[Federal Register Volume 62, Number 1 (Thursday, January 2, 1997)]
[Rules and Regulations]
[Pages 1-4]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-33390]



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 Rules and Regulations
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  Federal Register / Vol. 62, No. 1 / Thursday, January 2, 1997 / Rules 
and Regulations  



[[Page 1]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1124

[Docket No. AO-368-A25; DA-95-01]


Milk in the Pacific Northwest Marketing Area; Order Amending the 
Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This final rule adds two counties to the Pacific Northwest 
milk marketing area and modifies the component pricing provisions of 
the order.

EFFECTIVE DATE: February 1, 1997.

FOR FURTHER INFORMATION CONTACT: Constance M. Brenner, Marketing 
Specialist, USDA/AMS/Dairy Division, Order Formulation Branch, Room 
2971, South Building, P. O. Box 96456, Washington, DC 20090-6456, (202) 
720-2357, e-mail address Connie__M__B[email protected].

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.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have retroactive 
effect. This rule will not preempt any state or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with the rule.
    The Agricultural Marketing Agreement Act of 1937, as amended (7 
U.S.C. 601-674), provides that administrative proceedings must be 
exhausted before parties may file suit in court. Under section 
608c(15)(A) of the Act, any handler subject to an order may request 
modification or exemption from such order by filing 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. 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.

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 farmers. 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.
    Interested persons were invited to present evidence on the probable 
regulatory and informational impact of the hearing proposals considered 
in this proceeding on small businesses or to suggest modifications of 
the proposals for the purpose of tailoring their applicability to small 
businesses. In addition, in order to properly assess the impact on 
small businesses, information relating to the impact of the amendments 
contained in this rule has been obtained from the market administrator.
    During August 1996, the representative month for determining 
producer approval of this action, 1,297 dairy farmers were producers 
under the Pacific Northwest order. Of these, 808 would be considered 
small businesses, having under 326,000 pounds of milk production for 
the month. Of the dairy farmers in the small business category, 219 
produced under 100,000 pounds of milk, 328 produced between 100,001 and 
200,000 pounds of milk, and 261 produced between 200,001 and 326,000 
pounds of milk during August.
    Of the 489 producers producing in excess of 326,000 pounds of milk 
during August 1996, 178 produced between 326,001 and 500,000 pounds of 
milk, 186 produced between 500,001 and 1,000,000 pounds of milk, and 
125 producers produced at least 1,000,001 pounds of milk.
    In terms of total dollars, the negative impact on producer returns 
resulting from the multiple component pricing amendments generally 
would be less on small producers than it would be on large producers. 
However, the effect of the amendments on each individual producer would 
depend on the relative protein, other nonfat solids, and butterfat 
content of the producer's milk production rather than on the volume of 
its production.
    The effect of the multiple component pricing amendments on 
handlers, both large and small, would depend on how they use the milk 
they receive from producers. Handlers' cost of milk used in 
manufactured products would be reduced by approximately 10 cents per 
hundredweight, depending upon the component content of the milk. The 
cost of milk used in fluid products would be unchanged. In addition to 
butterfat tests, handlers would be required to report protein tests and 
``other solids'' tests instead of nonfat solids tests of producer 
receipts. Because most of this testing is done using infra-red analysis 
equipment, there should be little additional cost connected with the 
testing and reporting of the protein component and the ``other solids'' 
component.
    Of the 23 dairy plants pooled under the Pacific Northwest milk 
order during August 1996, 15 would be considered to be operated by 
small businesses on the basis of having fewer than 500

[[Page 2]]

employees. Eight of the pool plants were operated by handlers having 
more than 500 employees.
    Expansion of the marketing area to include the two remaining 
Olympic Peninsula counties would have no effect on producers and would 
result in the regulation of no additional handlers. Four handlers who 
currently distribute fluid milk products into the two counties would be 
benefitted by a reduction in their recordkeeping and reporting burden. 
Sales outside the marketing area are required to be reported separately 
for the purpose of determining a handler's pool status. The addition of 
these two counties to the marketing area will remove the requirement 
that these handlers keep separate records and file reports about sales 
in these counties. Two of the handlers affected would be considered to 
be small entities.
    Prior documents in this proceeding:
    Notice of Hearing: Issued June 15, 1995; published June 21, 1995 
(60 FR 32282).
    Extension of Time for Filing Briefs: Issued October 12, 1995; 
published October 23, 1995 (60 FR 54315).
    Extension of Time for Filing Briefs: Issued November 2, 1995; 
published November 9, 1995 (60 FR 56538).
    Recommended Decision: Issued August 19, 1996; published August 23, 
1996 (61 FR 43474).
    Final Decision: Issued November 21, 1996; published November 29, 
1996 (61 FR 60639).

Findings and Determinations

    The findings and determinations hereinafter set forth supplement 
those that were made when the Pacific Northwest order was first issued 
and when it was amended. The previous findings and determinations are 
hereby ratified and confirmed, except where they may conflict with 
those set forth herein.
    The following findings are hereby made with respect to the Pacific 
Northwest order:
    (a) Findings upon the basis of the hearing record. 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 governing the formulation of marketing agreements and 
marketing orders (7 CFR Part 900), a public hearing was held upon 
certain proposed amendments to the tentative marketing agreement and to 
the order regulating the handling of milk in the Pacific Northwest 
marketing area.
    Upon the basis of the evidence introduced at such hearing and the 
record thereof it is found that:
    (1) The Pacific Northwest order, 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 marketing area, and the minimum 
prices specified in the order, 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 Pacific Northwest order, as hereby amended, regulates the 
handling of milk in the same manner as, and is applicable only to 
persons in the respective classes of industrial and commercial activity 
specified in, a marketing agreement upon which a hearing has been held.
    (b) Determinations. It is hereby determined that:
    (1) The refusal or failure of handlers (excluding cooperative 
associations specified in Sec. 8c(9) of the Act) of more than 50 
percent of the milk that is marketed within the specified marketing 
area to sign a proposed marketing agreement tends to prevent the 
effectuation of the declared policy of the Act;
    (2) The issuance of this order amending the Pacific Northwest order 
is the only practical means pursuant to the declared policy of the Act 
of advancing the interests of producers as defined in the order as 
hereby amended;
    (3) The issuance of the order amending the Pacific Northwest order 
is favored by at least two-thirds of the producers who were engaged in 
the production of milk for sale in the marketing area.

List of Subjects in 7 CFR Part 1124

    Milk marketing orders.

Order Relative to Handling

    It is therefore ordered, that on and after the effective date 
hereof, the handling of milk in the Pacific Northwest marketing area 
shall be in conformity to and in compliance with the terms and 
conditions of the order, as amended, and as hereby further amended, as 
follows:

PART 1124--MILK IN THE PACIFIC NORTHWEST MARKETING AREA

    1. The authority citation for 7 CFR Part 1124 reads as follows:

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

    2. Section 1124.2 is amended by revising the list of Washington 
counties to read as follows:


Sec. 1124.2  Pacific Northwest marketing area.

* * * * *
    Washington counties:
    Adams, Asotin, Benton, Chelan, Clallam, Clark, Columbia, Cowlitz, 
Douglas, Ferry, Franklin, Garfield, Grant, Grays Harbor, Island, 
Jefferson, King, Kitsap, Kittitas, Klickitat, Lewis, Lincoln, Mason, 
Okanogan, Pacific, Pend Oreille, Pierce, San Juan, Skagit, Skamania, 
Snohomish, Spokane, Stevens, Thurston, Wahkiakum, Walla Walla, Whatcom, 
Whitman and Yakima.
* * * * *
    3. Section 1124.30 is amended by revising paragraphs (a)(1) (i) and 
(ii), and (c) (1) through (3) to read as follows:


Sec. 1124.30  Reports of receipts and utilization.

* * * * *
    (a) * * *
    (1) * * *
    (i) Milk received directly from producers (including such handler's 
own production), and the pounds of protein and pounds of solids-not-fat 
other than protein (other solids) contained therein;
    (ii) Milk received from a cooperative association pursuant to 
Sec. 1124.9(c), and the pounds of protein and pounds of solids-not-fat 
other than protein (other solids) contained therein;
* * * * *
    (c) * * *
    (1) The pounds of skim milk, butterfat, protein and solids-not-fat 
other than protein (other solids) received from producers;
    (2) The utilization of skim milk, butterfat, protein and solids-
not-fat other than protein (other solids) for which it is the handler 
pursuant to Sec. 1124.9(b); and
    (3) The quantities of skim milk, butterfat, protein and solids-not-
fat other than protein (other solids) delivered to each pool plant 
pursuant to Sec. 1124.9(c).
* * * * *
    4. Section 1124.31 is amended by revising paragraphs (a)(1) and 
(b)(1) to read as follows:


Sec. 1124.31  Payroll reports.

* * * * *
    (a) * * *
    (1) The total pounds of milk received from each producer, the 
pounds of butterfat, protein and solids-not-fat other than protein 
(other solids) contained in such milk, and the number

[[Page 3]]

of days on which milk was delivered by the producer during the month;
* * * * *
    (b) * * *
    (1) The total pounds of milk received from each producer and the 
pounds of butterfat, protein and solids-not-fat other than protein 
(other solids) contained in such milk;
* * * * *
    5. Section 1124.50 is amended by revising paragraph (f) 
introductory text, paragraph (g), and adding a new paragraph (h) to 
read as follows:


Sec. 1124.50  Class and component prices.

* * * * *
    (f) The butterfat price per pound, rounded to the nearest one-
hundredth cent, shall be the total of:
* * * * *
    (g) The protein price per pound, rounded to the nearest one-
hundredth cent, shall be 1.32 times the average monthly price per pound 
for 40-pound block Cheddar cheese on the National Cheese Exchange as 
reported by the Department.
    (h) The other solids price per pound, rounded to the nearest one-
hundredth cent, shall be the basic formula price at test less the 
average butterfat test of the basic formula price as reported by the 
Department times the butterfat price, less the average protein test of 
the basic formula price as reported by the Department for the month 
times the protein price, and dividing the resulting amount by the 
average other solids test of producer milk pooled under Part 1124 for 
the month, as determined by the Market Administrator. If the resulting 
price is less than zero, then the protein price will be reduced so that 
the other solids price equals zero.
    6. Section 1124.53 is revised to read as follows:


Sec. 1124.53  Announcement of class and component prices.

    On or before the 5th day of each month, the market administrator 
shall announce publicly the following prices:
    (a) The Class I price for the following month;
    (b) The Class II price for the following month;
    (c) The Class III price for the preceding month;
    (d) The Class III-A price for the preceding month;
    (e) The skim milk price for the preceding month;
    (f) The butterfat price for the preceding month;
    (g) The protein price for the preceding month;
    (h) The other solids price for the preceding month; and
    (i) The butterfat differential for the preceding month.
    7. Section 1124.60 is amended by redesignating paragraphs (f) 
through (m) as paragraphs (g) through (n), revising the section 
heading, the undesignated center heading preceding the section heading, 
paragraph (e), redesignated paragraphs (g) introductory text, (g)(3), 
the phrase ``assigned to shrinkage'' in paragraph (h) introductory text 
to ``assigned to inventory'', (h)(3), and (h)(6), and adding a new 
paragraph (f) to read as follows:

Producer Price Differential


Sec. 1124.60  Handler's value of milk.

* * * * *
    (e) Multiply the protein price for the month by the pounds of 
protein associated with the pounds of producer skim milk in Class II 
and Class III during the month. The pounds of protein shall be computed 
by multiplying the producer skim milk pounds so assigned by the 
percentage of protein in the handler's receipts of producer skim milk 
during the month for each report filed separately;
    (f) Multiply the other solids price for the month by the pounds of 
other solids associated with the pounds of producer skim milk in Class 
II and Class III during the month. The pounds of other solids shall be 
computed by multiplying the producer skim milk pounds so assigned by 
the percentage of other solids in the handler's receipts of producer 
skim milk during the month for each report filed separately;
    (g) With respect to skim milk and butterfat overages assigned 
pursuant to Sec. 1124.44(a)(15), (b) and paragraph (g)(6) of this 
section:

* * * * *
    (3) Multiply the pounds of protein and other solids associated with 
the skim milk pounds assigned to Class II and III by the protein and 
other solids prices, respectively;
* * * * *
    (h) * * *
    (3) Multiply the pounds of protein and other solids associated with 
the skim milk pounds assigned to Class II and III by the protein and 
other solids prices, respectively;
* * * * *
    (6) Subtract the Class III value of the milk at the previous 
month's protein, other milk solids, and butterfat prices;
* * * * *
    8. Section 1124.61 is amended by revising the section heading, 
introductory text, and paragraphs (a), (d) and (e) to read as follows:


Sec. 1124.61  Producer price differential.

    A producer price differential per hundredweight of milk for each 
month shall be computed by the market administrator as follows:
    (a) Combine into one total for all handlers:
    (1) The values computed pursuant to Sec. 1124.60 (a) through (c) 
and (g) through (n) for all handlers who filed the reports prescribed 
by Sec. 1124.30 for the month and who made the payments pursuant to 
Sec. 1124.71 for the preceding month; and
    (2) Add the values computed pursuant to Sec. 1124.60 (d), (e) and 
(f); and subtract the values obtained by multiplying the handlers'' 
total pounds of protein and total pounds of other solids contained in 
such milk by their respective prices;
* * * * *
    (d) Divide the resulting amount by the sum, for all handlers, of 
the total hundredweight of producer milk and the total hundredweight 
for which a value is computed pursuant to Sec. 1124.60(k); and
    (e) Subtract not less than 4 cents per hundredweight nor more than 
5 cents per hundredweight. The result shall be the producer price 
differential.
    9. Section 1124.62 is removed, and Section 1124.63 is redesignated 
as Section 1124.62 and revised, including the section heading to read 
as follows:


Sec. 1124.62  Announcement of the producer price differential and a 
statistical uniform price.

    On or before the 14th day after the end of each month, the market 
administrator shall announce the following prices and information:
    (a) The producer price differential;
    (b) The protein price;
    (c) The other solids price;
    (d) The butterfat price;
    (e) The average protein and other solids content of producer milk; 
and
    (f) The statistical uniform price for milk containing 3.5 percent 
butterfat, computed by combining the Class III price and the producer 
price differential.
    10. Section 1124.71 is amended by revising paragraph (a)(1), the 
reference ``Sec. 1124.73(a)(2) (i), (ii), and (iii);'' in paragraph 
(b)(1) to ``Sec. 1124.73(a)(2) (ii) through (iv);'' and paragraph 
(b)(3) to read as follows:


Sec. 1124.71  Payments to the producer-settlement fund.

* * * * *
    (a) * * *
    (1) The total handler's value of milk for such month as determined 
pursuant to Sec. 1124.60; and
* * * * *

[[Page 4]]

    (b) * * *
    (3) The value at the producer price differential adjusted for the 
location of the plant(s) from which received (not to be less than zero) 
with respect to the total hundredweight of skim milk and butterfat in 
other source milk for which a value was computed or such handler 
pursuant to Sec. 1124.60(k).
* * * * *
    11. Section 1124.73 is amended by revising paragraphs (a)(2) (ii) 
through (vi), (c) introductory text, (c)(1), the reference ``paragraph 
(a)(2) (i) through (iii) of this section'' in paragraphs (c)(2) and 
(d)(2) to ``paragraph (a)(2) (i) through (iv) of this section'', 
(f)(2), and adding paragraph (a)(2)(vii) to read as follows:


Sec. 1124.73  Payments to producers and to cooperative associations.

* * * * *
    (a) * * *
    (2) * * *
    (ii) Add the amount that results from multiplying the protein price 
for the month by the total pounds of protein in the milk received from 
the producer;
    (iii) Add the amount that results from multiplying the other solids 
price for the month by the total pounds of other solids in the milk 
received from the producer;
    (iv) Add the amount that results from multiplying the total 
hundredweight of milk received from the producer by the producer price 
differential for the month as adjusted pursuant to Sec. 1124.74(a);
    (v) Subtract payments made to the producer pursuant to paragraph 
(a)(1) of this section;
    (vi) Subtract proper deductions authorized in writing by the 
producer; and
    (vii) Subtract any deduction required pursuant to Sec. 1124.86 or 
by statute; and
* * * * *
    (c) Each handler shall pay to each cooperative association which 
operates a pool plant, or to the cooperative's duly authorized agent, 
for butterfat, protein and other solids received from such plant in the 
form of fluid milk products as follows:
    (1) On or before the second day prior to the date specified in 
paragraph (a)(1) of this section, for butterfat, protein, and other 
milk solids received during the first 15 days of the month at not less 
than the butterfat, protein, and other milk solids prices, 
respectively, for the preceding month; and
* * * * *
    (f) * * *
    (2) The total pounds of milk delivered by the producer, the pounds 
of butterfat, protein and other solids contained therein, and, unless 
previously provided, the pounds of milk in each delivery;
* * * * *


Sec. 1124.74  [Amended]

    12. Section 1124.74(c) is amended by revising, in two locations, 
the phrase ``weighted average differential price'' to ``producer price 
differential''.


Sec. 1124.75  [Amended]

    13. Section 1124.75 is amended by adding the phrase ``or 
statistical uniform price'' after the words ``estimated uniform price'' 
in the second sentence of paragraph (a)(1)(i), and by revising the 
phrase ``estimated uniform price'' in the first sentence of paragraph 
(b)(4) to ``statistical uniform price''.


Sec. 1124.85  [Amended]

    14. Section 1124.85 is amended by revising the reference 
``Sec. 1124.60(h) and (j)'' in paragraph (b) to ``Sec. 1124.60(i) and 
(k)''.

    Dated: December 30, 1996.
Michael V. Dunn,
Assistant Secretary, Marketing and Regulatory Programs.
[FR Doc. 96-33390 Filed 12-31-96; 8:45 am]
BILLING CODE 3410-02-P