[Federal Register Volume 61, Number 210 (Tuesday, October 29, 1996)]
[Rules and Regulations]
[Pages 55731-55733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27723]


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


DEPARTMENT OF AGRICULTURE
7 CFR Part 1079

[DA-96-11]


Milk in the Iowa Marketing Area; Revision of Pool Supply Plant 
Shipping Percentage

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This document reinstates certain provisions of the Iowa 
Federal milk order indefinitely for the months of September through 
November, beginning with October 1996 milk deliveries, and revises 
other provisions for the months of December 1996 through March 1997. 
This action increases the percentage of a supply plant's receipts that 
must be delivered to fluid milk plants to qualify a supply plant for 
pooling under the Iowa Federal milk order. The applicable percentage 
will be increased by 5 percentage points, from 30 percent to 35 
percent, for the months of September through November; and by 10 
percentage points, from 20 percent to 30 percent, for the months of 
December 1996 through March 1997. The revision is being made in 
response to a request by a distributing plant that is regulated under 
the order. This action is necessary to assure an adequate supply of 
milk for fluid use.

EFFECTIVE DATES:
    1. Amendment number 1 is effective October 1, 1996.
    2. Amendment number 2 is effective October 1, 1996, and applies 
October 1, 1996, through November 30, 1996, and for the September 
through November period thereafter.
    3. Amendment number 3 is effective December 1, 1996, through March 
31, 1997.
    4. Amendment number 4 is effective April 1, 1997.

FOR FURTHER INFORMATION CONTACT: Constance M. Brenner, Marketing 
Specialist, USDA/AMS/Division, Order Formulation Branch, Room 2968, 
South Building, P.O. Box 96456, Washington, DC 20090-6456, (202) 720-
2357.

SUPPLEMENTARY INFORMATION: Prior document in this proceeding:
    Notice of Proposed Revision of Rule: Issued August 26, 1996; 
published September 4, 1996 (61 FR 46571).
    The Department is issuing this final rule in conformance with 
Executive Order 12866.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have a retroactive 
effect. This 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 provisions of the 
order, or any obligation imposed in connection with the order is not in 
accordance with the law and request a modification of an order or an 
exemption 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.
    This document reinstates the pool supply plant shipping percentage 
of 35 percent under the Iowa order for the period October 1 through 
November 30, 1996, and the September through November period 
thereafter. A reduction from 35 to 30 percent was issued in 1990 (55 FR 
41504, published October 12, 1990) effective October 12, 1990, for an 
indefinite period. This action increases the percentage by reinstating 
the original percentage of 35, thus eliminating the prior 1990 action. 
The proposed rule for this action (61 FR 46571, published September 4, 
1996) incorrectly stated that the current percentage for the months of 
September through November was 35 and would have been increased to 45.
    The current issue of the Code of Federal Regulations (CFR) shows 
the percentage requirements to be 35 percent for September through 
November and 20 percent for December through August because a temporary 
change (e.g., 35 percent to 30 percent) is not printed in the CFR.

Small Business Consideration

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.), the Agricultural Marketing Service has considered the economic 
impact of this action on small entities and has certified that this 
rule will not have a significant economic impact on a substantial 
number of small entities. For the purpose of the Regulatory Flexibility 
Act, a dairy farm is considered a ``small business'' if it has an 
annual gross revenue of less than $500,000, and a dairy products 
manufacturer is a ``small business'' if it has fewer than 500 
employees. For the purposes of determining which dairy farms are 
``small businesses,'' the $500,000 per year criterion was used to 
establish a production guideline of 326,000 pounds per month. Although 
this guideline does not factor in additional monies that may be 
received by dairy producers, it should be an inclusive standard for 
most ``small'' dairy farms. For purposes of determining a handler's 
size, if the plant is part of a larger company operating multiple 
plants that collectively exceed the 500-employee limit, the plant will 
be considered a large business even if the local plant has fewer than 
500 employees.
    The supply plant shipping percentage provisions are being increased 
in the order to assure an adequate supply of milk for the fluid market. 
It is expected that producers and their handlers who share in the 
benefits of the higher-valued fluid uses of the market through their 
participation in a marketwide pool should be required to help supply 
milk to fluid milk distributing plants when additional supplies are 
needed. As a result of this expectation, order

[[Page 55732]]

provisions based on testimony and data presented at a public hearing in 
which all interested parties were encouraged to participate were 
promulgated and approved by at least two-thirds of the dairy farmers 
whose milk was pooled under the Iowa order.
    The Iowa order provides that the pool supply plant shipping 
percentages in the order may be increased or reduced by the Director of 
the Dairy Division, Agricultural Marketing Service, to assure that an 
adequate supply of milk will be made available to distributing plants, 
or to avoid excessive costs of hauling and handling milk that may be 
moved to distributing plants only to pool plentiful supplies of 
producer milk.
    For the month of July 1996, 2,995 dairy farmers were producers 
under the Iowa milk order. Of these, all but 23 would be considered 
small businesses, having under 326,000 pounds of production for the 
month. Of the dairy farmers in the small business category, 2,389 
produced under 100,000 pounds of milk, 533 produced between 100,000 and 
200,000, and 50 produced between 200,000 and 326,000 pounds of milk 
during July 1996.
    The reports filed on behalf of the slightly more than 20 milk 
handlers pooled, or regulated, under the Iowa order in July 1996 were 
filed for individual establishments that, for the most part, would meet 
the SBA definition of a small business, having less than 500 employees. 
However, most of these establishments are part of larger businesses 
that operate multiple plants and meet the definition of large entities 
on that basis.
    This revision will increase the percentage of milk receipts that 
handlers are required to move to fluid milk distributing plants. Some 
handlers may choose to move increased volumes of their milk supplies 
from manufacturing uses to fluid use in order to assure that all of 
their producer milk supplies will be able to share in the benefits of 
the marketwide pool. Other handlers may elect to not pool some of their 
producer milk supplies rather than ship more milk to distributing 
plants. Still others may already be moving as much as they will be 
required to move under increased percentages and will be unaffected by 
the revision.
    If the shipping percentages are not increased, the distributing 
plant operator requesting the revisions, a large entity based on its 
multiple plant operations, may not be able to obtain an adequate supply 
of milk at a competitive price to meet its needs. The handlers from 
whom the distributing plant handler would be most likely to receive 
increased shipments are also, for the most part, large entities.
    This revision is issued pursuant to the provisions of the 
Agricultural Marketing Agreement Act and the provisions of 
Sec. 1079.7(b)(1)of the Iowa order.
    Notice of proposed rulemaking was published in the Federal Register 
(61 FR 46571) concerning a proposed increase in the percentage of a 
supply plant's receipts that must be delivered to fluid milk plants to 
qualify a supply plant for pooling under the Iowa Federal milk order. 
The revisions were proposed to be effective for the months of September 
1, 1996, through March 31, 1997. The public was afforded the 
opportunity to comment on the proposed notice by submitting written 
data, views, and arguments by September 11, 1996.
    Two comments supporting and one opposing the proposed revision were 
received.

Statement of Consideration

    After consideration of all relevant material, including the 
proposal set forth in the aforesaid notice, and other available 
information, it is hereby found and determined that the supply plant 
shipping percentage set forth in Sec. 1079.7(b) of the Iowa Federal 
milk order should be increased by 5 percentage points, from 30 percent 
to 35 percent for the months of September through November, effective 
October 1, 1996, and should be increased by 10 percentage points, from 
20 percent to 30 percent, for the months of December through March.
    An increase of 10 percentage points to the supply plant shipping 
percentages for the months of September 1996 through March 1997 was 
proposed by Anderson-Erickson Dairy Company (A-E), a proprietary 
distributing plant that is regulated under the order. The handler 
contends that the increase in the shipping standard is necessary to 
bring forth an adequate supply of fluid milk for fluid use.
    According to A-E, the handler has been and is willing to pay the 
announced market price for milk, which includes over-order premiums. A-
E states that the higher-valued uses of fluid milk are not being shared 
in the pool. Thus, fluid milk is not being made available to A-E at a 
market price which can retain A-E's competitiveness. The handler's 
comments state that the federal order for Iowa has at least temporarily 
ceased performing its statutorily-mandated functions because it is not 
equalizing payments to producers and simultaneously is not assuring the 
delivery of fluid milk to fluid handlers. In the absence of increased 
shipping percentages, A-E urged the Secretary immediately to suspend 
(or terminate) the pricing provisions of the Iowa order until such time 
as the pricing actually results in uniform prices to producers and in 
the delivery of fluid milk to fluid plants. Comments received from Hy-
Vee Food Stores, Inc., of West Des Moines, Iowa, support A-E's request 
for an increase in the percentage of a pool supply plant's receipts to 
be shipped to fluid milk plants.
    Beatrice Cheese, Inc., is a proprietary manufacturer of dairy 
products in Fredericksburg, Iowa, that markets milk for eight small 
cooperatives located in Northeast Iowa and Southeast Minnesota. 
Beatrice also has its own supply of milk from nonmember producers. 
Beatrice Cheese, Inc., strongly opposes the shipping percentage 
increases proposed by A-E Dairy. Beatrice claims to have supplied A-E, 
on a monthly basis, with what Beatrice estimates to be about fifty 
percent of A-E's needs. Beatrice also supplies milk to pool 
distributing plants regulated under another Federal order at a level 
they claim meets or exceeds current order supply plant shipping 
percentages. Beatrice contends that they are supplying the pool 
distributing plants in the marketing area with more than a fair share 
of the milk pooled by Beatrice. According to Beatrice, if additional 
supplies were available to be shipped to A-E without creating a 
financial burden on Beatrice, Beatrice would be fulfilling A-E's needs, 
but these additional supplies are not available. Based on recent Class 
I use percentages, Beatrice contends that if the 45 percent shipping 
requirement were adopted, excessive milk supplies could be required to 
be shipped to bottlers, necessitating uneconomic shipments back to 
other milk users. Beatrice states that the proposed shipping 
requirements would put unjust financial pressures on Beatrice, creating 
a competitive disadvantage for its dairy farmers. Since January 1996, 
Beatrice claims, it has incurred a substantial financial loss due to 
current shipping requirements, given the absence of hauling credits 
under Order 79. Beatrice states that it may be necessary for pool 
distributing plants to go outside their normal procurement avenues to 
purchase the extra milk they require at current market prices, without 
using the Federal Order system to force shipments.
    Market data show that the Class I percentage of milk pooled in the 
Iowa marketing area since March 1996 has been significantly higher than 
for the same periods in several preceding years.

[[Page 55733]]

For the months of June through August 1996, the percentage of pool milk 
used in Class I has increased over the average of the same months of 
1993-95 by an average of 10.5 percentage points. The average increase 
has grown from 9.3 percentage points for June 1996 compared with June 
1993-95, to 12.7 for August 1996 over August 1993-95. Although some of 
the increase in the Class I utilization percentage undoubtedly reflects 
the effect of customarily-pooled milk that was not pooled because of 
Class III and Class III-A pricing differences, these numbers still 
indicate that the supply of milk available to the fluid market has 
declined in recent months. This revision to increase the percentage of 
a supply plant's receipts that must be delivered to fluid milk plants 
to qualify a supply plant for pooling under the Iowa Federal milk order 
is necessary to attract an adequate supply of milk for fluid use due to 
the increasing percentage of milk used in Class I.
    Although the proposed revision published September 4, 1996 (61 FR 
46571) discussed the possibility of increasing the applicable 
percentage from 35 percent to 45 percent for the months of September 
through November 1996, the effective shipping percentage for that 
period previously had been lowered to 30 percent on October 12, 1990 
(55 FR 41504). According to market data, however, it appears that a 
reinstatement of the 35-percent shipping percentage would be 
appropriate to bring forth an adequate supply of milk for fluid use. 
Such a percentage is also within the 10-percent revision limitation 
provided for within the order while the proposed 45 percent level would 
be greater than that allowable under the 10 percentage point increase 
limitation (Sec. 1079.7(b)( 1)). Furthermore, the market data indicates 
that a 40 percent standard would provide an excess of Class I milk. 
Finally, the market data indicates that the need for increased Class I 
milk supplies will continue beyond November 1996 and so it is 
appropriate to increase the supply plant shipping percentages for 
December 1996 through March 1997.
    It is hereby found and determined that 30 days' notice of the 
effective date hereof is impractical, unnecessary, and contrary to the 
public interest in that:
    (a) This revision is necessary to reflect current marketing 
conditions and to maintain orderly marketing conditions in the 
marketing area for the months of October and November, and for December 
1996 through March 1997.
    (b) This revision does not require of persons affected substantial 
or extensive preparation prior to the effective date; and
    (c) Notice of the proposed revision was given interested parties 
and they were afforded opportunity to file written data, views, or 
arguments concerning this revision.
    Two comments supporting and one opposing the proposed revision were 
received.
    Therefore, good cause exists for making this revision effective 
less than 30 days from the date of publication in the Federal Register.

List of Subjects in 7 CFR Part 1079

    Milk marketing orders.
    For the reasons set forth in the preamble, 7 CFR Part 1079, is 
amended as follows:

PART 1079--MILK IN THE IOWA MARKETING AREA

    1. The authority for 7 CFR Part 1079 continues to read as follows:
    Authority: 7 U.S.C. 601-674.


Sec. 1079.7  [Amended in Part]

    2. In Sec. 1079.7(b), the introductory text is amended by revising 
the words ``30 percent'' to read ``35 percent,'' effective October 1, 
1996. This amendment applies as of October 1, 1996, through November 
30, 1996, and for the months of September through November thereafter.
    3. In Sec. 1079.7(b), the introductory text is amended by revising 
the words ``20 percent'' to read ``30 percent,'' effective December 1, 
1996, through March 31, 1997.
    4. In Sec. 1079.7(b), the introductory text is amended by revising 
the words ``30 percent'' to read ``20 percent,'' effective April 1, 
1997.

    Dated: October 23, 1996.
Richard M. McKee,
Director, Dairy Division.
[FR Doc. 96-27723 Filed 10-28-96; 8:45 am]
BILLING CODE 3410-02-P