the Handling of Milk in the 
Carolina, Tennessee Valley, and Louisville-Lexington-Evansville 
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 agreements and to the orders 
regulating the handling of milk in the aforesaid 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;
    (3) The said orders as hereby amended regulate the handling of milk 
in the same manner as, and is applicable only to persons in the 
respective classes of industrial or commercial activity specified in, 
marketing agreements upon which a hearing has been held; and
    (4) All milk and milk products handled by handlers, as defined in 
the order as hereby amended, are in the current of interstate commerce 
or directly burden, obstruct, or affect interstate commerce in milk or 
its products.

Order Relative to Handling

    It is therefore ordered, that on and after the effective date 
hereof, the handling of milk in each of the specified orders' marketing 
areas shall be in conformity to and in compliance with the terms and 
conditions of each of the orders, as amended, and as hereby amended, as 
follows:
    The provisions of the proposed marketing agreements and orders 
amending each of the specified orders contained in the recommended 
decision issued by the Administrator, Agricultural Marketing Service, 
on August 17, 1995, and published in the Federal Register on August 24, 
1995 (60 FR 43986), shall be and are the terms and provisions of this 
order, amending the orders, and are set forth in full herein.

PART 1005--MILK IN THE CAROLINA MARKETING AREA

    1. The authority citation for 7 CFR parts 1005, 1011, and 1046 
continues to read as follows:

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

    2. In Sec. 1005.7, the reference ``(d)'' in the introductory text 
is revised to read ``(e)'', in paragraph (b) the words ``Director of 
the Dairy Division'' and ``Director'' are revised to read ``market 
administrator'' wherever they appear, paragraph (d) is redesignated as 
paragraph (e) and revised, and a new paragraph (d) is added to read as 
follows:


Sec. 1005.7  Pool plant.

* * * * *
    (d) A plant located within the marketing area (other than a 
producer-handler plant or a governmental agency plant) that meets the 
qualifications described in paragraph (a) of this section regardless of 
its quantity of route disposition in any other Federal order marketing 
area.
    (e) The term ``pool plant'' shall not apply to the following 
plants:
    (1) A producer-handler plant;
    (2) A governmental agency plant;
    (3) A plant with route disposition in this marketing area that is 
located within the marketing area of another Federal order and that is 
fully regulated under such order;
    (4) A plant qualified pursuant to paragraph (a) of this section 
which is not located within any Federal order marketing area but which 
also meets the pooling requirements of another Federal order and from 
which there is a greater quantity of route disposition, except filled 
milk, during the month in such other Federal order marketing area than 
in this marketing area; and
    (5) A plant qualified pursuant to paragraph (b) of this section if 
the plant has automatic pooling status under another Federal order or 
if the plant meets the pooling requirements of another Federal order 
during the month and makes greater qualifying shipments to plants 
regulated under such other order than to plants regulated under this 
order. 

[[Page 65031]]



Sec. 1005.32  [Amended]

    3. In Sec. 1005.32(a), the words ``March through June'' are revised 
to read ``February through May'' wherever they appear.
    4. In Sec. 1005.53, paragraph (a)(6) is redesignated as paragraph 
(a)(7) and revised, and a new paragraph (a)(6) is added to read as 
follows:


Sec. 1005.53  Plant location adjustments for handlers.

    (a) * * *
    (6) For a plant located within the Middle Atlantic Federal Order 
Marketing Area (part 1004), the adjustment shall be computed by 
subtracting the base zone Class I price specified in Sec. 1005.50(a) 
from the Class I price applicable at such plant under the Middle 
Atlantic Federal Order; and
    (7) For a plant located outside the areas specified in paragraphs 
(a)(1) through (a)(6) of this section, the adjustment shall be a minus 
2.5 cents for each 10 miles or fraction thereof (by the shortest hard-
surfaced highway distance as determined by the market administrator) 
that such plant is from the nearer of the city halls in Greenville, 
South Carolina, or Charlotte or Greensboro, North Carolina.


Sec. 1005.61  [Amended]

    5. In Sec. 1005.61 paragraphs (a) introductory text and (a)(5), the 
words ``July through February'' are revised to read ``June through 
January'' and in paragraph (b) introductory text the words ``March 
through June'' are revised to read ``February through May''.


Secs. 1005.90 and 1005.91  [Amended]

    6. In Secs. 1005.90 and 1005.91, the words ``March through June'' 
are revised to read ``February through May'' wherever they appear.


Sec. 1005.93  [Amended]

    7. In Sec. 1005.93 paragraph (b), the words ``March through June'' 
are revised to read ``February through May'' wherever they appear, the 
words ``February 1'' are revised to read ``January 1'', and in 
paragraph (e) the words ``March 1'' are revised to read ``February 1''.


Sec. 1005.94  [Amended]

    8. In Sec. 1005.94, the words ``February 1'' are revised to read 
``January 1''.

PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA

    9. Section 1011.2 is amended by revising paragraph (b) to read as 
follows:


Sec. 1011.2  Tennessee Valley marketing area

* * * * *
    (b) In Kentucky, the counties of Bell, Breathitt, Clay, Harlan, 
Jackson, Knott, Knox, Laurel, Leslie, Letcher, McCreary, Owsley, Perry, 
Pulaski, Rockcastle, and Whitley.
* * * * *
    10. In Sec. 1011.7, the reference ``(d)'' in the introductory text 
is revised to read ``(e)'', paragraph (b) is revised, paragraph (d) is 
redesignated as paragraph (e) and revised, and a new paragraph (d) is 
added to read as follows:


Sec. 1011.7  Pool plant.

* * * * *
    (b) A plant, other than a plant described in paragraph (a) of this 
section, from which fluid milk products, except filled milk, are 
shipped to plants described in paragraph (a) of this section subject to 
the following additional conditions:
    (1) During the months of August through November, January and 
February, such shipments must equal not less than 60 percent (40 
percent during the months of December and March through July) of the 
total quantity of milk approved by a duly constituted regulatory agency 
for fluid consumption that is received during the month at such plant 
from handlers described in Sec. 1011.9 (c) and (d) and from dairy 
farmers, including milk that is diverted from the plant pursuant to 
Sec. 1011.13 but excluding milk diverted to the plant;
    (2) The operator of a plant described in this paragraph may include 
milk diverted from the plant to plants described in paragraph (a) of 
this section for up to one-half of the shipments required pursuant to 
this paragraph;
    (3) A plant which meets the shipping requirements specified in this 
paragraph during the months of July through February shall be a pool 
plant during the following months of March through June unless the milk 
received at the plant does not continue to meet the requirements of a 
duly constituted regulatory agency, the plant fails to meet a shipping 
requirement instituted pursuant to paragraph (b)(4) of this section, or 
a written application is filed by the plant operator with the market 
administrator on or before the first day of any such month requesting 
that the plant be designated a nonpool plant for such month and for 
each subsequent month through June during which it would not otherwise 
qualify as a pool plant; and
    (4) The shipping requirements described in paragraph (b)(1) and 
(b)(3) of this section may be increased or decreased up to 10 
percentage points by the market administrator if he or she finds that 
revision is necessary to obtain needed shipments or to prevent 
uneconomic shipments. Before making such a finding, the market 
administrator shall investigate the need for revision either at his or 
her own initiative or at the request of interested persons. If the 
investigation shows that a revision may be appropriate, the market 
administrator shall issue a notice stating that the revision is being 
considered and invite data, views, and arguments.
* * * * *
    (d) A plant located within the marketing area (other than a 
producer-handler plant or a governmental agency plant) that meets the 
qualifications described in paragraph (a) of this section regardless of 
its quantity of route disposition in any other Federal order marketing 
area.
    (e) The term ``pool plant'' shall not apply to the following 
plants:
    (1) A producer-handler plant;
    (2) A governmental agency plant;
    (3) A plant with route disposition in this marketing area that is 
located within the marketing area of another Federal order and that is 
fully regulated under such order;
    (4) A plant qualified pursuant to paragraph (a) of this section 
which is not located within any Federal order marketing area but which 
also meets the pooling requirements of another Federal order and from 
which there is a greater quantity of route disposition, except filled 
milk, during the month in such other Federal order marketing area than 
in this marketing area; and
    (5) A plant qualified pursuant to paragraph (b) of this section if 
the plant has automatic pooling status under another Federal order or 
if the plant meets the pooling requirements of another Federal order 
during the month and makes greater qualifying shipments to plants 
regulated under such other order than to plants regulated under this 
order.


Sec. 1011.13  [Amended]

    11. In Sec. 1011.13 paragraph (e)(3), the words ``Director of the 
Dairy Division'' and ``Director'' are revised to read ``market 
administrator'' wherever they appear.
    12. Section 1011.52(a)(3) is revised to read as follows:


Sec. 1011.52  Plant location adjustments for handlers.

    (a) * * *
    (3) For such milk which is physically received at a plant located 
within the Kentucky counties of Bell, Breathitt, Clay, Harlan, Jackson, 
Knott, Knox, Laurel, Leslie, Letcher, McCreary, Owsley, Perry, Pulaski, 
Rockcastle, and 

[[Page 65032]]
Whitley, the Class I price shall be decreased by 32 cents; and
* * * * *

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


Sec. 1046.2  [Amended]

    13. In Sec. 1046.2, in the list of Kentucky counties, the word 
``Pulaski'' is removed.

    [Note: The following appendix will not be published in the Code 
of Federal Regulations.]

Appendix--Marketing Agreement Regulating the Handling of Milk in 
Certain Specified 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 said 
marketing areas (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. 95-30670 Filed 12-15-95; 8:45 am]
BILLING CODE 3410-02-P